AVN’s, World’s Largest Advertiser, FC Buildout
Annual Vendor Negotiations (AVNs)
Despite Amazon looking to be price competitive and offer the best assortment online, it is continuing to seek out the best terms from manufacturers. While each AVN experience is unique, a couple of commonalities stand out this year. First, several manufacturers have indicated Amazon appears more eager to wrap up negotiations faster this year than in prior years. This should be a benefit to manufacturers as Amazon was more willing to drag out the negotiations in 2019. Secondly, Amazon is looking to more clearly delineate the advertising organization from the retail organization, and advertising spend is not counting towards core retail metrics like in the past. Feedback suggests this is problematic as many manufacturers feel their deal terms with Amazon have essentially soaked up any potential additional dollars. This is leaving them with few options to support the increased investment asks, either having to pull it from Amazon Advertising spend or potentially look for those funds from other parts of their organization.
Amazon the Largest Ad Buyer on Earth
Amazon has been crowned the world’s largest advertising buyer, as 2019 expenditures climbed 34% to $11B, reaching around 2% of total global advertising spend, and overtaking CPG giants such as P&G and Unilever. Amazon notably advertised it’s Alexa service with a Super Bowl commercial as well as rolled out a number of advertisements highlighting its Fresh grocery delivery service which is now free for Prime members.
Amazon Building FCs
Amazon noted on its earnings call that it is planning to invest more significantly into its fulfillment center footprint throughout the course of 2020. This will be done to help improve one-day delivery capabilities, increase the amount of inventory it can warehouse, build out its grocery delivery capabilities further, and generally create a better offering for its Prime members. While management did not provide details on the pace or magnitude of these investments, we expect it to total in the billions of dollars, meaningfully larger than the investments of any of its competitors.
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