If you’re a brand operator or leader and not excited about Amazon.com as a short- and medium-term growth channel, I’m afraid your competitors may be laughing as they quietly prepare to eat your lunch.
Amazon will continue to dominate in the next few years
Online retail makes up less than 16% of total retail sales, but is growing at more than double the rate of overall retail. Amazon drives more than 2/3 of the online retail market.
While Amazon is growing slower than the overall eCommerce market (12% last year vs 16% for the total market), it’s sheer size will keep Amazon.com as the global leading online retailer for the next several years, at least.
In other words, don’t get too distracted by other platforms yet - Amazon is still the place to be online.
The Amazon channel is an increasing focus for Boards and Investors
Amazon has matured as a marketplace from a disruptive eCommerce player to a core component of many global conglomerates’ sales strategies. This shift is evident in a couple key areas:
Stock performance: The correlation between Amazon's stock price and the performance of companies with a strong Amazon presence has become more pronounced because of how hey drive each others’ revenues, and is becoming more of a frequent topic in investor presentations
Traditionally retail-focused companies: like those in the CPG, Luxury and even Automotive segments - are investing heavily in Amazon to reach a broader consumer base
Dedicated Amazon teams: Many large corporations have established dedicated teams to manage their Amazon presence, showing a shift to committing to the platform.
Expanded budgets: Amazon advertising budgets have grown significantly, driving Amazon’s Ad Services revenue up by 16% in 2023.
The platform will evolve more and more quickly
Nonetheless, think how far Amazon has come in the last few years: Just 5 years ago:
- Revenue from 3P sellers has nearly tripled, from $54B in 2019 to $140B in 2023
- Amazon Ads was nowhere near the revenue stream it is today (ad revenue more than doubled between 2020 and 2023, up to $46.9B last year)
- Sellers and brands had very limited options to tap into customer data for targeting and optimization. Compare to 2024, where Amazon Marketing Cloud - and even standard in-platform tools like Sponsored Display - allow for quite sophisticated customer segmentation and targeting, greatly improving attribution and efficiency
Given increased competition from other online retailers and players like TikTok Shop, and increased demand from brands and sellers, Amazon will pushed and pulled to innovate even faster in coming years to maintain dominance.
So, Amazon in 2029 is going to look very different to what it does today. But what direction is it heading? We’ll try to answer that today.
So the billion dollar question is:
What strategies will define the future behemoth brands of Amazon?
Gone are the days of random no-name imports raking in the big bucks on Amazon; today, Amazon is more brand-driven than ever.
Driven by a rise in private label brands, increased advertising spend, and 3P DTC-first sellers, Amazon has turned from a search site to an ever-more-immersive way to discover new brands.
But it’s clear that some brands are really driving at the cutting edge, and others are being left behind.
These are the strategies that are setting the dominant players apart:
1. Fully integrate Amazon (and online retail) into P&L as a core channel alongside Retail and DTC
I’ve seen Amazon integrated into brands’ P&L in a bunch of ways, but recently more brands are splitting it out as it’s own channel (as distinct from DTC and/or retail depending on whether the brand is selling via 1P or 3P).
This is a critical step because:
- In the case of Amazon 3P, cost structure is distinct to DTC
- Channel KPIs are unique and distinct from both DTC & Retail
- Category-specific dynamics like market share need to be tracked to contextualize top-line trends
- Sales are less correlated with other channels - typically more driven by market dynamics than DTC’s advertising “pull” and therefore less erratic
- Operations and requirements are relatively distinct from other channels - which needs dedicated resourcing, separate strategy, and it’s own budget
This isn’t enough, though.
Brand leaders must also push for cross-functional, omnichannel alignment between each channel, not least so that brand messaging seamlessly integrates across channels and timeframes. Special coordination is needed with DTC, since DTC advertising at scale has a significant halo effect on Amazon.
Cross-functional syncing also forces prioritization of issues, sometimes reaching “plan C” decisions that result in a better outcome for the whole company instead of channel A or B.
Either way, brands who will win on Amazon will have given their Amazon team appropriate support and delineation, in line with the channel’s increasing focus from stakeholders.
