Why Amazon must bolster its UK front

Amazon UK chief Tom Allchurch has the difficult task of stabilising the site’s popularity while overseeing its expansion into new product areas. But success may elude him if he fails to shake off its US-driven strategy.

As former Unilever executive Tom Allchurch takes up his new role as marketing director of Internet books and entertainment retailer Amazon.co.uk, the words of his predecessor will be ringing in his ears.

Chris Ketley left Amazon UK, where he was marketing director, in July after just four months in the post.

Ketley was quoted at the time as saying: “I joined thinking I was doing one job, but it has become another. Amazon UK is a start-up with high ambitions that are very much driven from the US.”

Samantha Smith, a friend of Ketley and managing director of ad agency FCA!, adds: “Chris went to Amazon to build a long-term brand but found that it is all about short-term return on investment.”

Allchurch joined last week from Unilever, where he was new business development director for food and beverages Europe. He refuses to comment on his appointment, but there is no shortage of industry observers willing to point out the difficult job he has taken on.

At first glance, it is an enviable role. Unlike many other Web retailers, Amazon enjoys high awareness of its name; it was one of the first into its sector and has made the most of the advantages that that can bring; and it has been very successful in the US.

Yet Allchurch is joining a company where strategy is driven by the experience of its US parent Amazon.com, and this may prove frustrating, especially, if as some suggest, implementing a strategy that simply mimics the US approach turns out to be a mistake.

Jason Goodman, managing director of BMP.DDB’s Internet arm, BMP Interaction, says: “If I were in his shoes I would look at the basic lack of innovation in Amazon UK’s marketing – it is very well known but doesn’t stand out from the crowd. Also, it has up to now focused on books, but if it develops its product range at great speed, as it did in the US, it could baffle those in the company and then the consumers.

“Allchurch is going into a high-profile position and I’m sure there will be big issues he must face, but will he have the autonomy to make big marketing decisions?”

The amazon.co.uk Website has, in just a year, become the most popular destination by far to buy online books and CDs. In December it beat Richard Branson’s virgin.net entertainment retail site as the most visited site, according to figures by research company Net Value. Amazon.com, was third.

Amazon UK has also reported fourth-quarter sales to the end of December up by 430 per cent, from £4.9m to £26m, on the same period last year, which was the company’s first quarter in operation.

According to managing director Steve Frazier, the sales results were well beyond the company’s expectations, let alone the predictions of analysts. He also announced the UK branch was to tread the same path as its US parent by expanding into other product areas. Amazon.com’s range includes home improvement and electronic products, and toys.

Although Allchurch is taking on a marketing role where the brand has all the recognition it needs – and a strategy to boot – as he gears up to stretch the brand into new product areas, observers are not clear on whether Amazon UK’s brand is as strong as it may at first appear.

Nick Band, chief executive of PR company Band and Brown, which Amazon consulted over its business in the UK, says: “They have not taken the leadership stance I would have expected. I don’t think anything about the brand because I haven’t been encouraged to.”

Though it is hard to argue with a company’s strategy when sales are at such a high, Amazon comes in for a surprising amount of criticism from marketers. Amazon refuses to answer any criticisms, though it could dismiss them as the rantings of jealous rivals.

A leading Internet portal UK managing director says: “It is doing very well and we are all jealous of its customer focus and personalisation of sales. But in the UK Amazon has a harder task. It doesn’t have such a strong first mover advantage, yet you don’t hear much from them. Something feels wrong about its marketing.”

Graham Hodge co-founder of Internet start-up consultancy eSouk, says: “I can’t imagine that Amazon’s somewhat cryptic ad campaign [which showed customers linking everyday scenes to their experiences with Amazon] has done much to help. Perhaps it doesn’t matter when you have so much mindshare, but bol.com is chipping away at that.”

The point levelled at Amazon UK is that here, where competitors have had time to prepare and, in Bol’s case, block the company’s entry, it will need a different approach.

Bol has been buying up books inventory since 1998 when it was clear Amazon would move into the UK. It has also increased advertising investment to improve brand recognition and is currently fourth in Net Value’s most popular entertainment sites, despite selling only music and books.

Certainly, as the pressure increases from analysts who are looking for business-to-consumer Internet businesses to start turning a profit, Amazon needs to find compelling ways of staying on top.

Durlacher Research Internet analyst Sarah Skinner says: “People are starting to call the chips in on business-to-consumer Internet businesses. Unless there is a particular reason why not, there is a feeling that, especially in retail, investors should start seeing sales turned to profits.”

Many argue it would be better for Amazon to ensure its books business is as dominant as it is in the US before spreading into new areas – or risk losing out altogether.

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