How Local Businesses Can Take Advantage Of Their ‘Frenemy’ Relationship With Amazon

As large and small retailers head to the NRF’s Big Show this weekend, the question of Amazon as a friend/enemy or “frenemy” will hang over most of the discussions as the industry seeks to find a way to adjust to the e-tailer’s hegemony and influence with consumers.

Earlier this week, Amazon touted the benefits to SMBs during 2017. Among the highlights Amazon pointed to was that more than 300,000 U.S.-based small and medium-sized businesses joined the Amazon Marketplace.

The company also said that more than 140,000 SMBs selling on Amazon surpassed $100,000 in annual sales, while Amazon Lending surpassed $3 billion lent to small businesses on Amazon since the program started in 2011.

“More and more small and medium-sized businesses are choosing to join the Amazon Marketplace and sell right alongside Amazon to reach customers around the world. Entrepreneurs and small business owners are succeeding on Amazon – they sell half the products that Amazon customers buy, and more than 140,000 small and medium-sized businesses surpassed $100,000 in sales on Amazon in 2017,” said Peter Faricy, VP for Amazon Marketplace. “These businesses are reinvesting in their local communities – creating jobs and supporting local suppliers. We are proud of how the Amazon Marketplace helps empower so many small businesses, not just in the US, but around the world.”

Amazon’s Gravitational Force On Retail

The growth of e-commerce and the decline of store sales has largely been blamed on the gravitational pull Amazon exerts on the space.

And stats cited by  Bryan Eisenberg, co-founder of marketing consultancy BuyerLegends and co-author of  Be Like Amazon: Even A Lemonade Stand Can Do It, would seem to suggest that this is not a case of mass paranoia: Amazon captured 89 percent of all online holiday spending in the five-week period beginning on Thanksgiving, according to an analysis of credit- and debit-card transaction data by Earnest Research in New York.

In comparison, Walmart, which purchased Jet .com in 2016 for $3 billion, remained a distant second a 4.4 percent, Eisenberg notes.

Amazon has continued to move aggressively in expanding its promise of near-immediate delivery and physical pick-up options for its online shoppers by rapidly opening up fulfillment centers in major cities. But as Eisenberg suggests, there is a lot that local businesses can do to take advantage of Amazon rather than be crushed by it.

The Instant Pot Model

The first thing retailers need to do is come to terms with the fact that Amazon is determined to reach every city, town, and block with ease over the next few years.

“You can’t even say ‘Amazon dominates,’ because it’s beyond that when it comes to retail and retail search,” Eisenberg says. “When someone wants a product, they’re going to Amazon. It’s their choice to be there or not. I think retailers have to be there. Yes, you can keep them as a ‘frenemy.’ But keep in mind two things.”

The first is that when brands are exceptional, and they behave like Amazon, they can grow massively without having to compete with the e-tail giant.

One example Eisenberg offers is the phenomenal success of the Instant Pot.

While Amazon has been adding its own versions of many products sold on its platform, it isn’t going to compete with Instant Pot for two reasons, says Eisenberg: Instant Pot is priced fairly and has built a cult-like community around it. The latter is something Amazon would not be inclined or able to do.

As a result of all those factors, Instant Pot thrives in Amazon’s world.

Another example Eisenberg points to is Anker, which makes cell phone accessories, which has similarly built its brand through Amazon despite facing  white labeled items sold under Amazon’s banner. Amazon doesn’t slight or mind Anker because it adheres to what Eisenberg says is Amazon’s “four pillars”:

“They take care of their customers, they get the products to them quickly, they’re constantly innovating and creating new products, they price their products fairly, and they sell well,” Eisenberg says. “So if you live by Amazon’s rules, they leave you alone. But if you’re an Energizer or a Duracell that have gauged consumers on batteries, Amazon will create a private-label knock-off and price it to allow it to take over that market.”

The Amazon Advantage

That product proposition can also be applied to local stores, Eisenberg adds, though many of the benefits are still a few years off.

“The advantage to local businesses is – and I don’t think you’re going to see that today — that you will be able to get global reach,” Eisenberg says. “Amazon has out-Googled Google by becoming a better product search engine. They’re also potentially be competitive in retail services such as plumbers and contractors.”

That’s a space that Google, Yelp, and Facebook have been aiming to capture as well. And that competition from Amazon will give those local businesses a good deal of leverage, especially as the marketing battle among voice-activated assistants heats.

