Dive Brief:
- Amazon is expanding its $3.5 billion ad business to AmazonFresh, where shoppers will begin seeing sponsored products placed on AmazonFresh's website, Digiday reported. This is the first time AmazonFresh will feature sponsored posts on its own product pages.
- The sponsored posts will appear in regular search results and product detail pages on Amazon.com in addition to AmazonFresh’s search results. Ads will appear through keyword searches. Advertisers will be paid when a shopper clicks on the ad regardless of whether they purchase the item.
- Sponsored content will appear to shoppers in U.S. cities where AmazonFresh is available, which includes Los Angeles, Boston and New York City.
Dive Insight:
More than half of consumers begin their online shopping queries directly on Amazon.com instead of Google or another search outlet, according to a 2016 survey from BloomReach. It’s only become harder for companies to cut through the fray as shoppers have the ability to peruse thousands of products with a mere swipe or click.
Amazon holds a lot of influence on the decision a shopper makes based on its advertising. Expanding ads into AmazonFresh is a huge opportunity for fresh food brands and consumer packaged goods companies. These businesses can now vie for visibility on the AmazonFresh site to strengthen their brands or gain recognition among customers who are shopping a variety of grocery items.
Many people use online shopping as a way to research products and options before making a purchase either online or in a store. This gives brands an incentive to pay for ads on AmazonFresh as part of their marketing strategy, even if shoppers go to another store or site to complete the transaction. The new initiative also could provide a boost to Amazon's Whole Foods banner if consumers ultimately decide to make the purchase in the store.
“The inclusion of sponsored products in the Fresh category will simply accelerate the transition of ad dollars from the physical retail shelf to the digital aisle,” Jason Roussos, vice president of strategy for Adlucent, said in an email to Grocery Dive. “Whereas some of these brands would pay co-op budget for shelf space in the old days, today this is the cost of doing business in e-commerce.”
Sales on Amazon are a key part of many CPG companies' revenue streams and affect their retail strategies. The brands that take advantage of the new sponsored ads first will reap the most benefits by having the lowest costs per click as their products are among the first to be showcased. As more brands sign up for sponsored posts, the clicks will inevitably be divvied up among the growing number of options that shoppers see. With consumers purchasing more of their groceries online, displaying ads will increasingly be a way to standout in the digital marketplace, much like coupons or mailed circulars have done for years.
One of the best ways to take advantage of the new opportunity is to focus on products that are inherently unique as opposed to the myriad generic items that Amazon already offers.
"Amazon sales are an integral revenue stream for many CPG brands, so it’s imperative that brands take a holistic view of their business and figure out the value of a click on Amazon," Roussos said. "Additionally, they should double down on their brand’s unique value proposition to differentiate from generic Amazon products. If a CPG company has to have the marketplace traffic and conversions to support their success, then Amazon Fresh sponsored ads should be on the menu."
For Amazon, the sponsored products will extend beyond just the Fresh website itself. It will keep Amazon competitive against fellow retailers Walmart, Target and Kroger, which have robust ad programs for brands as part of their own e-commerce efforts.