2. Own the customer relationship through DTC, maximizing eCommerce presence
Not owning 1P customer data is a huge bugbear for eCommerce leaders about Amazon.
Lack of 1P data massively reduces LTV potential on the channel compared to DTC, since you can’t reach out to push reorders. Not to mention that the data gap takes away most of the ability to understand the customer and connect with them personally.
Although those used to be reasons for DTC brands not to go for Amazon, the tides are now turning. With rising DTC advertising costs and the realization that Amazon customers share less overlap with DTC than previously feared, therefore resulting in less cannibalization of sales as Amazon grows, many DTC brands are taking a more aggressive approach to their Amazon growth — while still protecting the value proposition of the DTC channel. It’s common practice, for example, to exclude DTC segments from Amazon targeting to minimize CACs and maximize LTVs, and reduce DTC cannibalization.
Many market darling DTC brands are further fine-tuning their DTC approach to drive value, both to reduce reliance on the fast-growing but high-risk Amazon channel, and as a way to continue to foster brand loyalty.
For example, Hello toothpaste offers limited products and bundles on their site not available elsewhere, and they’ve driven a vortex-like funnel to their site using some massive influencer accounts.
Conversely, Dollar Shave Club defaults users to their subscription option on their PDPs. It feels a bit sneaky, but I suppose is one way to get around ever-increasing CACs.
As a result, the roles of each channel within the omnichannel mix have become more clearly defined in the last 2 years:
- DTC pulls customers in from paid media and retains via lifecycle marketing, driving maximal customer lifetime value
- In-store retail generates awareness and familiarity, and offers the best price and availability for customers, and acts as a significant revenue driver for brands
- Amazon offers ubiquitous availability and ultimate convenience. It’s shoppers’ primary search destination and brands can achieve quick payoff on the first order
While I’ve heard anecdotal evidence that there’s very low (single- to low-double digit) overlap between channels, it’s becoming more imaginable that customers loyal to a brand would switch between channels depending on their needs.
DTC, as the channel with the most direct mechanisms to drive loyalty, plays a pivotal role in creating the “glue” to keep a customer within a brand’s channels — and augments the eCommerce experience in a way that Amazon can’t.
3. Develop (or hire) deep mastery of Amazon’s ecosystem, at all levels of the organization
At the most basic level, to grow on Amazon today, you need very competent operational support. Amazon is a tough business partner. Their customer service doesn’t care about you, their departments do not speak to one another, and your account can get switched off at any minute on a technicality — even if you’ve done nothing wrong.
A lot of success on Amazon comes down to risk management and playing defence - against operational issues like this, against out of stocks, resellers, and bad actors.
From my experience managing a category-leading, mid 8-figure 3P brand, you really need a specialist on your account for when things get hairy.
I prefer having a third party agency to manage operations, but many brands bring someone on in-house or as a contractor.
Whatever a brand chooses, I’ve only seen it work when the person is 100% dedicated to operations (instead of having to juggle ore strategic work alongside), is deeply knowledgeable about the channel and policies, and is confident enough to solve issues without escalating too often (which causes bottlenecks).
At the mid-management level, Amazon team leads need to make a proactive effort to understand the nuances of how the platform works, and stay updated with policy updates — it’s critical that they understand the repercussions of their decisions, which sometimes have unintended second-order impacts (like changing a barcode).
Team leaders tasked to grow the channel will need to become champions of the channel. They’ll find themselves having to explain, sometimes several times, what “the buybox” is to their CEO. As with any system, they’ll have to make sure they understand the nuances of how the system works when going into those conversations, so that they can focus on driving tactical decisions.
At the highest level of the organisation, the strongest brands on Amazon stand out because their executives and eCommerce leaders deeply understand Amazon and their respective categories’ place in it, and drive the Amazon growth agenda. They have both the technical oversight to drive decision-making, and the skill to communicate channel nuances upwards and externally, which remains a differentiator for a channel as poorly understood at the Executive level as Amazon.
