Amazon’s Secret Weapon: Unveiling the Power of SPN
Introduction
One of the stronger features of SPN is a futuristic tool that is being coded to allow automation of ad-driven activity for products that have notable tag data in a competitive category. This tool will calculate the best rate of ad-driven activity that will have the highest probability to increase the sale of a product. This is an important feature, as it will make it easier for companies to get the most out of SP without directly overspending time and money. This tool functions in creating a virtual marketplace to determine the best competitive price for the product and then executing the calculated ad-driven activity priced ideally to capture increased sales without compromising the cost-to-revenue ratio. This feature will ultimately benefit Amazon and companies that are using SP.
An intriguing application of SPN is to effectively pull large amounts of data to test the functionality of products that are tagged together in a category, department, or a specific search term that is Amazon product related. If two products have tag data that belongs to the same category or department, a meta-analysis can be conducted to compare the products and conclude which one is more deserving of ad-driven activity. An example here would be comparing two similarly priced products that are from the same company with an aim to see which one is a better candidate for SP to increase and optimize Amazon performance.
First off is understanding SPN. SPN is a tag-based software that can track the resulting activity of products that are advertised with the Amazon Sponsored Products program. This includes impressions, clicks, and sales that the ad-driven activity produces. SPN enables exhaustive data tracking and reveals an array of info related to the product’s performance in relation to ad-driven activity on Amazon. At the most fundamental level, SPN can prove whether or not a product is a worthy candidate for SP, and if so reveal which products elicit the best results from ad-driven activity. This is an important tool for businesses that are using SP because it provides insight on the cost-to-revenue ratio for a product and serves to ultimately reveal which products or types of products should be advertised with SP.
This is an exciting time for companies that use SP and it is time that they truly understand the value and potential results as well as how to achieve these results. Now, Brett has granted me permission to reveal a small bit of what SPN is doing to the public. This article will explain SPN and provide a small bit of data showing the potential results of using SP.
When SP was in an early stage of development, understanding how to maximize the tool and the potential results were difficult as SP allowed for little testing and there wasn’t much information readily available about the program. This is where “Amazon’s Secret Weapon: Unveiling the Power of SPN” by Brett McHale comes into play. SPN, a program developed by Brett McHale, is step one of an attempt to provide a guide that will allow people to understand how to get the most out of SP with insight on data, details of working with SP, and examples of what can be achieved. This guide is a great start and a well-written interview has provided insight of SP from the Amazon perspective, but much more work needs to be done, and there are still leaps and bounds that can be achieved in research of SP and testing for the best results from SP.
As Amazon continues to build its massive business and increase its online market share, it must also continue to build business relationships with other companies and organizations. One successful way of doing this has been through the utilization of sponsored products, better known as the SP program. By using SP, companies can increase the visibility of their products on the Amazon marketplace and drive more traffic and increased sales. This can lead to the potential for higher revenues and increased growth for a company.
Understanding SPN
Defining SPN is the first necessary step in understanding its strengths and benefits. Amazon states SPN “is a self-serve advertising solution that is focused on helping vendors and sellers drive awareness and sales to specific products” which is pretty much marketing jargon for saying SPN is designed to help listers promote their various products by creating ad campaigns with specific objectives in mind. With Promotions often not having the desired effect and it being entirely too late for anyone to care about Amazon’s failed webstore, SPN is essentially a more modern approach to marketing products and Amazon’s recent focus on it is a clear indication that consumer interest in the products is a high revenue generator.
Amazon recently launched its own advertising platform called Sponsored Products Network (SPN) to help its vendors and sellers reach out to potential customers. This move is by far the most significant and strategic one that Amazon has made in the advertising space by offering cost-per-click placements and keyword targeted ads inline with search results and product listings. Amazon is a little late to the CPC game, but these types of ads have become invaluable for online retailers wishing to drive sales. Google Shopping/Product Listing Ads (PLA) have been very effective for ecommerce merchants, and the SPN campaign performance metrics such as clicks, sales and ACoS provided by Amazon offer a level of accountability that has not been seen with traditional Amazon Promotions, Display or eBay’s AdCommerce ads.
