I had the privilege of representing my company, Seller Accountant, along with several of our clients at the 2018 IRCE. I regularly attend trade shows but this was my first IRCE experience and I want to share some key takeaways with any of you who didn’t make it. If you did make it to the conference please chime in with your key nuggets as well.
Amazon Will Continue to Disrupt Retail
You can tell that IRCE is not an Amazon-centric conference because some of the talks still describe Amazon as a destructive force to be managed and mitigated. The 2018 IRCE was no exception but it appears that the tone is slowly shifting from “Amazon is destroying our business” to “Amazon is becoming our business”.
The Gorilla Keeps Growing!
Several of the sessions talked about Amazon’s continued dominance in e-commerce. There doesn’t appear to be a viable competitor to dethrone Amazon or at least not in the next 5 years. Walmart, eBay, Google and other competitors are investing heavily in e-comm but I learned at IRCE that Amazon’s lead and velocity are so staggering that even sourcing and distribution giants like Walmart are several years away from directly competing. As such it seems highly likely that Amazon will continue to command more than half of all initial product searches on the web and will continue to deliver advertising conversion rates that are 10 times better than what retailers experience in other e-channels.
This means that if you are not selling your brand on Amazon you are late but not too late. If your product has a strong market somebody will be selling it on Amazon if they aren’t already. Your best bet for protecting your brand is to make sure that you control your brand’s presence on Amazon.
Richard Hastings said in a Tuesday morning talk, “Now is a great time to buy and own Amazon stock or at least for the next 5 years.”
Voice Purchasing is Growing Rapidly
The last 5 years have seen the dramatic rise in mobile phones as the preferred shopping device and the last 2 years have seen the meteoric rise of the smart home voice-activated device. Early adopters mainly used Alexa and other voice-activated devices to select music for the home but Alexa is becoming increasingly important in actual e-commerce transactions.
The 2018 IRCE presenters expect this trend to accelerate. Sellers need to scramble to ensure that their listings are optimized to take advantage of Alexa purchases. On Amazon, the trend toward voice purchasing will increase the value of known brands and of products that win the buy box.
Competition and Consolidation Are Forcing a Focus on Profitability
Every major shift in buyer behavior creates the opportunity for quick and bold pioneers to jump into the market rewarding these brave souls with strong early profits. This was Amazon’s 3rd party marketplace 10-15 years ago. This is the Introduction Stage if you look at this classic industry life cycle graph.
The market gains adoption and accelerates into the Growth Stage where competitors dive in to take advantage of increasing profit opportunities. Most of the time the earlier movers still have the advantage as the second wave arrives but everyone makes money during the Growth Stage. This has been Amazon over the past 5-6 years. We are still riding this wave right now but the Maturity Stage is right around the corner!
The Maturity Stage always rewards the best executors! I believe (and the talks at 2018 IRCE support this) that product and seller saturation while still a few years out are close enough that we are going to see the cleanest executors win going forward at the expense of sellers that don’t run tight operations. Some of these “loose” operations will even be some of the earlier adopters who selected products and built stores that can’t support new advertising and fulfillment expenses. Some of these veterans will use their scale and resources to adapt and others will fail as pricing pressure increases.
Profit Is Critical!
As execution counts more and more I believe we will see significant acquisitions happen over the next 18-24 months. Better operators with cash have already begun to purchase strong products that need cash or improved infrastructure in order to compete.
2020’s profitable sellers will be bigger, with improved inventory management and better accounting. In other words NOW is the time to simultaneously tighten up your seller business just in case the right offer comes along and be on the lookout for the NEXT emerging wave. For more about profitability check out our other post on financial mistakes sellers make.
Fakers Won’t Make It Much Longer
The days of learning gimmicks and gaming the e-commerce platforms are coming to an end. One of the key indicators that the industry maturing is that platforms like Amazon are getting better and better at killing off bad sellers. Just finding a Terms of Service loophole is a bad business strategy especially as Amazon’s A9 algorithm gets smarter.
Fakers won’t make it but registered brands with quality content will increasingly drive conversions and capture profits on the e-commerce platforms. If you own a brand and haven’t walked through the brand registry 2.0 process NOW is the time. Register your brand and make sure that you protect your position by staying TOS compliant.
The FBA Hybrid Fulfillment Model is Trending
Amazon sellers are increasing the sophistication of their inventory management system. FBA storage space has become more scarce and Amazon has implemented the Inventory Performance Score program to reward good inventory managers and to keep slow-moving products out of FBA.
Many sellers are responding by adopting a hybrid approach where they lease or purchase a small warehouse and use it as a fulfillment staging center for FBA. These sellers also use their small warehouses as a backup plan so that they never run out of inventory. The specifics and economics of sending just the next several weeks worth of inventory to FBA deserve its own post. Suffice it to say that e-commerce sellers will get better at managing inventory or they will get punished and FBA Hybrid approach is working for some sellers.
2018 IRCE Summary
I really enjoyed the conference and I have already started helping our clients implement some of the nuggets that I learned. I hope this short list helps you in some small way!