Consumers will be the real winners when Amazon opens in SA

Amazon Marketplace, an ecommerce platform owned and operated by Amazon, plans to launch in South Africa later this year, offering savvy brands an unprecedented ecommerce opportunity.

The largest ecommerce marketplace globally, Amazon Marketplace allows third parties to sell new or used products directly to consumers on a fixed-price online marketplace alongside Amazon’s regular offerings. The platform has done exceptionally well in the US, Germany, the UK, Japan India, France, Italy, Canada and Spain, and is experiencing growth in Brazil, Mexico and Australia.

How successful the platform will be in South Africa remains to be seen. What is not in question is that the launch of Amazon Marketplace will grow the ecommerce space in this country significantly, create employment, open up new channels for retailers to distribute their products and expand the local logistics sector. Amazon’s imminent launch has already spurred Takealot, part of the Naspers stable and a mature ecommerce brand by local standards, to make bigger investments in its platform.

The winners will be consumers, who will have more choice in their ecommerce offerings than ever before, particularly on Black Friday and other special holidays, given Amazon’s focus during these periods.

What differentiates other ecommerce retailers from Amazon is that they were primarily created out of necessity. Amazon enters the South African market on an entirely different premise and as part of its global growth strategy. The behemoth is undergoing a cost-cutting exercise worldwide as it strives to become more profitable. It’s likely that it will be prioritising acquiring sellers and eyeballs in its first two to three years in South Africa.

Last year marked a shift in Amazon’s strategic approach as it pivoted to concentrate more on brand owners and made brand registration mandatory for all vendors. At the same time it phased out nonbrand owners from vendor roles.

Many brands have enjoyed huge success on the Amazon platform. We expect Amazon to put a large seller acquisition team in place before the launch of Amazon Marketplace later this year.

However, before registering to become a vendor, it’s important that brands understand the platform and what it will take to do well on it - because simply having a brand presence on Amazon Marketplace is no guarantee of success.

Brands need to take their A-game to Amazon and continually re-evaluate their strategy to ensure it is effective. Brands that succeed on Amazon Marketplace understand that it will involve significant effort and resources. Payback on their investment will not be immediate. Even brands that have the necessary resources and understand how to play in this complex and highly competitive environment will start to see a return on their investment only 18 months after the launch of Amazon Marketplace.

If that’s the case, where exactly does that leave smaller brands that don’t have access to large marketing budgets? There’s a big misconception that just because Amazon Marketplace is the largest marketplace globally, all brands need to be on it and the profits will quickly follow. Smaller brands need to think carefully about whether they have the appetite and resources to play the long game required to succeed on Amazon Marketplace.

There are three key components to succeeding on Amazon: getting organic content, payment and accounting right.

Organic content needs to be optimised so that it can be found easily and provide each visitor with a great customer experience. Regarding payment, brands need to run highly effective campaigns targeting full funnel strategies both on and off Amazon. And as far as accounting is concerned, it’s important to remember that Amazon is a live environment that requires constant observation, change and the ability to manage an account effectively.

Brands need to become sticklers for detail and be prepared to put in the hard yards for at least a year as they build their presence, get reviews, build sales velocity and climb the organic and paid ranking ladder.

Ultimately, it’s all about building momentum on the notorious Amazon flywheel. The flywheel is Amazon’s way of using its algorithm to leverage customer experience to drive sales velocity. It’s important to understand how the ecosystem works and how the algorithm is weighted in order to optimise a brand’s listing. Get that right and the algorithm will be stimulated to notice the brand, at which time the proactive work of building the ranking to speed up the flywheel can start.

Brands that are serious about achieving long-term success on Amazon should consider getting expert advice on how to navigate this environment in all its complexity.

Michael Walker is head of marketing at RT7.

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The Red Zone
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