“We know that Amazon is betting the farm on Alexa and implanting that beyond Echo devices,” Eisenberg notes. “Alexa will be more deeply embedded on other people’s phones, it will be on watches and wearables, it will be on refrigerators, and most importantly, it will be in cars. It will have an important place in self-driving cars at some point.”

In the not-too-distant future scenario Eisenberg paints, a consumer will be traveling in their autonomous vehicle and decide they need a shirt for a conference they’re attending next week. They’ll tell Alexa to find it. Considering that Alexa knows the person’s size, where you like to shop, and has their payment info, the voice activated assistant will have the details in seconds. After scanning listings near the route, Alexa will ask if it should navigate to a selected store.

The store will get the sale and Amazon will be able to take a piece of that advertising business, while taking another piece through its payment system. And because Amazon can’t do everything itself, it will be a win-win for retailers, Eisenberg says.

“There are more things that Amazon can offer in terms of services that can’t fit into a warehouse or fulfillment center,” he says. “It’s also more cost efficient to rely on a retailer than on its fulfillment center.”

Eisenberg’s view is already borne out by at least two local retailers that shared their stories with Amazon.

“Since selling on Amazon, we’ve been able to grow our business from three to 40 employees, right here in Delray Beach, Florida,” said Michael Dudley, managing director of Salon’s Choice. “We recently launched on Amazon in the U.K., and are now shipping thousands of orders a day through Fulfillment by Amazon to customers around the world.”

“We launched on Amazon two years ago and are now operating in more than seven countries around the world,” said Phil Williams, CEO and founder of Coffee Gator. “2017 was our biggest year on Amazon, with sales growing by more than 100 percent year-over-year, and we expect 2018 to be even bigger.”

Nevertheless, for those retailers who plan to take their chances in terms of opposing Amazon’s local incursions, Euclid Analytics CEO Brent Franson presented his own battle plan that calls for updating co-op data and marketing strategies.

“Building an effective data co-op for retail is challenging – 55 percent of online shoppers start their product searches on Amazon, says BloomReach – but ultimately worth the battle,” Franson wrote on GeoMarketing this week. “More choice will force the industry’s three major players – Amazon, Facebook, and Google – to improve what they offer to marketers. If the competition is better, then the Big Three runs the very real risk of significant losses. Either way, the consumers – in this case, the marketers – win.

“The right co-op structure will yield better personalization based on actual customer needs and intent. It will earn customer trust by balancing privacy concerns with personalization; for example, the co-op should outline clear rules that ensure obfuscation of certain kinds of data (e.g. PII) before sharing with the pool. Finally, it will prioritize optimized marketing for long-term value. This is about building long-term relationships that reward both the retailer and the consumer; it’s not merely about immediate conversions. Each member of the cooperative should believe in, and be working toward, that goal.”

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Vistar Hires Ex-GroundTruth Performance Strategist Matt Schuster As CRO

Vistar Media, seeking to deepen its cross-platform insights between out of home advertising and location technology, has named Matt Schuster, formerly of location ad marketplace GroundTruth, as its chief revenue officer.

he most recently was head of performance strategy, leading development and go-to-market strategy for all performance-based solutions. Before that Schuster was head of sales for GroundTruth, responsible for revenue growth from all major brand and holding companies in North America. Under his lead, the sales team achieved 100 percent growth in both revenue and headcount. Previously, Schuster was Sales Director at Undertone, a digital advertising company, where he oversaw a 300 percent increase in revenue over 18 months.

“Out-of-home is where the most innovation is happening in today’s media landscape, as mobile has largely become commoditized and centralized toward a few large industry players,” said Matt Schuster. “In out-of-home there is tremendous opportunity to bring targeting and concrete ROI measurement to advertisers that have never before been able to measure the impact of this channel.”

The company has called 2017 a “breakout year” for Vistar, and Schuster’s appointment follows a recent expansion into Canada.

“Matt joins Vistar at a time of rapid growth, and his experience scaling teams and revenue for innovative businesses will help our transition into additional international markets, as we bring in top talent to meet increasing global demand for our services,” said Michael Provenzano, CEO of Vistar Media.

We checked in with Provenzano about the evolution of OOH and the location tech connection amid the company’s growth plans.

GeoMarketing: What’s the state of “Digital Out of Home?” How has Vistar’s approach to DOOH evolved?