Definition and Purpose
Note: SPN provides automatic targeting ads. This means sellers can bid on a certain product category, similar product, or target consumer interests. However, ads like this can make the market too price sensitive for a seller, which can harm the seller’s business. It is generally recommended that sellers use manual targeting ads so that they can have more control over how their ads impact consumer shopping decisions for a particular product.
Sellers are provided with ad performance data when using SPN. This can help sellers understand product marketability and make decisions about whether to continue promoting certain products. SPN offers simple but powerful features which allow sellers to effectively segment ad performance data. This data is saved for up to 60 days after an ad has ended.
How to register for the hotel sponsored products service: 1. Go to the advertising tab in Seller Central and click Campaign Manager. Click the button to create a new campaign. 2. You will be prompted to select a campaign type. Choose ‘product targeting’.
Sponsored Products ads, or SPN, are a form of PPC. They allow sellers to run ads for individual products within the Amazon Marketplace. SPN can help generate visibility for products when shoppers look for products like the seller’s. Sellers that have won the ‘buy box’ are eligible to run ads with SPN. Ads with SPN can send shoppers to the seller’s Amazon product detail page or to their Store. These ads appear on desktop and mobile shopper platforms, as well as on both product and search result pages.
Key Features of SPN
Finally, Amazon says that the core advantage of SPN is that it unifies learning and inference into a single process. This effectively means that in an SPN, the network structure can determine a type of clustering over the provided data. And by using that structure, a query can be efficiently answered in many cases without having to resize the data. This can allow for a very broad range of applications for SPN in AI and statistics.
In contrast with the conventional wisdom that probability is the sole foundation of rational decision, Amazon argues that effective decision making involves a manageable transformation of uncertainties into final choices of actions. This is a rather interesting and complex viewpoint. It acknowledges that in most decision problems, the amount of required information is vastly superior to the amount that can realistically be acquired. Furthermore, the computation required to come to a decision is a necessary step in between receiving the information and making a choice.
The key features are the spine technology, probabilism, and finally the uncertainty. According to Amazon, Spine Technology is the branched structure of an SPN. It simplifies the process of constructing the network and the subsequent probabilistic calculations. This also contributes to the simplification of complex decision problems. SPN provides a coherent and consistent unification of the various aspects of probabilities and effective decision making in the context of AI.
Benefits of SPN
When one considers the lifeline and vitality on which brands thrive, it becomes clear that sales are the make or break factor in continued success, customer awareness, and frequent return customers. Like Niagara Falls, sales are often imagined as an endless, powerful, and one-directional force. However, in a modern age of corporate sales, companies depend on detailed analyses and customer-targeting strategies to continually bolster sales. While attempting to direct this so-called “force” of commerce, brands invest in various forms of advertising, depending on the medium, platform, and consumer demographic of their product. However, advertising and sales increases often come at the expense of loss of transparency and control over an optimal direction of sales. In many cases, overdependence on certain advertising strategies has ended up diverting sales into a more circular “force”, resulting in no net gain of sales. With the release of Sponsored Product Networks, Amazon has made available to vendors an unprecedented degree of transparency and direction over the sales of their products. By allowing for tracking and directing of specific sales increases, SPN has essentially provided a steering wheel for the sometimes chaotic “force” of sales.
SPN Implementation in Amazon
The integration process starts with the building of Amazon’s global procurement and payables system. This is a unified web-based solution that replaces localized, non-standardized procurement and payment methods and has become the foundation to automate and globalize Amazon’s buying and paying process. The system was built throughout an on-demand hosted technology platform, which means it needs an application that runs on one server and is accessed through the internet by several users. To facilitate the internet connection, Amazon is using an integration service provider that offers web-based global B2B e-commerce services.
