Andrea Leigh, Ideoclick’s VP of Strategy and Insights, recorded her Amazon predictions for business during 2020 and beyond. Since then, the ecommerce industry has shifted dramatically, but many of these Amazon predictions are still very relevant, and are especially interesting today.
Leigh preceded the content of the video with the statement that her Amazon predictions are not based on any inside information. Leigh’s predictions are formed through her knowledge of Amazon’s behaviors in the past, Amazon information in the news, and her personal opinions.
Prediction #1: Amazon Will Spin-Off a Business Segment
The prediction was that Amazon would spin off its AWS and/or its advertising business. This was based on the observation that Jeff Bezos prefers to resolve issues his own way instead of waiting for the government to get involved or provide guidance. For example, recounting the reaction to the headcount tax in Seattle, Bezos responded by stating that he would stop hiring in Seattle.
“This [spin-off move] would distance Amazon a little from the question the government is asking about whether they are taking funds from highly profitable segments and shift to help their retail business, therefore making their retail anti-competitive,” Leigh explained.
Update: The heat is on with Jeff Bezos being called into a congressional antitrust hearing to testify along with other technology leaders from Google, Facebook, and Apple. Although Amazon is not being charged with antitrust violations at this hearing, it’s a solid reminder that the government will always be curious when one company wields such a vast amount of power.
Prediction #2: Grocery Consolidation
Considering the many different grocery formats Amazon has (Amazon Fresh, Prime Now, Amazon Go, Pick Up Points), Leigh’s next Amazon prediction was that they would create some integration between the different formats. She noted that the platforms are growing and likely becoming more costly to operate separately, which creates a good business case for consolidation. “I would expect some integration here,” she said. “Maybe some rebranding [to alleviate format confusion] and potentially some consolidation.”
Update: Now that consumers are navigating social distancing orders due to the COVID-19 pandemic, Amazon Fresh has become a heavily relied-upon method for many families to receive their groceries. This may lead the direction for Amazon’s grocery consolidation decisions.
Amazon Pantry has recently paused taking new items, indicating that they may be folded into another program. Ultimately, there’s still a need for Amazon to at least repair the confusion around how the different Amazon grocery formats work.
Prediction #3: Retail Acquisitions for Amazon
Leigh predicted more retail acquisitions would be being targeted by Amazon, specifically in the small drug-store chain and fashion categories. An Amazon purchase of a small format drugstore chain would enable the company to gain an instant geographic footprint versus negotiating leases one by one, noted Leigh. She explained that this model could be especially helpful in creating locations for order pickup in more densely populated neighborhoods with apartment dwellings where ecommerce tends to struggle.
Fashion is another acquisition category Leigh predicted. With Nordstrom aligned in technology, innovation and customer focus, she thought they would be an ideal acquisition target. Amazon is after credibility in the fashion space, she explained, and was previously unable to achieve it.
“They’ve been unable to break into this space in a meaningful way,” Leigh said. “I think [Amazon] believed in the past that they would be able to sign some higher-end [lines] and fix their site to make the navigation and discovery experience different for fashion.”
Leigh noted that Amazon’s private label fashion assortment has become interesting and could conceivably be sold through acquired retail locations.
Update: As the coronavirus pandemic has caused tremendous economic strain and even closures for retailers, especially in the fashion sector, the price tag for another retailer acquisition could be decreasing. The company’s recent talks with JC Penney wouldn’t gain Amazon much fashion credibility but could provide them with real estate for their own fashion endeavors.
From a fashion image standpoint, Amazon has made progress with the introduction of Amazon Prime’s “Making the Cut” fashion reality show featuring Heidi Klum and Tim Gunn – enabling them to become affiliated with a higher fashion sense and bridge the gap between fashion and online purchasing.
In March of this year, Vogue and the CFDA partnered with Amazon to create Common Threads fashion storefront to support the financial pressures independent designers are experiencing during coronavirus. The storefront, promoted heavily in the Amazon Prime Wardrobe try-before-you-buy shopping service, is where fashion-savvy consumers can find designer $1,200 summer dresses and $85 face masks. This has opened yet another area where Amazon is sidling up to well-respected brands and hand-selected designers to improve its fashion reputation.
Prediction #4: Voice is the New Search
“I think we’ve all been underestimating the power of voice,” said Leigh, when talking about her fourth Amazon prediction for Amazon’s upcoming year. She explained how her belief is that Amazon’s entry into Voice is not directly about shopping, but about the company’s quest to know the consumer.
The reason Amazon wants to know a consumer’s likes, dislikes, and search behavior is for them to continue growing as a company. “They need to figure out how to continue to monetize the traffic they’re experiencing on their website.”
With a shift to thinking about Amazon as more of a search engine than a retailer, the company can leverage its traffic on a whole new level, Leigh speculated. There’s a compelling reason why Amazon, through its Alexa Fund, has invested tens of millions of dollars to help the Voice industry move forward, and it will be interesting to watch the platform and voice technologies open new possibilities in the future.
Update: Amazon has announced a huge increase in the use of Voice in the home for music, skills, and search while people are spending more time in the home due to the COVID-19 pandemic. “In many ways, Alexa acts as a search engine but without the need for an extra device. There’s also a more personal element to the voice interactions,” said Tom Taylor, SVP for Amazon Alexa in this recent Geekwire article.
It also seems that every week, new and more affordable products are being added to the IoT household voice-controlled list. The depth of data collection in this realm is enormous and will be in high demand by CPG companies. It may be a matter of time before that data becomes a selling point for Amazon’s demand side platform (DSP) advertising. Amazon can keep its commitment not to store personal information from its Alexa smart speaker devices while still leveraging behavioral data.
Latest Amazon Predictions for 2020 and Beyond
It’s safe to say that many of the above sets of predictions from ecommerce experts have proven to be true when compared to actual Amazon market happenings. Topics including Amazon healthcare, Amazon fashion, and Amazon supply chain are all discussed in our Amazon predictions video. Discover our most recent latest Amazon predictions recorded by Ideoclick’s VP of Strategy, Andrea Leigh.
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