Tax avoidance has inadvertently become a
brand manager’s worst nightmare this year, leaving some of the biggest American
companies having to squirm their way through long-winded excuses and
explanations as to why they aren’t paying acceptable levels in the UK. The
Brand Avenger recently focused on Starbucks and what impact avoidance would
have on its brand decline but now the attention of the ‘beacon of brand
justice’ turns its focus to Amazon.
Read the above article and you maybe
surprised to hear that Amazon’s current £4.2 billion annual sales from its 8
warehouses in the UK are currently NOT taxable as funds are routed through
Luxembourg! However that is all set to change if G20 reforms have anything to
do with it with the tax issue becoming a question of legality and not just
morality. And the change probably couldn’t come soon enough for those marketer’s
responsible for enhancing Amazon’s brand reputation on English soil.
Amazon’s brand perception has taken a hit
this year which is big news when you consider the brand has enjoyed three years
of relatively, steady growth in terms of perception metrics in the UK. Of
course when you compare this to a 22% rise in sales within the same quarter it
might be premature to begin hitting the panic buttons but it is clear that
Amazon need to do something to address the controversial tax practices if it
doesn’t want to impact the success of future brand extensions.
When focusing on brand extensions lets
focus our attention on Amazon fresh.
Amazon Fresh is the ambitious but at the
same time somewhat logical attempt to expand Amazon’s distribution capabilities
into the grocery market. From a size of prize perspective the grocery market
would certainly attract any company who feel they have something unique to
offer. Put simple the hundreds of billions in sales a year grocery generates makes
Amazon’s £4.3 billion in the UK look like small fry. Tech crunch repots that
following a successful trial in Seattle the grocery arm of Amazon has somewhat
quietly rolled out into LA and there is a strong possibility the rollout could
reach other urban Cities in the US within the next few years.
Initial trials of the delivery service in a
new area have returned positive results for Amazon Fresh. There are of course
some clear advantages to the service that could expand to all markets it could
operate in. The amount of choice it could give the consumer in the shopping
mission would be unprecedented. All of a sudden the shopper would be able to
choose between small independent butchers or large-scale discounters for their
Sunday meat option. Dessert could come from any one of the numerous small
suppliers of fine produce. Put simply it is a convenience customers dream even
if it does make the process of increasing basket size with impulse purchases a
little trickier.
Then of course we have to think of the
bottom line. Is the roll out of Amazon Fresh good for the stockholder? Well
opinion seems to be split on this one. If you were to look at Amazon Fresh
investment in complete isolation to the rest of Amazon’s portfolio you may say
it is a loss leader and not worth effort. If you were to look at the brand
extension as a complimentary service for customers that encourage them to spend
more on Amazon and perhaps pick up other products while shopping then this is
where the true value exists.
But I digress; the question you might be
quite rightly asking now is what does all of this have to do with Amazon’s UK
tax avoidance? Well the answer can be found in the public’s overall current
perception of the Amazon Fresh.
http://www.marketingmagazine.co.uk/article/1191936/nearly-40-shoppers-would-not-buy-groceries-amazon
As we stand in todays market 40% of
shoppers claim they would not buy groceries from Amazon. It is clear that the
tax avoidance issues and questions over ethics still have an impact on the
potential growth of Amazon as a business. Of course this won’t be the only
reason why customers would be reluctant to switch to Amazon and I’m sure there
were plenty who never thought they would buy a book or item of clothing from
the site as well. However, clearly this is an interesting enough statistic with
a big enough negative outcome that cannot be ignored. Brand metric scoring has
already showed us that Amazon’s image has suffered. If they are to truly start
growing their company into a viable contender for the lucrative grocery market
immediate brand building and recovery strategy needs to be developed. Amazon
want to be in a place where they become as known for selling Apple Crumble as
they are for games and accessories rather than looking back in despair in a
number of years for believing they were too big to crumble. Listen to the
customer, do the right thing and be the vision want to achieve.