Case in point: Aaron Jones, VP of Digital at Liquid IV — One of this highest grossing brands on Amazon — founded his own CPG brand to become the best selling new product on Amazon, and then went on quickly rise in the eCommerce strategy team at Unilever, before taking over in his current role. It’s obvious that he has both the channel and category knowledge, as well as the senior leadership experience, to drive the Amazon agenda for the brand. There’s a reason they’re outranking even market honey LMNT hydration, and as with most things, I suspect it comes from the top.
Undoubtedly, the brands that succeed on Amazon will have a team driven by masters of the channel - operationally and strategically.
4. Create an outstanding brand foundation
Most brands come to Amazon fully formed, but some brands have a unique advantage: DTC brands.
DTC brands have been built for online, and so they naturally “pop” online more than brands who are built for the shelf. They typically also have a compelling social media presence and story, which looks great when duplicated on an Amazon storefront.
But even the most old-school retail brands can make an Amazon store look great. Check out Levi’s. Their search and storefront experience is worlds better than other apparel brands on Amazon (a notoriously underdeveloped category), and their selection is so extensive but easy to navigate. And finally, they have an incredible amount of positive reviews on most of their products - there’s not much you can do on Amazon if you don’t have a quality product, because the reviews say it all. Overall, Levi’s has managed to make dozens of drab pairs of jeans stand out on Amazon - it works.
On the other hand, it’s worth noting how different the Amazon landscape is to what you might see in Retail. For example, note the prominence of Chinese brands and how many of them don’t even have a brick an mortar presence in the US.
Along these lines, competition can come from unexpected directions on Amazon — and come unexpectedly fast — and winning brands will have prepared for that, as any winner will have some challengers after a while.
For example, I run the Marketplace team for a men’s natural soap company, the market leader in soap for a few years. We noticed that there were these “skin lightening”, “kojic acid” popping up on our non-brand search results, and within a few months, we suspect the brand (which is aimed at women) had clearly stolen a fair share of the total soap market - men’s and women’s.
Shifting trends like this are difficult to predict or respond to until it’s too late, but many strong brands have protected themselves with unique positioning, branding, and marketing that can’t be beat. For example, Crocs: no one can come up against that shoe model. And Yeti: They’re market leaders in outdoor products, positioning themselves as premium and durable. Their products sell twice as fast as products a third of the price.
But it’s all about what you do with it on Amazon.
Crocs is indeed one of the topselling brands on Amazon, but their search listings are rather messy (being sold by dozens of resellers and distributors), an their store - which could help organize the selection - is just a product dump.
If you’re looking for a Yeti, though (which as a shopper looking for outdoor gear, you probably are, because you’re comparing the other brand you want to buy, at half the price), you’re funnelled into a colorful swirl of beautiful products, leading to a pleasingly themed and color coded brand store which perfectly brings across their brand experience. It’s hard to click away from that page without feeling like you’re really losing out on something.
It feels to me like every week Amazon is deploying a tiny tweak that makes brands and their products “pop” a little more on site, and while I struggle to keep up, I’ve kept note of how best-in-class brands are using the features — not purely as direct conversion rate drivers, but to support the customer experience.
Like, Premium A+ content, or Mary Ruth’s store page that looks better than their DTC site (the incredible store format is apparently a testing concept for now).
Whether you keep it simple and direct like Levi’s or immersive like Yeti, creating a brand foundation drives desire and interest in customers.
The future behemoths of Amazon, I predict, will absolutely outshine their competitors in this way, converting the awareness they drive with off-site activity to exceptionally high conversion rates through gorgeous product, ad, and store imagery, engaging video, and unique formats.
(As an aside, even small DTC brands are uniquely well-positioned to do well on Amazon because they’ve generally developed a strong digital brand presence which translates well both to content and customer interest. Branded search for new brands has the most marginal utility of any type of search, so lean into it while you can - you’re already paying for it! For goodness sake, if you’re a DTC brand and you’re STILL not on Amazon, this is your sign.)
5. Use a full-funnel approach to Amazon Retail Media to drive traffic
“Amazon US is growing more branded as a whole”, says Momentum Commerce. And I believe them. In June 2024, they cite 22.9% of Amazon.com searches containing a brand name, up from 22.6% a year prior. Not a huge jump, but along with other indicators, you can sense a definite shift towards brandedness on the platform versus where it was 5 years ago.