Amazon takes the task to change its pathways for buying products and services with the effort to connect suppliers with customers through utilizing the internet. The company assumes that using the traditional procurement processes that involve paperwork would be ineffective and inefficient. Hence, Amazon brings its one-site e-procurement system called Enterprise Buying Platform. This initiative is the first step of SPN implementation in Amazon. Enterprise Buying Platform was introduced in 2000 aiming to simplify purchasing processes across the company, and it has engaged a lot of buyers and achieved millions of dollars in savings just for a short time. This platform links the buyers with suppliers through a basic internet connection, and with the passing of time, Amazon is looking for new ways to connect them in a more effective and efficient way. From there, SPN is trying to build into a technology that eventually integrates the procedures that have been done before into a more effective and efficient one by utilizing the internet.
Integration Process
Finally, a big step of attempting to change the culture was providing incentives for long-term thinking and mindful spending. This was enforced by making the SPN bonuses and stock-based compensation for employees involved in the SPN projects. Amazon had to ensure that the stock option program was competitive and sortable through all levels of the organization, and this resulted in changes upwards of five thousand employees’ compensation plans. Again, this was an important change to get all employees to start aligning their decisions with SPN strategy.
Next was developing an SPN organization structure. This involved separating the technology and retail divisions, ensuring that SPN developers were located near and working directly with the retail executives. This was the case in hopes of speeding up the learning process and influencing developers to make tools that are more effective for the retailers. The organization of SPN later changed to a single-threaded leader for each project who would work with and influence the retailers. This was a big change from the previous structure where the developers made the decisions on what projects were undertaken.
Amazon started the integration process by implementing an Economic Value Added (EVA) approach in hopes to align with SPN strategy that focuses on maximizing long-term free cash flow. This involved educating and running training simulations with employees to ensure they had a full understanding of the SPN concept and how it is applied to the company. EVA was later scrapped in favor of moving to SPN, but it was an important process to get people to start thinking about the long-term cost implications of their decisions in the company.
Although the concept of SPN and its advantages seem simple, the integration of SPN into a company’s system requires detailed planning and strategies. Amazon attributes their successful implementation of SPN mainly to cultural change within the company. The integration process took years to implement, from changing the mindset of employees to the top-level executives understanding and buying into the idea of SPN.
Impact on Amazon’s Operations
The SPN solution provides vendors with an accessible point of entry for the relationship with Amazon and simplifies the process for doing business with Amazon. This is achieved through the consolidation of numerous buying processes, systems, and tools that were less efficient and effective. This is a key part of how Amazon improved the efficiency of its operations with SPN, as stated in Vyas and Yang, “Amazon’s Supply Chain efficiency and effectiveness significantly improved with the implementation of SPN”. This improvement and simplification of the buying process will save vendors time and effort and allow Amazon to operate a more streamlined buying process to support the ability to obtain the best product prices.
With the integration of SPN, Amazon has unleashed a powerful new solution for managing its vendors and improved the choice, convenience, and relevance for customers. SPN has improved the interactions between Amazon and its vendors to obtain the best prices for products, which results in greater cost savings for customers. “We could cut the time it took to make a pricing decision from 14 days down to 1” (Amazon.com, 2003). The ability to negotiate and collaborate on the vendor’s terms allows Amazon to make decisions and take actions based on the potential value of the products and relationships with specific suppliers. By doing this, Amazon is creating value throughout the supplier lifecycle by enabling them to better understand how to increase their products’ visibility and make a more compelling sales proposition to Amazon’s customers.
Results and Success Stories
The SPN campaign targeted in Stock and Sold IO digital pen SKU, driving highly targeted traffic to the product detail page. The product detail page is the best representation of the customer’s experience and where purchase decisions are made. Logitech experienced a 5-10% increase in conversion rates on average for customers who visited the product detail page in comparison to other forms of online advertising. This had resulted in driving an average of 20 incremental orders per day specific to the SPN campaign. IO digital pen has now become a staple product in Logitech’s arsenal. Completing a successful first quarter with SPN, achieving the goal of driving customer adoption and retention, we can label this SKU SPN a success with increased sales and customer acquisition. IO digital pen, in comparison to other products, has had one of the highest conversion rates and incremental order averages. This SPN campaign was a major factor in Logitech awarding Amazon with their advertiser of the month title.