Michael Provenzano: The digital out-of-home industry is in an exciting spot today. At a basic inventory level, we’re seeing more and more media owners digitizing their networks, which is bringing opportunities for more dynamic content and creative executions to new contextual environments.

The biggest shift that we’re seeing in the OOH space is the push to tie OOH to measurable ROI (with programmatic being one of the mechanisms driving this shift). Digital buyers are increasingly looking to add OOH into their broader omnichannel media mix, and media owners are eager to tap into growing digital budgets. Transacting digital out-of-home programmatically requires systems that have been built to handle the complexities of OOH, such as measuring a 1-to-many medium, managing creative approvals (which have stricter regulations due to their public display), creative transcoding to fit the huge variety of screen displays, and much more. At the same time, programmatic systems that have been built from the ground up to handle these challenges are also offering new opportunities for buyers to reach their audiences in targeted, measurable ways across a very impactful medium.

Our approach to OOH has changed over time as we learned the ins-and-outs of the medium and got to see first hand the challenges that both media owners and advertisers were facing. The first challenge was simply building technology that would enable efficient transactions at scale. We focused on building those pipes and also aggregating supply by integrating and building partnerships with media owners across 90% of the available supply. As we ran more and more campaigns and learned more about the strategies of OOH buyers, we added in a focus on data and measurement, to demonstrate the ROI of OOH media. Today we have the ability to measure the impact of OOH advertising as never before and help marketers understand their consumers in amazing new ways, based on their movement patterns.

One thing we’ve been looking at is the rise of autonomous vehicles. What happens to billboards and radio when cars drive themselves?

There’s no question that the rise of automated vehicles will have a dramatic impact on the OOH industry, but ultimately we don’t see it as a damaging change. To start with, OOH is not really about billboards. It’s about using real estate assets – the physical locations that the OOH networks own – as opportunities to engage with consumers through compelling 1-to-many content. That opportunity doesn’t go away as people change how they move throughout the world, it just shifts the requirements for the content.

OOH media owners are also already starting to use their assets for multiple purposes – adding sensors to become a data collection point, working with telecom providers to support their networks, providing wifi, working with municipalities to become part of the citizen communication systems, etc. So there’s a lot of opportunity to diversify the use of the physical asset, which today might only be serving as a static billboard.

We also believe that mobile and OOH are perfect complements to each other, and the rise of autonomous vehicles will drive this connection further. Combining the impact of OOH media with the personal communication of mobile advertising is very powerful, and as consumer use of mobile devices increases during transportation moments, the interaction between OOH and mobile will be amplified.

How does geo-data and the use of location analytics factor into DOOH measurement for Vistar’s clients?

The biggest challenge of out-of-home historically has been that there was no real way to directly tie any impact results back to the actual campaign exposure. With location data, you can understand consumer movement enabling marketers to validate store visitation and household validation.

In-store visitation is a crucial KPI for retailers in a range of industries, from the big box retailers to telecom, QSR and casual dining. If they can invest in media and then see an increase in the number of people visiting their stores, and therefore increasing sales, that demonstrates the ROI of that ad spend and is a huge win for their business. Vistar measures foot traffic by using location data to identify audiences that have been exposed to a digital out-of-home campaign and then visited a physical store location. This provides a powerful view into the impact of OOH media exposure.

Visitation is great for retail marketers, but for some marketers in areas like automotive and CPG, sales are the final KPI that matters. In a similar way that location data tells us where someone went, it also can tell us where someone lives. Some of the largest transactional data sets for sales are stored at the household level. By combining location data with transactional data, we are able to understand what households are exposed to what ads and understand how sales were changed at a selection of households.

Are there any new programs or initiatives Vistar is planning to expand looking ahead to 2018?  

A major area of growth for us in 2018 will be expanding in international markets. We recently launched our business in Canada and are already seeing strong traction among leading brands, agencies and trading groups. We will be launching operations in the UK in January 2018 and expect to enter other European markets over the course of the year. The OOH industry in the EU is quite evolved, so we see tremendous opportunity to bring sophisticated targeting and measurement to this channel.

We will also be expanding our vertical solutions through key partnerships, to be able to extend our targeting and sales lift measurement capabilities to more industries (similar to our current solutions for automotive, retail and CPG).

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Rental Car Brands Avis And Hertz Shift Gears To Self-Driving

As a range of car manufacturers like General Motors roll out more connected car features and evolve their approach to shared mobility, car rental brand Avis Budget Group and its rival Hertz are working to make sure they doesn’t get caught behind all the technological changes.

