When it comes to business news, we can’t go a day — or maybe an hour — without hearing about Amazon.
And why wouldn’t we? The ecommerce juggernaut continues to shape online retail and consumers’ demands for fulfillment and delivery. Amazon is even influencing brick-and-mortar retail, first through bagging Whole Foods and then by opening cashierless stores. Just this week, Amazon announced it expanded Whole Foods’ grocery delivery to a total of 48 cities.
Surely, Amazon represents great opportunity for all kinds of CPG manufacturers, but how can they navigate such a complex system? And how can candy makers make the most of it?
Peter Kearns, v.p. of client solutions for 180Commerce, has a few ideas. The former Amazon marketplace leader for consumables spoke to members of Retail Confectioners International (RCI) during the group’s Fall Regional Conference in Portland, Oregon last week.
Kearns noted 44 percent of U.S. ecommerce sales came through Amazon in 2017, and they're expected to swell to 58 percent by 2020. Amazon sales also accounted for 4 percent of all retail sales last year.
As consumers become more and more comfortable shopping online, Amazon doesn't just serve as the purchase point. Shoppers also use the site to research products, prices and reviews. In fact, 55 percent of product searches start on Amazon, Kearns said.
“You may want to be on Amazon should people be looking for your products,” he said.
Kearns added that sales of smaller brands are catching up to legacy brands, noting that growth is “significantly weighted” toward smaller brands, especially if they have causes or ingredient standards that align with consumers’ passions and needs.
Nonetheless, Amazon Marketplace can be tough to crack. Of the new sellers launched in 2017, Kearns said, only 28 percent generated a sale and fewer than 10 percent are selling today.
Furthermore, managing perishable grocery items — produce, fresh proteins, frozen goods and even chocolate — remains an issue for Amazon. While having the brick-and-mortar Whole Foods infrastructure helps, Kearns said technological advancements continue to be directed toward that space.
But what should candy makers do if they do decide to enter the world of Amazon?
Kearns suggested companies with seller central accounts should make sure product information is thorough and photos are high quality; have strong reseller agreements in place; and respond to unfavorable reviews as soon as possible.
In terms of fulfillment, Kearns noted consumers’ expectations for delivery timelines, especially with Amazon Prime, are shortening from days to hours.
“People in the U.S. have this mentality that you should be getting your products in two days for free,” he said. “It’s going to continue to be a problem.”
If sellers don’t want to handle shipping themselves, they can use Fulfillment by Amazon. The company has 120 fulfillment centers across the U.S., but they aren’t temperature controlled, Kearns said. Using this service requires strict inventory management, and candy makers may consider using it only from October to March.
Amazon also offers Seller Fulfilled Prime, which allows manufacturers to do their own shipping under the Prime guarantee — especially cold shipping — but it has to be within the two-day timeframe. It could be costly, but it does offer access to 90 million consumers dedicated to buying things online. Kearns said five billion items were delivered to Prime members last year.
It’s not an easy decision to make, but as technology continues to improve and consumers’ shopping behaviors change, it’s worth taking into consideration. But, as Kearns said, companies have to be ready for it.