One such success story is related to Logitech. They launched their new IO digital pen with SPN. This product uses a Bluetooth connection and special digital paper to digitize users’ handwritten notes, drawings, and sketches. Logitech’s goal was to measure if they could increase incremental orders and also drive customer adoption and retention.
When one talks about SPN in Amazon, the first thing that comes to mind is the ‘success’. It has been a huge success story for Amazon. Amazon has had almost a 200% increase in revenue/performance over the quarter each year, for the four years SPN has been in effect. Discussing these success stories and results is a way to understand the potential of SPN in increasing revenue and performance of a company. There are numerous success stories related to SPN in Amazon, from advertising a very high-cost product to very low-cost products; from helping launch a new product to helping clear excess inventory.
SPN Best Practices
Following on from this, add a Negative Keyword List according to the data that has been identified. Negative keywords will prevent an ad from being triggered by a certain word or phrase, and this is a great way of filtering out unwanted traffic. For example, for a brand new product that you are selling, it may be relevant to add a specific product category as a negative keyword to prevent traffic looking for a different type of product.
Firstly, once the SPN campaign has generated sufficient traffic, run a Search Term Report and analyze the keyword data to identify keywords that are providing conversions, and also keywords that are incurring a cost but not converting. This is a simple yet often overlooked step that can help shift the focus onto the most relevant keywords.
The success of a SPN campaign lies in strategic bid optimization using target-specific related keywords and relevant creative to offer a combination of high traffic and high conversion at the lowest possible cost. Several steps can be taken to ensure SPN campaigns are being optimized to the fullest.
Importance of Data Analysis
With the ability to easily collect and analyze data, it has proven to be a valuable asset to many online companies. For companies that serve as an intermediary in this data collection process, it may be difficult to pinpoint specific data conclusions and how they relate to company benefits. Advertisers often look to increase product sales through increasing brand visibility and optimizing product positioning.
In the advertising industry, the more effective the ad targeting, the more advertisers are willing to pay. Effective ad targeting increases the relevancy of an ad to a consumer, which in turn increases the probability that the consumer will click on the ad. SPN can be compared to traditional PPC advertising when considering ad targeting strategies. The only difference is paid ads are displayed on top of search results instead of a sidebar or on the search results page. Amazon records both sales and ad performance data into a database.
Since data is recorded each time an ad is clicked, it is feasible to track ad performance through changes in product sales. This in itself will serve as a basis to measure ad effectiveness. Click data can be used as a metric to compare the effectiveness of search term and product ads. The goal is to increase the probability of a purchase following ad click. Click frequency patterns can be compared over time to determine which ads are most effective in increasing brand visibility. An increase in sales will be the determinate factor to whether a specific ad has optimized product positioning. By comparing these different types of ad data, it will provide an indication of overall SPN campaign performance.
While comparing ad data is an effective method to determine success, it is equally important to identify areas of opportunity and/or inefficiency with the use of CDNP analysis. CDNP analysis is a technique used to compare the costs, benefits, and possible alternative courses of action for the allocation of resources. It provides a structured method to compare different aspects of an advertising program to one another. This could prove to be very valuable when comparing between different types of ads or various campaigns. Ads could be compared based on cost and their individual effects on product sales.
Additionally, it can help compare specific product ads to search term ads and their respective impact on the sales of a specific product. The same comparison can be made between search term and product ads for individual products. By comparing these ad types, Amazon will be able to determine the best ways to allocate advertising resources within the given budget. An increase in product sales for specific products can also be compared with the opportunity cost relative to sales at beginning levels.
The purpose is to make the most sound decisions to optimize product positioning. It may be possible to simulate changes in ad grouping and placement in order to find the best result. This analysis technique will help to identify the most effective ad types and their ideal placement for maximum product sales and increased brand visibility.
