5 Amazon Predictions for 2021

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2020 may have been a difficult and challenging year for most businesses. But not for Amazon. The marketplace emerged as one of the winners of the pandemic, with the widespread shift to online shopping seeing the platform increase its US market share to 38% and generating a 37% year-on-year rise in net sales according to the latest Q4 report.

The global health crisis – and the changes in consumer behaviour that it has sparked – mean that whatever predictions we may have had for Amazon this year have flown out of the window. Amazon’s unprecedented growth is, in turn, expected to trigger unprecedented investments across a number of areas as the e-commerce giant grabs new opportunities to further develop. But just what may be on the cards for 2021?

Here’s what could happen…

1. Further Improvements to Amazon Logistics

Amazon Logistics – Amazon’s delivery arm – has been expanding outside of the Amazon network for some time. Almost out of nowhere, it became the world’s leading third party logistics provider, beating long established firms such as DHL and FedEx.

And Amazon Logistics is currently enjoying completely unrivalled levels of success. Not only did it receive high praise for managing to maintain excellent operations at a time when many other providers were struggling during the first wave of the pandemic, but it was also handed a massive reputation boost for partnering with the UK Government to deliver essential COVID-19 home test kits to key workers… all free of charge, of course.

If the board had failed to realise the true potential of Amazon Logistics before, then they certainly see it now. It’s almost impossible to miss. And so, this year, we predict that Amazon will invest more than ever in building a strong delivery service that dominates the market.

By expanding the capacity and capabilities of Amazon Logistics, Amazon may become the carrier of choice to support the growing direct-to-consumer trend that has been accelerating rapidly over the past few months. Research shows that DTC sales rose by nearly 25% in the United States alone, with similar figures across Europe.

Is this prediction likely to come true?

Yes, especially when you take a look at some of the organisational changes that are set to take place across the Amazon network this year. With current CEO of Worldwide Consumer, Jeff Wilke, taking early retirement in 2021, Dave Clark will be stepping into his shoes. Clark, Senior Vice President of Retail Operations, joined Amazon in 1999 and has been firmly focused on the logistics side of things since day one.

Clarke was instrumental in building Amazon’s air freight service, and played a huge role in Amazon’s decision to sack FedEx from its approved supplier list due to performance issues. If anyone’s going to make changes to Amazon Logistics, Clark’s the man to do it.

2. Global Expansion of Amazon Live

Man holding a movie clapper board

Live shopping experiences on Amazon are nothing new. In the United States, Amazon Live has been fully functional for more than 12 months, and the categories that it covers today are diverse, ranging from beauty and fitness to cookery, electronics, and pet products.

This Amazon Brand Registry feature is available to all US sellers with an Amazon Store and allows them to live stream interactive video content that enables viewers to purchase products directly, in much the same way as watching QVC.

However, while updates to the US service have been regular – some of the latest include chat moderation and horizontal capture – Amazon have so far failed to bring this feature to the rest of the world.

This year, we predict that all that will change, with Amazon Live finally being rolled out across some – if not all – of Amazon’s regions, including other destinations in North America, as well as South America, Europe, the Middle East, and Asia Pacific. Once again, this prediction is sparked by the pandemic.

As many physical stores have been forced to shut, customers are searching for new, unique ways to enjoy the social side of shopping without the in-store experience, and retailers are actively seeking solutions that enable them to provide this.

Amazon Live could emerge as a vital necessity during brick-and-mortar closures, allowing shoppers to enjoy a similar personalised experience from the safety and comfort of their homes.

Is this prediction likely to come true?

This is a tricky one. Amazon has already dabbled in live streaming shopping in the form of Style Code Live, which was cancelled in 2017 without notice, and without reason. But perhaps the timing just wasn’t right. As stores continue to stay shut, live shopping experiences are no longer considered a luxury, but rather a necessity.

It is likely that Amazon, in an effort to attract businesses whose physical presence has been impacted, will look to successful examples of virtual shopping around the world, and what they’ll find is China. China has been at the forefront of live streamed shopping for some time, with the livestreaming ecommerce market there now expected to be worth $63 billion following 2020’s 150% growth and upwards of 400 million unique viewers.

3. 100% Shift into Third Party Retail

Amazon currently builds two types of relationships with its sellers: first party relationships, and third party relationships. First party sellers are those who sell their products directly to Amazon, with the platform then acting as a reseller.

Third party sellers are those who sell their products directly to consumers through the Amazon platform. We predict that Amazon could potentially sell off or repurpose its first party business this year, focusing exclusively on the third party marketplace and development of fulfilment centres.

