Why Amazon Prime Is Expanding to Other Online Retailers

Amazon has spent nearly 30 years encouraging shoppers to buy directly from Amazon.com. Now, however, a new program is “extending its tentacles out to other sites,” as one analyst put it, encouraging customer purchases elsewhere. The program offers two of the things Amazon likes most, but experts told Adweek brands will have to weigh the pros and cons of participating—and while short-term benefits to the ecommerce giant are clear, it could ultimately even place Amazon in regulators’ crosshairs. Prime real estate The new program, Buy with Prime, expands the well-known benefits of Prime membership to sites beyond Amazon. It will start with sellers using the Fulfillment by Amazon (FBA) service and eventually extend to merchants without an Amazon presence. Shoppers will see the Prime logo on participating sites and be able to use the payment and shipping information stored in their Amazon accounts to place orders. “With shoppers purchasing directly from merchants’ online stores, Buy with Prime will allow merchants to build customer relationships and brand loyalty while offering conversion-driving benefits like fast, free shipping,” said Peter Larsen, vp of Buy with Prime, in a statement. But a simple—yet key—question remains. What’s in it for Amazon? First off, of course, is money. According to Matt Moorut, director analyst at Gartner, growth in Amazon’s core retail business has been slowing and, following a price hike for Prime, the platform “needed to look for further opportunities.” Third-party fulfillment partnerships in particular are a growing market, he said, and “Amazon spots an opportunity to increase its revenue by offering this.” Zach Weinberg, vp of ecommerce at performance marketing network Reprise Digital, agreed, noting Amazon has been scaling its fulfillment business for at least five years. “All this amounts to a way for Amazon to scale fees from fulfillment in an easier way,” he said. “And so for Amazon, this is now another way for them to capture some low-hanging fruit, frankly, from a fee standpoint.” Another potential impact: Smaller competitors offering logistics services to DTC brands will have to become even more competitive if they don’t want to get squashed. “They are going to need to bring very, very competitive pricing to those companies,” Weinberg added. Beyond revenue, it also deepens Amazon’s relationships with third-party sellers, which Moorut noted has "become more fractious in recent years.” Buy with Prime also insulates Amazon against the likes of Shopify making a similar move—and, perhaps most importantly, it will expand Amazon’s access to buyer data. “If Amazon can see how many transactions are going through other sites as well as their own, it allows them to move quicker than competitors in developing their own offerings,” Moorut said. In addition, while Moorut said the program indicates Amazon’s fulfillment services “are virtually unrivaled,” he also noted it’s an acknowledgement from the ecommerce giant that customers “may want different shopping experiences.” What’s in it for DTC brands? The clearest benefit to DTC brands is name recognition as consumers have long associated Prime with fast, free shipping. “Convenient fulfillment is the primary driver of where consumers buy products,” Moorut added. “It’s why so many people currently buy products via Amazon despite saying they intrinsically dislike Amazon. It’s an area that Amazon is able to win due to its scale and maturity of operations, which DTC brands can’t hope to match alone.” And so an Amazon partnership “enables those DTC brands to orchestrate customer journeys through their own platforms while providing a better delivery experience, which should increase their sales,” he said. The cons But giving Amazon access to data could actually be a deterrent to merchants. “The reason why they're DTC is because they want to own the customer data,” Weinberg said. “They want to own that entire journey of the consumer from awareness to purchase.” And so sellers will have to determine if the tradeoff—including increased visibility of Amazon itself on their own sites—is worth the benefits. Another con: There’s potential this cannibalizes Amazon traffic if it’s successful. But even if that’s the case, Amazon will still benefit from a revenue standpoint by collecting fees from other sites. “It’s a clever move by the ecommerce giant—and one that potentially puts them in an even stronger position atop digital commerce dollars,” Moorut said. “I wonder how far they can go before the U.S. government [and others] start seriously tackling them as potentially anticompetitive.”