Effective Targeting Strategies
Utilizing negative keywords is an efficient method of filtering out unwanted traffic. Negative keywords restrict ads from being triggered by certain searches, so they are extremely useful in stopping your ad from being shown to the wrong audience. This can lower costs and improve campaign ROI. An effective way to do this is to match entries in Google search terms report to poorly performing ASINs by giving these selections a category of their own. By doing this, you can easily place negative exact matches on all keywords in that category without applying them to the rest of the campaign.
Use a categorical targeting approach whenever possible. This involves separating and grouping potential buyers into specific categories. You can use information obtained from the Amazon Category Structure to form category-specific campaigns. Apply relevant keywords and products from the category structure you are targeting. Ideally, these should closely correspond with the product or service you are promoting.
Optimizing SPN Campaigns
Optimizing SPN Campaigns. After your Sponsored Products campaign has been running for several months, it is time to assess the effectiveness of your advertising spend. An efficient campaign structure will allow you to easily identify strong and weak areas within your campaign. Using advertising reports, sort data to compare the performance between product lines. Here you can identify which products are receiving a strong sales response and may require a higher bid.
Conversely, determine which products may need a stronger relevance with search terms or may need a more aggressive bid to increase their competitive position. Strongly performing products can be grouped in an individual campaign in the campaign manager tab to simplify the increased bid process. Products with different goals would be assigned in a separate ad group in the existing campaign. This way, products can be driven to their appropriate goals with minimal wasted spend.
Advertised products that perform weak across the board should be considered for a product detail page bid, as they may need increased relevance or visibility. When you have identified efficient product groupings and increased bids for strong products, you will need to monitor the difference between ad-eligible and ad-spend. Ad-eligible is the buildup in product impressions from search terms and is a good measure of a product’s exposure to the market. Plotting ad-spend vs ad-eligible on a graph will allow you to visualize the increase in spending or competition for a product.
An effective increase in bid will show a significant parallel increase in ad-eligible, and the cost of advertising on a product with sales results will justify the increased spend. An inefficient increase in bid or competitive pricing will result in increased ad-spend with no change in ad-eligible, meaning more cost for the same results. These products can be identified and have their bid values reduced to reclaim a desired cost of advertising.
SPN vs Traditional Advertising
Comparing SPN to conventional forms of advertising exhibits why major marketers and businesses typically choose to capitalize on SPN. In traditional advertising, one of the major drawbacks is payment. When running a print ad in a magazine, commercial, or banner ad, there is often a static fee that offers limited understanding of an ad’s efficacy. For instance, if an entrepreneur was to advertise a book for $2000 in a magazine, there is no way to measure how many readers took interest or if the book was even noticed.
Ad duration is also lacking in flexibility. If an ad was selling a product that was in limited stock or on sale for a short period, the advertisement itself will not mimic these changes. A static advertisement such as a print, radio, or banner ad has no way of targeting specific necessities relevant to a changing customer base. This adds to another limitation of traditional ads: segmentation. Ads such as these do not have the same potential for mass customization as SPN.
Over the years, traditional advertising has progressed and digressed in many forms ranging from print ads, radio broadcasts, commercials, and more. However, the same classic types of ads in these forms of communication all focus on a one-way transfer of information. The marketer or advertiser communicates to the consumer with limited feedback and dialogue at the time of the consumer’s choosing. Though these types of advertisements still have strong influences today and are effective, the qualities and capabilities of Sponsored Product Ads lead the new age of advertising to success.
Advantages of SPN over Traditional Ads
Word of mouth is a powerful way of getting sales. People are more easily influenced by friends rather than an advertisement. The best form of word of mouth is when someone tells you about an experience that they believe you would find relevant to your needs, followed up by recommending a specific product. SPNs allow for a whole new level of word of mouth advertising. For example, a wife may find out about a good Thailand holiday package from her friend. She can then find more information or even book the holiday for when her husband is at work. This is like the friend’s experience being shared directly relevant to the product.
