How Imitators, Amazon’s Choice and AmazonBasics Put Innovation at Risk
For brands that are built on new consumer product innovation, Amazon is the retail juggernaut that cannot be ignored. Franklin Foer, writing in the Atlantic, reports:
“Today, Bezos [Amazon founder and CEO] controls nearly 40 percent of all e-commerce in the United States. More product searches are conducted on Amazon than on Google, which has allowed Bezos to build an advertising business as valuable as the entirety of IBM.”
Simply put: if you want to sell products online, you must have an Amazon strategy (whether you’ll be offering your products on the platform or not).
Amazon is So Innovative—How Could it Endanger Innovation?
Amazon is widely touted as one of the most innovative companies of our time, earning such laudatory headlines as, “Amazon Shares 6 Ways It Creates a Culture of Innovation and How You Can Too.”
Of Amazon’s 14 Leadership Principles, several concern innovation. Perhaps Amazonian innovation is most clearly defined by the principle “Invent and Simplify:”
“Leaders expect and require innovation and invention from their teams and always find ways to simplify. They are externally aware, look for new ideas from everywhere, and are not limited by ‘not invented here.’ As we do new things, we accept that we may be misunderstood for long periods of time.”
For product innovators who have faced continuing challenges from the mega online marketplace, it’s perhaps bittersweet to consider that Amazon will adopt and sell any inventions—whether invented at Amazon or not.
It’s a Knock-Off World, After All
Amazon’s policies don’t allow the selling of counterfeit goods, but with more than 600 million items for sale and over three million vendors, enforcement is a never-ending battle. The Motley Fool reports the company spent $400 million in 2018 to address fraud and abuse, and has sued various third-party sellers for selling counterfeits.
Still, the American Apparel & Footwear Association placed some e-commerce venues operated by Amazon on its 2019 Notorious Markets list, stating:
“’While we are happy to have seen increased engagement with Amazon on brand protection issues during the past year,’ said AAFA president Rick Helfenbein, ‘that engagement regrettably has not translated into a discernible decrease in counterfeits of our members’ products on Amazon’s marketplaces.’”
Product innovation certainly suffers when there’s a realistic threat of counterfeit goods thriving in an online marketplace.
Louise Matsakis for Wired concisely defines what Amazon’s Choice is supposed to mean:
“One innovation the company devised is ‘Amazon’s Choice,’ a distinctive black badge typically bestowed on a single product per search term. The company says the award is given to ‘highly rated, well-priced products available to ship immediately.’”
But reporting by the Wall Street Journal reveals:
“‘Amazon’s Choice’ Isn’t the Endorsement It Appears – The retailer attaches the badge to some items with safety concerns, that make false claims or whose listings appear to have been manipulated.”
Matsakis also gives examples of when the Choice designation is applied to fakes, exacerbating the counterfeit goods problem:
“The whole idea of Amazon’s Choice—to make it easy for consumers to buy something they say they want—sometimes has more problematic outcomes. Take brands that aren’t on Amazon. Searching for ‘Goyard,’ a French company whose bags usually retail for thousands of dollars, often displays a $25 knockoff as Amazon’s Choice. The result for ‘Cult Gaia Purse’ is similarly a $30 impersonation; the designer’s signature handbag typically retails for around $150. By contrast, if you search Nordstrom for Goyard, the retailer displays a message saying it doesn’t carry that brand online and directs you to other options.”
When shady vendors game the Amazon’s Choice system, these ‘false positive’ results take up valuable space in search results and deceive consumers.
For consumers, the concept of AmazonBasics seems like a boon to shopping hassle and expense:
“AmazonBasics offers everyday items like HDMI cables, batteries, and audio cables to power electronics, as well as home essentials like bedding, towels, and knife sets, all at a value.”
These private label products, with their prominent search result placement and brand recognition, can quickly replace their name-brand counterparts. Beyond cables and kitchen utensils, AmazonBasics is just as capable of adopting the innovations found in larger-ticket items. This month, Consumer Reports declared its preference for an AmazonBasics Mattress over the Tempur-Pedic LuxeBreeze:
“Who wins when the least expensive foam mattress is pitted against the most expensive foam mattress? The least expensive mattress, according to a new Consumer Reports mattress report. That is the AmazonBasics 10-inch memory foam mattress, retailing for $245 in queen, which has an overall score of 68 from Consumer Reports. It came out ahead of a Tempur-Pedic Tempur-LuxeBreeze Firm mattress, retailing at $4,500, which has an overall score of 62 from Consumer Reports.”
I wonder what long-term impact this score will have on product innovation at Temper-Pedic. If mattresses are compelled to come down in price to compete with Amazon, how much R&D budget will the brand be able to allocate?
Despite the misgivings of inventors and product innovators about the effect Amazon will ultimately have on the marketplace, consumers reward Amazon with purchases—and loyalty. Foer writes:
“A 2018 poll sponsored by Georgetown University and the Knight Foundation found that Amazon engendered greater confidence than virtually any other American institution.”
So, in an Amazon world, what’s a product innovator to do? That remains an open question.