Making Sense of Amazon’s Push Deeper Into Local

In this regular Street Fight feature, local marketing gurus David Mihm and Mike Blumenthal kick around some of the biggest ideas affecting the local search ecosystem and the broader industry. Send an email or leave a comment if you have specific topics that you’d like them to touch on in future columns!

David: Hey Mike, for our conversation this week, I thought we might carry on a discussion we were having offline about the broader topic of my most recent newsletter: Amazon. Not exactly a company many SEOs or digital marketing agencies have ever paid that much attention to. But you and I both think that needs to change in a hurry.

Mike: I also discussed some of Amazon’s recent moves in Last Week in Local earlier this week and think some of them are amazing. Clearly they are positioning themselves in the sales funnel aggressively, and unlike Google their presale efforts lead directly to sales that they control. How do you think Alexa plays into this whole picture?

David: Being the biggest Voice bull I know, I think Alexa might be the key puzzle piece for Amazon’s future success. They were late to the game with mobile — at least on the hardware side, their phone was obviously a complete failure — but they’ve leapfrogged everyone on Voice, and as just about every analyst pointed out last week, they won CES 2017 as a result.

Their expansion strategy takes the best from both the Apple and Google models in terms of the app “Echosystem.” Echo has the largest market share of any voice assistant hardware, which attracts developers (over 7,000 already), whose products make the voice assistant more compelling, which attracts even more consumers, and the virtuous cycle continues.

Amazon needs neither advertising revenue nor hardware revenue in order for Voice to add massive value to their bottom line.

Mike: And they finally have a dependable, recurring cash cow that exceeds their massive real world expansion ambitions of being able to deliver a product to almost every household in America (and probably everyone else) in under an hour. Cloud services is not only generating massive income but allows them to “give” Alexa away for free, guaranteeing its ongoing uptake in the assistant market.

Their new Alexa everywhere strategy is showing results with significant beachheads like the Ford infotainment cockpit and more important as the assistant of choice on HTC Android phones. Did Google alienate their OEMs with a Pixel-first strategy?

David: No question about it. Amazon has forced Google into a really hard position. Samsung’s acquisition of Viv makes it obvious their Voice strategy doesn’t involve Google. Meaning soon Google will be shut out of voice data by the largest hardware manufacturer on their operating system. And smaller, but still substantial, players like HTC may well see Amazon/Alexa as a better long-term partner (with at least as good a Voice product).

Mike: I saw an interesting chart on Twitter that showed the total inversion of where product searches were occurring between 2014 and now. They have shifted away from Google heavily towards Amazon (and other retailer websites but that is a discussion for another day).

When you combine the Alexa everywhere progress with their aggressive moves in logistics, same day delivery and even potentially buying store fronts, they are clearly aiming for a bigger portion of all sales going through their marketplace.

Obviously if they are garnering most product searches AND building out their own retail and delivery structure that is going to have a fundamental and earth shattering impact on the local retail scene.

David: The biggest losers in local from Amazon’s rise are the big-box national retailers. You don’t have to look any further than the news out of Sears, Macy’s and Kohl’s last week, but this chart from Scott Galloway at L2 really hammers the point home. Even Walmart is no match for the likes of Amazon.

I see Alexa further reinforcing the death spiral for local businesses of all sizes selling commodity products like consumer packaged goods, apparel, or electronics. Specialty stores should continue to do quite well with differentiated service and brand loyalty.

Mike: Yes, I think I will still need a value added reseller for an expensive jewelry purchase but the likes of Staples and Best Buy are having troubles as well. Although in the case of Macy’s and Sears they have played a huge part in their own irrelevancy.

Living in a rural community I can no longer find the level of quality that I want or need in everything from shoes to computers. I have to go to Amazon (and Zappos). And Amazon has put a bid in for the 250 American Apparel stores?

David: They must realize they can’t close every loop purely with eCommerce–certain items require more immediate delivery than even Prime can provide. And the Amazon Go story underlines their brick-and-mortar aspirations even more.

I honestly would not be surprised if Amazon buys a bankrupt mall or two this year in conjunction with their (attempted) American Apparel purchase, at least as an experiment.

So bringing it back to our audience–any strategic or tactical advice for the bleeding-edge businesses or agencies that agree with our Amazon point-of-view?

Mike: Three thoughts for the small single owner store: High Value Add, referrals and the Amazon Marketplace.

I have been through hell and back as a family retailer (a dying breed) that only added medium value to every sale and I took a beating. It’s harder to do in hard goods but possible.  Find a way to continually add significantly more value to whatever you are selling and keep figuring out new ways to do so as the world changes around you. If you aren’t getting better every day someone else is.

The second is that I too am a firm believer in word of mouth referrals as the primary way of attracting and keeping new business. This is both p2p and in the digital world via reviews. There is a whole new generation of buyer that uses and trusts reviews as a basis for a sophisticated local purchase. And they want to shop locally as well. Give them a reason.

And given Amazon’s increasing dominance for product searches, certain types of local businesses should look and explore leveraging Amazon’s Marketplace for their business presence.

And you?

David: I’ll extend your third recommendation a little further. If I’m a large retailer (like Home Depot or Macy’s), I’m spending a substantial portion of my R&D budget building an Alexa skill that adds real value for my customers and keeps them loyal to me on future purchases.

And if I’m a small business, I’m paying very close attention to which of those 7,000 (and growing) developers Amazon is featuring and promoting. Make sure you have an optimized presence on these platforms that have high utility and visibility for Alexa users. In a way, it’s basically a new twist on the old concept of Barnacle SEO.

To bring things full circle, it’s clear that you and I both agree investing in a thoughtful Alexa strategy is worthy of time and energy at this point. Alexa is here to stay and as Google referrals continue to decline, your business will need to take advantage of alternative channels in local marketing.

Got an idea for what you want Mike and David to discuss next time? Send it to either [email protected] or [email protected], or just leave a comment below and we’ll put it in the hopper!