Branded searches are frequently driven by off-Amazon activity like top-of-funnel campaigns or social media spend, and so it’s critical to track your branded search activity over time — and it’s share in the category — to understand the impacts of your omnichannel investments in your category share.
However, relying on off-Amazon media (e.g. driven by DTC or broad brand campaigns) to drive interest on Amazon is no longer enough.
When we think about brand marketing, we usually think about it as driven top-down by brand and marketing teams with agency execution. This has resulted in only incremental changes in adoption of retail media, little match for scrappier brands more responsive strategies.
Streaming TV (STV) is one of those strategies. It’s become a bit of a buzzword, but much less frequently actually put into practice (in my experience), and even less often done smartly. This is mostly, I think, because Amazon’s own tools started off so rudimentary and have evolved so quickly that there are few experts able to actually make proper use of them. But, some brands are driving incrementality.
As an example, a challenger brand IQBar in the nutrition bar space, tested upper funnel media for Amazon and drove meaningfully better bottom-line results.
I predict this will be the next wave of media on Amazon, and that it’ll take a long time for clunkier and less-equipped brands to catch on. Brands getting in on the trend early will drive a disproportionate volume of incremental traffic. With rising CPCs on paid search, this could be a game-changer for some brands.
Of course, I haven’t mentioned anything yet about Sponsored Products, Display, and Brand. In case it wasn’t obvious, it’s critical for brands to be investing adequately in those channels to capture lower funnel demand before they explore upper funnel media. All the biggest brands already are. Amazon’s ad inventory has expanded rapidly over the last several years to meet rising demands and has now reached it’s peak, but if you’re still underinvesting in ads, well, you’ll be left in the dirt by brands taking up the majority the customer viewing heatmap. Don’t think you can get away with not investing in branded search, either - a lost customer on branded search will probably cost you more than a gained customer gives you even on totally organic non-branded, depending on your Off-Amazon CACs. ‘Nuff said.
6. Strategically expand product portfolio
Typically when a brand starts out on Amazon, they start with a handful or less of products. Ideally, these become top-sellers. Whether or not they do, it’s important to expand the portfolio because reliance on one or a few SKUs leaves a brand highly exposed to risk, and leaves potential money on the table with unexplored categories. And in case you’re wondering, no, being a premium brand doesn’t necessarily put you at disadvantage on Amazon - higher priced brands in premium categories can do very well on Amazon.
Brands that I’m seeing now reaching rapid scale in omnichannel are putting at least their full core range on Amazon (and in Retail). You kind of want to make sure you’re always in stock of your basic SKUs there, if you can help it.
What doesn’t always make sense is limited releases or very long tail products (they take up valuable shelf and warehouse space and are a distraction). Those work better on DTC.
But Amazon also a great place to experiment with merchandising, like launching variations of the same product. You can launch 20 colors or scents of the same item on one parent listing if you want, and this really can drive incrementality if done right.
But, category expansion is the real game-changer for brands. Because there’s no limitations to what categories you can sell on, but access to a humongous TAM, Amazon is an ideal market to test new categories — Assuming you can eat the low ROI on the ads you’ll have to invest to gain traction early.
Amazon Aggregators and the people that trained them became the alleged masters of this process of category expansion (I know, I was there) in a sort of backwards way I like to call “market-product fit”. In short, your team looks for market trends like new but unsaturated sub-sub-categories and trending search terms to find gaps you can fill.
I think this deeply misses the point. This left brands with random hodgepodges of products that weren’t on-brand and chaotic supply chains, each node of which was underperforming because it had been rushed and the person running it had never even heard of the thing that they were sourcing.
I don’t know a lot of brands that were built like this who are doing very well today, because I think there wasn’t enough focus on specialization in the supply chain and marketing as a brand to keep up with the incoming wave of conglomerates.
The best brands on Amazon today in terms of product portfolio are those with a highly focused selection that addresses customer needs, drives repeat purchases, is easily shoppable, and supports their brand experience. Think Apple, Allbirds, Olaplex.
