Scott Galloway provides a short video where he shares some crazy statistics about Amazon. For example, did you know that within 45 minutes of an order being placed at Amazon, it is already loaded on a truck! In that video, Prof G also references a book where you can get many more details, Arriving Today: From Factory to Front Door — Why Everything Has Changed About How and What We Buy. This short video might be fun to show in class when you cover Chapter 3 (where we have a chapter opening case study of Amazon), Chapter 11 (logistics) or Chapter 12 (retailing).
Supply Chain Woes Drive Up Prices
My students are often curious about how the pandemic has influenced marketing strategy planning. The biggest example are the supply chain problems (Chapters 10 and 11) we read or hear about all the time. Those have clear implications for consumers who cannot find that new bike, toy, or automobile they are willing but unable to purchase. What are the marketing strategy implications?
First, there are implications for retailers (Chapter 12) who lose sales when their shelves are empty (or at least not fully stocked). That costs them sales and goodwill. Second, it can lead to higher prices (Chapters 17 and 18) which contribute to inflation (Chapter 3) which are specifically addressed in this article “Supply chain woes lead to pricy outdoor recreation products.” The article gives an example of a Kelty camping chair that will jump in price from $109 to $139 because shipping costs for a container have jumped up to 10x. All told, a great example that ties together a range of concepts in the textbook and the real world. A great example to share at the end of the semester.
Inflation worries influence consumer behavior; how do companies respond?
Several product categories have seen costs spike during the pandemic. While supply chains get plenty of well-deserved blame, there are more reasons than that. These videos might provide an opening to discuss this topic in class. The Wall Street Journal video “The Surprising Ways Inflation is Hitting Diapers” (August 4, 2021), describes how diaper makers costs have risen – everything from raw materials to freight costs. In addition, changing demographics (fewer babies born) has the two big diaper companies raising prices to offset lower unit sales. The result has been an increase in diapers prices of 12% in the last year.
Along the same lines, coffee prices have also soared (up more than inflation over the last five years)– see another WSJ Video “Your Coffee Is Getting More Expensive. Here’s Why.” This article describes how shipping costs have contributed to those rising prices. Together, these articles can show your students how prices are influenced by demographic trends, raw material costs, and freight costs. And coffee (maybe diapers) are product categories students understand.
Is this the dark side of Amazon? At the center of plenty of channel conflict
I know, I know, we always seem to be using Amazon as an example. Well the company gets plenty of press–both good and bad. This probably falls better into the latter category. The article, “More brands are leaving Amazon, but the strategy could backfire,” (CNBC, January 11, 2010) describes how some bigger brands–including IKEA and Nike–have stopped selling through the online giant. These brands have become frustrated with Amazon’s failure to police counterfeit products or are concerned with competition from the retailer or its third-party sellers. The brands might leave, but because third-party sellers still offer the brands, their departure does little if anything to harm Amazon–and may do greater harm to the brand. A bit of a catch-22 for large brands.
This situation provides a good example of vertical conflict (between Amazon and the brands) and horizontal conflict where third-party sellers are competing with brands trying to sell direct through Amazon. It also offers an opportunity to discuss how a brand can lose control of its strategy when third-party sellers set their own pricing and messaging. Thus, it has relevance to Chapters 3 (competition and Amazon chapter-opening case), 8 (branding), 10 (channels of distribution and channel conflict), and 12 (retailing). With that much relevance I couldn’t hold back.
Amazon’s advertising platform turns off customers…
It seems like we talk about Amazon a lot here at Teach the 4 Ps. For several reasons Amazon is a great class example. First, it is a brand that everyone knows and most of our students use on a regular basis. Second, they are at the leading edge of so many new marketing practices. Third, Amazon offers the opportunity for examples that reflect many marketing practices (and many chapters). Today, we are talking about Amazon the online retailer, as an advertising medium. After Google and Facebook, Amazon is growing fast as an advertiser. A Wall Street Journal article earlier this year pointed out that “54% of people looking for a product now begin their search directly on Amazon…” Search advertising has traditionally been Google’s sweet spot.
This article, “Ad Business a Boon for Amazon But a Turn-Off for Shoppers,” (November 26, 2019) points out that Amazon may need to be careful with all the advertising. Some customers are getting annoyed with the online retailer for serving up too many ads. Customers just want the product they are looking for–but they often have to search through many “sponsored posts” before they get there.
This article or example may be used in your marketing classroom in a number of ways. If Amazon wants to do well by customers, is this the right way? Is this customer-oriented behavior (Chapter 1)? An interesting counter-example might be drawn out by asking students if they have ever gone to Amazon looking for one thing, then seeing an ad for a competing product, and ended up buying the competing product. Was that information useful?
The question gets further muddled when the article also notes that ads like this might help Amazon deliver one-day service that customers love (Chapters 10 and 12). It also suggests changes in consumer behavior (Chapter 5). And then of course the article highlights how Amazon is becoming a new advertising medium (Chapter 15). Lots to potentially talk about here.
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