January 16, 2022
eCommerce leaders face an increasingly complex decision set with Amazon Advertising in 2023.
While Amazon continues to offer unprecedented scale, measurement, audience quality and inventory options compared to peers, its growth is slowing, ordering pattern volatility has increased, and there is more competition from other retail media options.
This complexity is layered on top of a capital markets environment stressing profitable growth.
There’s never been a moment quite like this.
To remove, or at least reduce the question marks, we benchmarked 51 consumer brand and agency partnerships on their Amazon ad budget plans.
- …ranged in size from small (sub-$10mm in annual sales on Amazon) to large ($50mm+ in annuals sales).
- …came from several categories including FMCG, hardlines and softlines.
- …were categorized as Amazon Outperformers if they were gaining share, accelerating their growth, or generating outsized profitability on Amazon.
The results suggest brands are investing more deeply into Amazon Advertising:
- The average brand is much more likely to be shifting their digital media and retail media budgets towards Amazon than away from it
- Brands are, on average, re-investing more of their sales into Amazon Advertising this year
Let’s dive in for those managing retail media, Amazon Advertising, or running the Amazon account for their business.
Brands 6x as likely to be shifting more of their digital media budget to Amazon than away from it
Media budgets are constantly evolving with the broad arc of traditional channels giving way to digital channels.
Retail media is an especially fast grower within digital channels and Amazon is the leader.
The benchmark indicates the magnitude of this trend - 66% of respondents are increasing the share of their budgets going to Amazon compared to 11% cutting.
There were two interesting takeaways amongst different groups:
- A net 56% of Outperformers are increasing the share of their media budget to Amazon compared to a net 46% of Underperformers (net = Amazon gaining share minus Amazon losing share)
- Marketers that used Trade to fund Amazon advertising are 1.5x as likely to be increasing Amazon’s share compared to marketers that source from Brand budgets
Brands 3x as likely to give Amazon more of their retail media budgets in 2023
41% of brands in our benchmark report show a willingness to give Amazon an even greater share of their retail media budgets compared to 14% shifting away from Amazon.
This net score of 27% comes despite Amazon already accounting for a dominant 70%+ of the market, and Amazon's share gains are especially prevalent with Outperformers, which have a net score 3x higher than Underperformers.
Based on our research, brands cite three core reasons why they continue to invest in Amazon:
- Scale – they can put the most dollars to work, the easiest, on Amazon
- Measurement – Amazon’s inherent closed-loop reporting and recent innovations with AMC, Attribution, and Stream provide more granular performance feedback than rivals
- Control & Targeting – Amazon continues to put more tools in the hands of brand and is continually providing capabilities, like targeting options
Admittedly, brands have a difficult time precisely measuring how much they are spending on retail media at each platform. However, these results contrast with our tendency to believe reversion (or share loss in this context) is inevitable.
Yes, Amazon’s peers offering retail media options are innovating and gaining incremental dollars from brands. The rising tide of digital advertising and retail media is lifting all retailers’ boats especially because brands must invest in these offerings as part of their overall commercial relationships (an area we’ll cover about in this live session).
But Amazon doesn’t appear to be ceding much of any ground in the year ahead, at least for this sample.
In conversation after conversation, brands and agencies, unprompted, bring up opportunity after opportunity to grow their businesses on Amazon through advertising. In contrast, in the same conversations, they are likely to bring up more challenges than opportunities on alternative retail media offerings, hopeful Amazon’s rivals can move faster in ’23.
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