Tactically, this looks like strategically adding products that address existing customer needs. For example, a face wash brand can add a toner and a moisturizer, and advertise these at various stages along the shopping journey, reducing CACs and leveraging brand equity to create a “cart building” experience that’s would otherwise be challenging to create on Amazon.
Private label is another way area this can work well - same products, expansion into lower price-point segments. Anker, the portable charger company, has done this very successfully, as has The Honest Company, who makes non-toxic baby care products. For brands who have the scale, specialization, and reputation to do this, it offers a very interesting opportunity to expand market share to the lower-cost segment that works so well on Amazon.
The brands who dominate the future marketplace will all be playing in multiple categories or segments, with a strategic approach to portfolio expansion that builds on their unique brand strengths.
7. Obsess over customer data to drive incrementality
Firstly, every Amazon brand should be scrupulously tracking performance metrics (like traffic, AOV, etc - see point 8 below). Your team should be obsessed with combing through this data to find trends.
DTC-first companies moan about Amazon’s lack of customer data. Meanwhile, the best eCommerce companies are using first-party data as a value exchange - yes, even on Amazon. How?
- Lean into data monetization. With apps like Pogo and BrandClub, customers are rewarded for sharing their purchase data, making incremental transactions, filling out surveys, incentivised to leave reviews (yes, legally!) and more - all things that are otherwise impossible within Amazon’s system of withholding customer details. But through these apps, legally, you can unlock an understanding of the shopper’s omnichannel journey while driving LTV. This could be the difference in retaining an extra 10% of a cohort to your brand when under threat from a competitor.
- Tap into AMC, DSP, and STV to strategically understand and target customer segments. Amazon DSP data is some of the richest you can find:
What’s more, this is data that you can’t find on any other ad platform – not even Google or Meta. Amazon has years and years worth of Amazon consumer data that is unique to Amazon. This comes from not only all the people around the world who shop on the Amazon marketplace, but also those who use Amazon-owned platforms such as Twitch Audible, Amazon Web Services, Goodreads, IMDb, and more. Are you interested in consumers who bought a product from your brand but haven’t in a certain amount of months? What about consumers who buy from your competitors? Would your product be perfect for people who have just recently purchased garden supplies? A baby cradle? Skin care? Pajamas? Geography books? You can pull in this information via Amazon DSP and build audiences with it.
Even better, you can use DSP to advertise to your DTC store too (although I’ve never tried this).
In my opinion, most experts have been a little smoke-and-mirrors about AMC so far — I’m not seeing anyone use it to drive meaningful recommendations at scale (but if you know of an example, PLEASE message me). Soon enough, it’ll get into the hands of the in-house analysts and strategists and we’ll hit an inflection point.
And since you all asked, here’s my take on customer reviews: Customer reviews are part of what you should be obsessing over. But know that 1) they are much less easily influenced, especially in the short term, than traffic and conversion rate, and 2) they are subjective.
If you notice your brand new product has 2 x 1-star reviews, by all means, take action. If you’re consistently 3 stars, you may need to actually consider, “is there something wrong with my product quality”? If you’re above 4 stars, and have good review velocity, I wouldn’t worry.
Except…
This is what all brands freak out about, especially when they’re newer to Amazon. “How do I get more reviews?” “How do I get rid of my bad reviews?” “Can I ask for reviews?”
You have a few options (Vine, BrandClub), but anything else is strictly forbidden (if you sell something without batteries and you’re thinking about a QR code right now, I’m talking to YOU).
Here’s what you do: You focus on driving top of funnel traffic, especially on social media. And you invest in high volume search terms. Yes, this is that sucky phase like when your microbangs are growing out, but you’ll get there eventually. All brands are built from scratch. You have to make an investment with a poor ROI now so it can pay off later.
Your DTC customers, who can now buy the product with the convenience of Amazon (and who you built up to be superfans) would probably love to leave a review. Just make sure you have something better waiting for them on DTC so they return.
8. Build lean, highly strategic teams who embrace technology
Amazon has a vastly different approach than traditional retailers (lack of concern with profit, rapid innovation, deeply entrenched interactions with the brands it sells).
