Opinion

Understanding Amazon

There is no doubt that the Amazon model is growing rapidly. As a manufacturer, one has to decide how to work with Amazon versus against it.

At a recent grocery leadership forum, the general manager of global e-commerce for Kellogg Co. said,

“Amazon is a critical customer for us in this space. They are still small, but they are growing quickly. When a consumer thinks about Amazon they think about a box that shows up on their doorstep. For us, they have continued to evolve their value proposition and offerings to consumers. It is important to note each one of their efforts has a value proposition for consumers, Amazon and us.”

Amazon demands of itself to deliver value to its suppliers, its customers and, of course, itself (the shareholders).  That is why it is growing.

The fact is that businesses cannot ignore customers’ choices on how and where they buy. The fact is customers are buying online in increasing numbers. What businesses should pay increasing attention to is profitability by customer. In this environment of slow economic growth and wage pressure, it will be interesting to see how companies allocate their trade spend on impulse versus planned purchase.

Convenience retailers that are well-positioned to motivate/encourage impulse purchases should seek a larger share of trade spend to encourage customer trial as well as to reinforce brand values.