Amazon & Social ‘e’nfluence

The ecommerce battles are rising with Amazon being at the forefront of the landscape but many regional competitors  (Flipkart in India, Lazada in SEA, Souq, Jumia in MEA, Rakuten in Japan, JD.com in China, etc) are competing well. However, with years of experience, enormous scale, millions of sellers and buyers and understanding the consumers’ pulse – Amazon has been innovating well on different strategies to keep the consumers and its customers interested using Amazon platform and services. Building on it, Amazon quietly launched its social media influencer program to drive the “social selling revolution” right within the Amazon platform. Some competitors such as Flipkart toyed with “social commerce” idea but haven’t successfully executed it. Players like Tencent with its WeChat platform on the other hand has taken social selling to the next level within the messaging ecosystems. Facebook with Marketplace is also trying its best for social selling to attract “buyer and seller traffic” and expand its business model from ads and commerce transactions as well. We believe this is a prudent and natural strategy for Amazon and we have analyzed various reasons for the same:

What are Amazon’s Social Sharing Revolution?

  • We suspect many influencers will be attracted to this. There are myriad YouTubers and users of sites like Pinterest, and other bloggers, that seek large, monetizable followerships.
  • Many promote products as part of their modus operandi. However the quality of their advice and the trust they have earned is directly proportional to their perceived level of impartiality. They will therefore jealously guard their reputation.
  • We understand a high proportion of product searches in the US now start on Amazon – rather than a general search engine like Google. This means that for many product searches, Amazon is the search engine.
  • For Amazon therefore, the influencer program is a low cost, low risk way to try to bring another layer of recommendation to their platform. It can help funnel potential purchasers to the Amazon site and reduce the likelihood for sales to be lost to rivals.
  • As to whether consumers trust influencers more than celeb endorsements or traditional ads, we think the answer is almost certainly yes, but with some caveats.
  • Most consumers are pretty savvy. They know that celebs are paid to endorse a product and therefore have little real interest or investment in the product itself. Influencers’ reputations rely on them offering impartial analyses of different solutions.
  • These often include assessments of positives and negatives and comparisons with other products. Any overt or blatant promotion without sound supporting evidence, will likely be seen for what it is and discounted in the minds of consumers.
  • The theory of perfect competition requires that buyers have access to identical products, perfect information and that sellers are price takers (among other things).
  • In the real world, the internet has enabled us to get closer to perfect competition than at any time previously. However perfect competition is not great for sellers.
  • Through things like the influencer program Amazon is helping the presentation of more complete information about products, but by so doing it is aiming to take an even bigger share of the retail pie and therefore move us away from the notion of perfect competition.

While Amazon has limited reach compared to Pinterest or YouTube based influence but in the core Amazon markets this could have decent implications on search engines, competing ecommerce platforms or content platforms which drive social selling. This move will not only drive search, research and influencer content traffic but also drive significant network effect in terms of footfall, top line and bottom line. With Amazon Web Services (AWS) ideally powering this potentially huge wave of content in future – scalability and costs will never be an issue, plays to Amazon’s vertical integration advantage.