Why?

Third party retail has been Amazon’s primary source of revenue for years. In 2018, it was reported that around two thirds of online sales came through the third party marketplace. And so, from a financial perspective, it would make sense for Amazon to drive more resources into the ever growing third party marketplace, perhaps shutting down its first party arm and even ending sales of its own private label, Amazon Basics, which hasn’t been quite as successful as the corporation was hoping it would be.

What this means for third party sellers is, well, everything. Walking away from first party relationships would undoubtedly leave Amazon with more time – and more financial resources – to drive into further developing the third party marketplace and introducing a range of valuable new selling, marketing, and logistics tools to boost sales and profits.

Is this prediction likely to come true?

Perhaps a 100% shift into third party retail is taking things a little too far. However, a greater focus on third parties wouldn’t be completely outside the realm of possibility.

For example, it could be a way to abandon the Amazon Basics label without drawing too much attention. A report by CNN identified 1500 reviews across 70 Amazon Basics items since 2016 that mentioned some form of explosion, fire, smoking, melting, malfunction, and risk, and it’s definitely been having an impact on reputation. There are a few signs that third party retail will be a hot topic this year, such as Amazon’s recent investment in new fulfillment centres suggesting an anticipated rise in demand.

4. Consolidation of Grocery Offerings

Close up of a shelf of bananas in a supermarket

In the UK right now, visitors to the amazon.co.uk website are provided with three distinct ways to purchase consumables online and have them delivered directly to the door:

  1. Amazon Prime – Amazon’s ‘grocery’ category offers non-perishable household goods, including food cupboard staples, chocolates, sweets, and snacks. These are purchased through the normal Amazon platform, in the same way as for any other category.
  2. Amazon Fresh – This is a same day delivery service that offers fresh, frozen, and ambient food products and household products from a local Amazon warehouse. Shoppers are provided with a 2-hour delivery window, with free delivery over £40.
  3. Morrisons – Amazon has partnered with Morrisons to offer a delivery service where selected items are picked, packed, and delivered from your nearest Morrisons supermarket in much the same way as they would be when placing a direct order.

Each option has different delivery times, different basket minimums, different delivery charges, and different delivery thresholds. It gets confusing. And so, for 2021, we expect that at least some of these options will be consolidated to create better, more seamless experiences for customers using Amazon to purchase food and household goods.

Is this prediction likely to come true?

Absolutely.

Going back to our first prediction – improved logistics capabilities – as Amazon invests more in logistics and fulfillment we expect grocery services to be high on the list.

The COVID-19 pandemic has massively increased demand for supermarket deliveries, so much so that many supermarkets have been unable to keep up.

Reports show that ecommerce now accounts for 13% of all grocery sales, up 7% year on year. Consolidation is already happening. In the UK, Prime Now is no longer a distinct service as it is in the US, but rather a category name for Fresh and Morrisons services Amazon also put Pantry to bed, transitioning all pantry items into the main grocery category.

5. More Branding Options for Advertisers

Lady in her office looking at her computer screen

Our final prediction for Amazon in 2021 is that it will solidify itself once and for all as a branding platform. Of course, the shift to branding has been in the works for quite some time, with recent updates and beta programmes being introduced such as Posts, Brand Stories, and video in Sponsored Brands.

There are a number of different ways Amazon could move forward with branding, but we’ve identified a few of the most likely ways.

The first is that Amazon will launch a selection of new insights and analytics tools for Sponsored Brands ads, helping to ensure that sellers are fully aware of the impact of their efforts, and can easily see how branding activities are influencing the bottom line.

It’s also possible that Amazon Posts will be adapted to look more similar to the Instagram feed as a way of building familiarity amongst first time Amazon sellers.

Is this prediction likely to come true?

Yes.

Branding is undoubtedly going to be a major focus for Amazon in 2021 as the marketplace becomes increasingly saturated. As retail moves online – and moves online exclusively for those businesses deemed to be non-essential that have been forced to shut their doors during the pandemic – the Amazon marketplace will become more competitive than ever before.

Inventory and pricing will no longer be enough to stand out. Businesses will need to differentiate through something else; through branding, through storytelling. And so it makes sense for Amazon to ensure it has a robust branding platform to give sellers what they’re looking for at this difficult time.

What Does the Future Hold?

Of course, as 2020 has shown us all, we can never predict exactly what’s going to happen. However, based on the changes that Amazon has been making over the past few years, and the shifts in consumer behaviour that have arisen due to the global health crisis, we can expect to see at least some of these predictions come true.

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