Like any other company that depends on getting its customers from one place to another, Avis and Hertz recognize they’re operating in the transportation industry, not just the car rental business.

So rather than follow once car manufactures like General Motors, with its growing Maven shared-mobility program, or Audi, which recently acquired airport-focused and app-based auto rental startup Silvercar, the two are starting to explore their respective options with self-driving cars.

On Monday, Avis signed a “multi-year agreement” to begin working with Google parent Alphabet’s Waymo autonomous vehicle experiment.

The Avis deal calls for the rental car company to support Waymo’s “growing” autonomous vehicle fleet as well as Waymo’s early rider program, a public trial of its self-driving cars in Phoenix, Arizona.

Waymo recently announced that it is adding hundreds of Chrysler Pacifica minivans to build a 600-vehicle fleet. This partnership will allow Avis Budget Group to service Waymo’s growing number of cars on the road, “ensuring Waymo’s self-driving vehicles are ready for riders around the clock,” the company said in a release.

“With members of the public using our growing fleet of self-driving cars, our vehicles need standard maintenance and cleaning so they’re ready for our riders at any time of the day or night,” said John Krafcik, chief executive officer, Waymo. “Avis Budget Group is an ideal partner to provide fleet support and maintenance. With thousands of locations around the world, Avis Budget Group can help us bring our technology to more people, in more places.”

“We are excited to partner with Waymo, the self-driving technology leader that is changing the mobility landscape in a profoundly transformative and beneficial manner,” said Larry De Shon, president and chief executive officer, Avis Budget Group. “Not only does this partnership enable us to leverage our current capabilities and assets, but it also allows us to accelerate our knowledge and hands-on experience in an emerging area as Waymo-enabled self-driving cars become available in the marketplace.”

Hertz Drives With Apple

Separately, Bloomberg News reported that Apple began leasing Lexus RX450h sport-utility vehicles from Hertz’s Donlen fleet-management unit in April, citing to documents released by the California Department of Motor Vehicles.

The Bloomberg report pointed to restive investors’ growing concerns about the role rental car companies will play in the autonomous vehicle future that appears to be fast approaching.

Even more than Hertz and Avis, Apple is also trying to keep pace with self-driving cars. With Amazon and Google ahead of the Cupertino company in powering voice-activated assistants within the connected home, Apple’s Project Titan, the name for its self-driving program, is perceived as lagging its rivals’ efforts in that area.

Still, Apple’s got a vastly different focus that might allow it to ultimately strike when the autonomous car moment is particularly hot. Instead of building its own autonomous cars, the company is mainly interested in providing the software that powers other brands’ vehicles.

In that sense, the race for the autonomous car is chaotic, and each brand is approaching it from the perspective of its own set challenges and strengths.

Avis’s Connected Car Commitment

Over the past year, Avis has struck a number of partnerships designed to allay those concerns and position it at the table for whatever shape the autonomous vehicle future arrives in.

Back in May, Avis touted its commitment to the connected car, saying that 50,000 more vehicles becoming fully connected by early 2018, more than doubling the number of connected vehicles in the Avis fleet. I

“This investment will bring the total of connected cars in the Avis fleet to nearly 100,000,” said Arthur Orduña, chief innovation officer, Avis Budget Group, at the time. “It will also ensure that we remain at the forefront of our industry and will bring us one step closer to realizing what we believe is the future of car rental for our customers.”

Roadmap To The Self-Driving Car Future

After Uber and Alphabet/Google stepped up investments in autonomous cars, traditional car companies and electronics manufacturers reacted quickly to form alliances and stakes in companies to ensure that they, too, don’t get left behind.

For most consumers at the moment, the idea of a driverless car still seems like science fiction — and along with the uncertainty of buying wearables, it’s not certain that people are clamoring for a virtual chauffeur. But then again, before the iPhone, how many people considered taking photos of themselves with their phones or pressing a button for food delivery and payment — or order a car service, for that matter.

As the technological hurdles are being dealt with on the road to the driverless car, a variety of major automotive manufacturers, electronics companies, and tech platforms appear all in on the idea of “if you build it, they will come.”

And for Avis and Hertz, along with all entities across the auto industry, if they’re not part of the building it, they’re likely to be stranded when the mainstream expectation fully emerges.

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