How many times have you seen an advertisement on TV and said, “That looks good? I’ll have to remember to look out for it next time.” There are too many steps involved to get from watching a TV ad to actually buying the product. Also, by the time you are ready to buy that product, you may have forgotten all about that advertisement. SPNs have an advantage here in that it is a relatively low involvement decision to click to the merchant or make a bookmark. The visual at the merchant site, compared to the many steps of the offsite buying process, is much closer to the product that prompted the decision in the first place.
Traditional ways of advertising are now a dead way of promotion. For a user to buy a product, the user needs to see the advertisement within a 2-week period 3-4 times. This is time-consuming and cost-inefficient for making a sale. SPNs(R) are designed to target consumers who are in the buying cycle favorable for the product. onesearch(TM) prequalifies the ad viewer and makes the advertisement relevant to the user’s needs. This, in turn, will enable the user to click to the merchant as the product is what they were looking for. This is a much faster and efficient way to make a sale.
Limitations and Challenges of SPN
SPN, with all its advantages over traditional advertising, still has some limitations and faces certain challenges when it comes to their implementation. Some of the limitations of SPN advertising are that message delivery is contingent on “high touch” relationships between account managers and customers; as a relationship channel, its effectiveness is dependent on both product and ongoing account management quality.
SPN demands a high level of sales force automation in order to support the channel. This results in increased cost of sales, making SPN unsuitable for certain small firms. As the internet continues to be an unregulated medium, SPN faces the threat of channel conflict with other newer forms of internet advertising. With the increased broadband capabilities of the internet, such as webcasting, SPN faces a growing challenge to capture the user’s attention. This still developing form of advertising is facing challenges to prove its value for firms, another potential challenge in the future.
As the buying and selling of fixed price placements becomes more similar to traditional advertising, there is a risk that SPN could lose its distinction and identity as a unique form of internet advertising. High-end SPN placements designed to promote brand image and capture customer interest are becoming similar to traditional forms of advertising. This could result in a situation where SPN will have to compete with traditional media for business. If SPN fails to compete with traditional media in terms of providing advertising effectiveness studies and ROI metrics, it could lose favor with firms that are increasingly adopting accountable marketing programs.
High accountability is one of the main selling features of SPN, and its effectiveness as a model has already resulted in firms increasing their marketing spend on SPN. This shift in marketing dollars is a major cause for the decline in traditional advertising. Failure to acquire a sufficient amount of market share from traditional media will limit the growth potential of SPN.
Future of SPN in E-commerce
Lastly, increased government regulation is an emerging trend. This will impact the way products are listed and sold online. Some specific regulations may dictate data tracking and product data comparison to ensure standardization. In the UK, there already exists a regulation to ensure all food products are listed with a data set of specific attributes. These trends will shape the future of e-commerce, and SPN will adapt to ensure that it is an integral part of successful online product sales.
Another key trend is the growth of comparison shopping and affiliate sites. These sites allow consumers to shop multiple stores and brands all in one location. They are a model for customer acquisition and have a low-cost, low-risk entry point for products to be listed. Typically, the affiliate model is based on a performance-based fee for a click or sale routed to the merchant’s site.
There are several key trends emerging in e-commerce. Many of them are certain to play a role in the future of SPN. First and foremost is the growth of online marketing. Online marketing will further divide itself into two main areas: customer acquisition marketing and brand marketing. For customer acquisition, marketing methods will become more efficient and accountable via performance-based advertising. This includes affiliate marketing and pay-per-click search engines. Brand marketing will focus more on customer targeting and CRM. This form of marketing will incorporate SPN to ensure that the customer sees the most relevant products to entice a purchase.
Reiterating a few key points about SPN, the future of SPN in e-commerce can be seen as critically important. Global e-commerce sales continue to rise in double digits. As online retail sales continue to grow, retailers and consumers are becoming more knowledgeable and sophisticated. With consumer adoption of broadband taking much longer than initially projected, the internet is becoming an everyday shopping and information tool for the home. With online retail sales still accounting for only a single-digit percentage of traditional sales, it is easy to see that the growth of e-commerce has only begun.
