Is Amazon more friend or foe for digital start-ups?
Amazon.com offers an upside and a downside as a marketing and sales channel for digital start-ups, according to a panel of venture fund managers at an NRF Big Show session.
Adam Spivack, principal at Comcast Ventures, said Amazon gets “a lot of negative press” about the pressures it exerts on online competitors. Yet Amazon “brought in an entire new economy into DTC brands that are born out of a digital age.” If Amazon continues to drive online’s growth, “that’s by definition a rising tide.”
An example of a successful partnership was last year’s exclusive Lady Gaga beauty launch that was a top Amazon holiday seller, he added.
On the downside, by being on Amazon, “your brand and your vision for it is fairly commoditized and you’re not able to control the experience in the same way that you are when you go directly.”
Nike’s recent decision to stop selling directly to Amazon was cited as an example. Mr. Spivack added, “There’s a bunch of different ways to go about it and some companies have gone all-in and had great success with it. Some companies have said the cost is too high in losing that ability to brand. For us, we’re kind of open-minded.”
“I think Amazon can be a friend if you have a thoughtful strategic approach to it that’s backed by investment,” said Nisha Dua, general partner at BBG Ventures.
Ms. Dua cited Barkbox, the treat-and-toy subscription service for dogs, as a positive partnering example. A small internal team came up with a range of higher-margin pet products to sell on Amazon and backed the effort by recruiting ambassadors. She said, “We would support our companies doing that, but you have to be at the right stage.”
Shamin Rostami Walsh, managing director BAM Ventures, cited being “where your customers are” as a positive to working with Amazon. Amazon’s ability to bundle shipments is advantageous for a CPG company, such as a deodorant brand, versus a single-purchase online sale, she added.
If highly successful, however, Amazon “may knock you off” or force a vendor into a first-party wholesale relationship. Ms. Rostami Walsh said, “Realistically, Amazon’s priority is still Amazon.”
DISCUSSION QUESTIONS: Is Amazon more of a friend or foe to digital start-ups? What advice would you have for younger brands or online start-ups about using Amazon for marketing or sales?