It’s notoriously complicated as a platform and difficult to build relationships with as a seller or vendor.
And, as we described above, it’s changing fast, and so are it’s market segments. This means WORK. A lot of work.
A combination of the game-theoretic chess skills of a strategist, and the keyboard-hammering stamina of a WoW player.
Understandably, some companies’ teams approach the channel with long teeth.
But the beauty is that if you get the model right, you can get by with a relatively lean team of high-level thinkers, some outsourcing, a whole lot of Excel, and these core competencies:
- Extensive knowledge of how eCommerce works, AND retail know-how
- Ability to think strategically, several steps ahead, and think with an omnichannel lense
- Deep analytical abilities (which comes in handy when analysing that AMC data you’ll be looking at)
- Strong marketing expertise, with a focus on driving full-company advertising efficiency
- Ability to coordinate workstreams seamlessly and economically cross-functionally
- No-balls-dropped project management skills (or you risk your account being shut down)
I think it’s better to have a small team of high performers who display multiple of the above capabilities, rather than a larger team were you’re spreading them out.
Why?
Because Amazon decisions can be very high-stakes and very fast, and you want to minimize and standardize the number of factors and time going into them.
And, because the channel is pretty complex, and it’s much easier to split the work between 2 people than it is between 3.
I think it’s worth holding out for an A+ player for this channel.
Note, if you see the words “Amazon guru”, run for the hills. Gurus are focused on hacks and backend keywords.
You need someone who understands every aspect of the fundamental eCommerce equations:
- Revenue = AOV x Traffic x CVR
- LTV = CP x Repeat purchases in a lifetime
I’m shocked at how often candidates (and often people employed as experts) don’t show a strong ability to play with this equation when it comes to breaking down the drivers of growth.
Here’s why I mention that: Because this team will be spending a LOT of time in Excel. And hopefully whatever SaaS you use for ads. And maybe SQL. And LLMs. And a dozen more tools and platforms you’ve brought on.
They will be creating a lot of pivot charts, and a lot of models and sensitivities.
They need to figure out stuff like, “if we raise our prices to X, what will happen to our traffic and CVR, given that when we raised our prices previously to y, this other thing happened?” so that you maintain organic rank and profitability.
And, “how big should our catalog be and what should be in it and how should we message all of those products to maximize customer interest”?
Or, “What should my optimal spend mix be between ad types to maximize ROAS or minimize TACOS, and which one am I trying to optimize for right now?”
If you are looking to outgrow your competition, those are important questions, and you need someone who can really break the problem down to the drivers and then build a strategy around it.
If you can get a few of those people in your team, I could be wrong about the first 6 strategies in this post, but you could still win the market on Amazon.
And because I couldn’t give you the one without the other…
Strategies that no longer work:
- Excessive discounting
- Sole reliance on Amazon for sales
- Ignoring customer data and feedback
- Focusing on products and neglecting brand building
- Obsession with growth hacks and strategies
- Resistance to change
Key takeaway
Amazon.com will continue to be the leading US online retailer for the next few years.
While there are many other fast growing platforms that brands can and should be testing out to de-risk, every minute spent away from Amazon is a massive opportunity cost.
Firstly, in short term revenue, which leading players are stealing a growing share of. Secondly, in long term revenue: because Amazon is the marketplace leader, all of it’s innovations will become market norms.
Don’t do yourself a disservice and fall behind.
eCommerce will never usurp the pivotal role that brick & mortar stores play in customers’ lives. But, online retailers are becoming an increasingly integrated part of the shopping journey. Leading brands are using Amazon as the connector for customers to view, top up, and review items in between store visits, driving them there with 1P data and targeted ads.
Brands that do this effectively will devore customers from those who treat Amazon like a standalone channel that they are too scared or intimidated to understand.
Many Executives and Boards are already coming round to the idea of Amazon as an outsized value driving channel, and if yours aren’t, you should make sure they understand why they should.
Treat Amazon like the strategic, cutting-edge channel that it’s proving to be and you may have reason to celebrate market dominance in the coming years.