Emerging Trends and Technologies
Shift from forecast-driven to demand-driven supply chain strategy requires a new level of automation. In order to provide high levels of mass customization for large customer bases, increased levels of technology must be used to ensure low unit costs and high flexibility. With the improved efficiency of information flow on a demand-driven supply chain, cost-effective automation can be achieved through the use of intelligent agent systems. These systems can form a virtual supply chain, making real-time rational decisions without human intervention.
Refers to the ability to react to changes in supply and demand as they occur. The main factors driving real-time supply chain capabilities are the instant access to demand and supply information, and the sophisticated information systems technology that enables this access. Real-time supply chains can be created and improved in a number of ways. Through decreased cycle time (e.g. the time taken from design to production), decision making can be delayed until the last possible moment, reducing the possibility of reacting to incorrect information.
This can be facilitated through efficient consumer response (ECR), a newer approach to supply chain management in the food industry, where decision making is consumer-driven, based upon the sharing of consumer information. Finally, the use of responsive supply chain partnerships is an effective way to create real-time supply chain capabilities. These partnerships can take the form of vendor-managed inventory (VMI), CPFR, or a direct model partnership between a supplier and manufacturer.
Potential Impact on the Industry
This chapter will discuss the probable impact of SPN on the industry. Given the current trends in B2B e-commerce, it is suggested that SPN will be widely accepted and adopted among businesses. As more and more businesses realize the potential of the internet for procurement and selling, there will be an increased demand for systems that make the process more efficient. Tools like SPN that help bring together buyers and sellers in an efficient manner will be sought after. This is particularly important given that exchange-based systems have not been extremely successful in driving business to date.
Amazon’s success in using SPN has been in recruiting sellers to use an Amazon site rather than competitors’ or their own. This is a key benefit of SPN because it is the sellers that bring the buyers, but it is still the early days of this model and there is much improvement to be done in systems that match and locate products to be purchased. With the rapid innovation in internet technology, it is expected that tools to improve the location and matching of products will lead to a much higher efficiency in B2B sales and procurement processes. Given that efficiency is often an enabler of cost-cutting, these trends are likely to mean a reduction in the cost of procurement and sales for many businesses.
A further potential impact of SPN is facilitating global sourcing and selling. At the moment, many businesses are still apprehensive about global trade. This is due to various reasons such as fear of the unknown, exchange rate risks and costs, and more recently political factors resulting in protectionist policies. Thus, there is a clear trend that despite globalization, many businesses are still sourcing and selling within their own domestic market. SPN helps facilitate global trade by making it easier to find overseas buyers and sellers and locate what are often niche products difficult to find locally.
Furthermore, one very interesting possibility given SPN is the ‘reverse’ global trade, i.e., procurement by businesses of foreign goods that were located in domestic markets. An example would be a small business in Canada procuring some Australian-made tools, which the seller had never considered selling to Canada. As the internet continues to break down communication and trade barriers, SPN is likely to be a key driver of global sourcing and selling, and there are a number of benefits to world welfare from this more efficient allocation of resources.
Conclusion
The formation of SPN completely changed the dynamics of program trading. Amazon not only successfully customized the cost management but also converged diversified activities related to investment business under a comprehensive and unified framework. Not only providing the transparency required under discrete decision-making process, they successfully installed a risk management tool with SPN to get a better hold of downside. With the rapid growth of employment of derivatives into various portfolios, comprehensive risk measures will be required and tools and techniques used in the past when risk control was solely focused on equity, will no longer be sufficient.
While SPN has internal flexibility and can be adjusted to the requirements of the individual firm, the broad concepts and strategies it implements are applicable to a wide range of financial activity. Considering that it already has a rich history in the specific context of bank capital allocation and has provided much the basis for the simulation of complex economic regulatory policies and Basel standards. Amazon can look forward to a successful long-term utilization of SPN as it continues to develop and provide.
It will threaten existing methods of risk assessment in the financial industry and also provide more efficient methods to many of the areas which SPN has already been successful.
