‘Amazon Choice is becoming increasingly important as we transition to this world of voice’

Alexa… how can I win on Amazon?

L2: ‘Amazon Choice is becoming increasingly important as we transition to this world of voice’

It’s well known that the brands that are growing the most rapidly on Amazon are not necessarily growing the most rapidly in grocery stores, so what are the most successful CPG players on Amazon doing differently?

Smart brands recognize that they need to develop a dedicated Amazon search optimization strategy and understand how best to use paid search, featured deals, sponsored products, subscribe and save and other Amazon features, says Cooper Smith, direct of research, Amazon Intelligence at e-commerce business intelligence firm L2.

“Companies such as P&G have institutionalized Amazon best practices," he told FoodNavigator-USA.

"They understand how consumers in their category are searching for products on Amazon. Yes, big brands have an advantage because they have more money to bid on keywords or promote their products, and they have a larger assortment. And yet we see that smaller brands are outperforming much larger brands in every category from beauty to women’s shoes.”

Customer satisfaction

But can products that really deliver for consumers - even if brand owners lack cash and clout - punch above their weight on Amazon?

Yes, said Smith, who noted that shoppers can search through top rated as well as best sellers, but also explained that Amazon Choice - whereby Amazon selects products to recommend in a given category - is based on customer satisfaction, not sales. 

It’s a special moniker that Amazon designates based on very high ratings, positive reviews and customer service. And it’s really important because Amazon Choice products go to the top of search results.  

“If you ask Alexa (the voice-operated search feature on Amazon Echo devices) for diapers for the first time [but don’t specify a brand], it will recommend the Amazon Choice brand, not necessarily the cheapest brand or the best selling brand. So we’re seeing the Choice moniker becoming increasingly important as we transition to this world of voice.”

‘Alexa, get me the usual’

If you’re looking at Alexa today as a piece of hardware, imagine a world in which Alexa was embedded in; you never ever left an ecosystem in which Alexa wasn’t reachable by your voice. And I think that’s exactly where Amazon’s trying to go whether it’s the Alexa app on your phone, whether that’s the partnership with Ford to embed Alexa into cars…

“You’ll get into your car… turn on your Alexa app in your car and go, ‘Alexa, get me the usual.’ That will contact your Starbucks app – contact your local Starbucks. Your usual be waiting for you when you drive up, walk in and walk out.”

Bryan Gildenberg, chief knowledge officer, Kantar Retail (speaking on a recent conference call hosted by analysts at Bernstein).

Will voice search kills brands?

According to Christian Rebernik, CTO at N26:

  • Alexa is in 4% of US households
  • Siri handles 2bn+ commands a week
  • 20% of searches on Android handsets are input by voice

According to Scott Galloway, founder of L2 and clinical professor of marketing at NYU Stern:

  • "Every day fewer people put a prefix of a brand name in a Google search and the same is going to happen with voice commands..."
  • "Over the past year non branded product searches have increased in every CPG category..."
  • "[Scott] Alexa: Buy Batteries... [Alexa] Amazon's choice for batteries is Amazon Basics...." 

Do you know how consumers shop in your category on Amazon?

“Between about 50-55% of all US products searches related to shopping today, start not on Google but on Amazon. 26% start on Google, 19% start on everything else. I think that's just one of the reasons why the CPG community continues to try to figure out Amazon because what they’re quickly realizing is that a lot of the work that I’m doing in digital marketing today needs to have an Amazon component to it in order to be able to work.”

Bryan Gildenberg, chief knowledge officer, Kantar Retail (speaking on a recent conference call hosted by analysts at Bernstein).

Walmart vs Amazon in food?

“In almost every city that Amazon Fresh is in, Walmart’s a trivial part of the retail ecosystem. So Wal-Mart’s problem in food is not Amazon in any meaningful way at all. Walmart’s problem in food … is their paranoia about the speed with which Lidl can accelerate because they’ve been to this movie before in the UK. They hate how it ends… Aldi and Lidl 12 years ago were less than 1% of the U.K. grocery market. [Today] they’re over 12% of the market.”

Brian Gildenberg, chief knowledge officer, Kantar Retail (speaking on a recent conference call hosted by analysts at Bernstein).

‘There’s been no better time in history to be a consumer than today’

Right now, when it comes to e-commerce, established grocery retailers retailers are spreading their bets and experimenting with click and curbside collect services whereby shoppers order online and collect their groceries at the store (Walmart, Kroger and others offer this service); and partnering with services such as Instacart and Uber and Lyft (many retailers have tried this, from Andronico’s and Whole Foods to Publix) that can tackle the last mile for consumers that want home delivery, said Smith.

“It’s a great way to test demand and dip your toe in the water, and then over time you could bring it in-house.”

Walmart's e-commerce boss Marc E. Lore told delegates at the recent Robert W. Baird Global Consumer, Technology & Services Conference in New York that it is now testing same-day delivery from 10 stores, meanwhile.  

However no one model is dominating, and we’re witnessing a period of intense experimentation both in terms of e-commerce, and store formats and product mix, said Smith.

“The only thing that is clear is that there’s been no better time in history to be a consumer than today. Retailers can no longer set up a large store in rural Ohio and expect to attract everyone in the neighboring towns. They need to be where their customers are.”

As a percentage of the overall grocery retail market, Amazon’s $350m in Q1 grocery sales (annualized – that’s $1.4bn) is pretty small fry. But its mouthwatering 30% year-on year-growth suggests that CPG manufacturers that don’t have a clear strategy for how to engage with Amazon now risk missing out on big opportunities further down the road, says e-commerce data firm One Click Retail.

Although online grocery sales are growing across all demographic groups, the largest group is men between the ages of 18 and 44, who are less likely to spend time in a brick and mortar store." Nathan Rigby, VP sales and marketing, One Click Retail

Top-selling categories, grocery, Amazon.com (US, Q1, 2017): Source: One Click Retail

  1. Snacks/granola bars +20%
  2. Coffee +35%
  3. Tea +15%
  4. Candy and gum +25%
  5. Wine +115%
  6. Snacks +40%
  7. Juice +35%

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