Is this the dark side of Amazon? At the center of plenty of channel conflict

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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…

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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.

Mattress firms creating value (?) with financing deals…

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The mattress industry is a pretty crazy (check out “The Great Mattress Conspiracy: Why Are There So Many Mattress Stores?” on Endless Thread, podcast and story). You might check out the podcast for a fun example when you cover retailing. Or ethics. You might also check out one of our previous posts, “The Gray World of Online Reviews” (Teach the 4 Ps) — tags include ethics and online reviews.

Onto our story of the day and we are back in the retail mattress industry. With the emergence of new mattress products designed for easy shipping, online mattress stores (Casper, Leesa, Tuft & Needle), this market continues to be very competitive. Retail brick-and-mortar store Mattress Firm has closed 700 stores and is in Chapter 11 bankruptcy. Now they are competing on financing. In fact, Mattress Firm will give you six years of 0% interest on a mattress purchase of up to $3999. Financing is certainly one way to create value for customers — and the automobile industry has done it for years — but does it make sense for buyers of mattresses. We will see. Learn more reading “6-year, 0% loan for a mattress? Intense competition continues to grip mattress industry,” USA Today, October 25, 2019.

Delivering convenience and high quality meat from a vending machine

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Students don’t often think about how Place and choice of distribution channel can differentiate a product or deliver value (often through convenience). And not too many of us think about vending machines as a channel of distribution for much more than snacks and soft drinks. That is why this example, where the Applestone Meat Co. offers self-serve vending machines stocked with vacuum-sealed packages of meat, including everything you might expect to buy at a high-end butcher shop: Porterhouse steaks, rack of lamb, sausages, and ground beef. You can read more, and perhaps clip an image to drop into your slides when you cover Place in Chapters, 10, 11 and 12.

As an aside, if you, like me, didn’t get the “Horn & Hardart” reference in the article’s title, check out this Wikipedia entry and learn a little history.

#M4BW Amazon Commits to 100% renewable energy, 100,000 electric vans to fight climate change

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Our focus on Marketing for a Better World (#M4BW) continues with a look at a recent announcement by Amazon. Amazon promises to “meet the terms of the Paris climate agreement 10 years ahead of schedule.” Its recent announcement comes after some pressure from employees (Amazon Employees for Climate Justice).

This article provides an opportunity to discuss how creating shared value might actually create value. You could ask your students why Amazon is doing this? Is it good for shareholders? Why or why not? The answer is not clear, but students may not recognize that actions like this might make it easier for Amazon to recruit top talent. Many young people are concerned about the environment and want to work someplace that is doing something about it. This might also enhance Amazon’s brand and reputation among consumers. Finally, it may lower operating costs — as the initial cost of an electric van may be offset by lower operating costs (electric vehicles typically cost less to operate as compared to gas-power vehicles).

This issue might be discussed — with different emphasis — in Chapter 3 (Amazon is featured in our chapter-opening case), Chapter 11 (logistics), Chapter 12 (retailing) or in Bonus Chapter 2 (Marketing’s Link with Other Functional Areas — including human resource management).