Episode Number:

23

May 5, 2025

The Evolving Landscape of E-commerce Agencies

Our conversation kicked off by tackling the big question: Where is AI heading, and how will it affect our businesses?

Key Insights:

  • Short-Term Opportunity, Long-Term Transformation (Chris): Chris painted a picture of AI offering immediate opportunities for cost reduction and enhanced capabilities in areas like creative generation and optimization. However, he cautioned that this could lead to a “race to the bottom” within the next five years due to changing pressures on agencies, including employee costs and margins. He sees it as both a threat and an opportunity, perhaps weighted more towards opportunity in the immediate future.
  • A Phased Evolution (Simon): Simon largely agreed with Chris but suggested a more gradual evolution. He envisions an initial phase of prosperity for agencies leveraging AI for efficiency gains while maintaining current retainers. This will likely transition into a phase where the perceived value of some traditional agency services diminishes, potentially leading to service integration and evolving offerings – a sort of bell curve of impact.
  • The Cycle of Evolution (Danan): I chimed in, echoing the sentiment of a natural cycle of life and death within the business world. I leaned towards a longer period of prosperity but also anticipated AI accelerating the demise of less adaptable, “fly-by-night” agencies. Conversely, larger agencies offering comprehensive solutions and advanced data capabilities will likely thrive by integrating AI into their services.
  • A Shift Towards “One Person Plus AI” (Chris): Chris further elaborated on the long-term view, suggesting that the ultimate form of an agency might be “one person plus AI.” He believes that the core differentiator will become the quality and effectiveness of the AI tools an agency possesses, potentially leading to more performance-based billing models.
  • The Rise of Proprietary Operating Systems (Simon): Simon offered a slightly different take on the “one-person” model, envisioning the evolution towards distinct agency operating systems powered by AI. These systems, offering a broader range of integrated services (including areas less easily replicated by AI, like complex negotiations), could become a key unique selling proposition for agencies.

Components Most Exposed to AI

We then drilled down into which specific components of full-service agencies are most vulnerable to the impact of AI tools.

Key Insights:

  • Creative Asset Creation and Copywriting (Simon & Chris): Both Simon and Chris highlighted creative content generation and copywriting as areas already significantly impacted. AI’s ability to rapidly produce and deploy content, even dynamically adapting to seasonal or Amazon-specific events, poses a direct challenge to traditional creative agency models. Chris specifically mentioned “bulk creative” for e-commerce (like A+ content and short videos) as an area where AI offers significant cost and time savings.
  • Media Buying and Optimization (Chris): Chris pointed to media buying and optimization as another area ripe for AI disruption. He believes that while humans currently augment AI in this space, the trend is towards increasing automation and eventual replacement of human roles focused on spend management and optimization.
  • Analytics and Reporting (Chris): The automation of analytics and reporting was identified as “low-hanging fruit” already being addressed by software tools, further reducing the need for human intervention in these areas.
  • Campaign Strategy and Planning (Chris): Interestingly, Chris believes that campaign strategy and planning, particularly the generation of novel ideas, will likely remain a human domain for the foreseeable future.
  • Account and Client Management (Chris): The human element of account and client management, focused on building relationships and ensuring client satisfaction, was also seen as a more resilient role.
  • Amazon’s Own AI Integration (Simon): Simon highlighted Amazon’s increasing integration of AI, such as automatically generated performance metrics and root cause analysis, which will necessitate agencies understanding and working in tandem with Amazon’s AI systems.
  • The Power of Data and LLMs (Danan): I emphasized how current agencies often leverage data from the SP API. The future, I believe, lies in the ability to intelligently process and interpret this data using AI, potentially through dedicated LLMs for Amazon sellers, enabling sophisticated insights, predictions, and automated recommendations.
  • The Disappearance of Barriers to Entry (Simon): Simon noted that the decreasing cost and complexity of building SaaS tools mean agencies can now develop their own proprietary technology and data solutions, differentiating them from competitors who rely solely on off-the-shelf software.
  • The Shift from Flagging to Doing (Chris): Chris underscored the importance of AI moving beyond simply identifying opportunities to actually implementing changes (like price adjustments or content updates) and conducting rapid A/B testing, further automating tasks traditionally done by humans.
  • Enhanced Efficiency Through AI (Simon): Simon highlighted potential future applications of AI like day-parting optimization for PDP pages based on user behavior at different times of day, leading to significant conversion rate improvements.

The Timeline of Impact

We then tackled the crucial question of when these changes will truly take hold and when we can expect to see significant erosion in certain agency roles.

Key Insights:

  • Acceleration Driven by Technology (Chris): Chris reiterated his shorter timeframe, emphasizing the rapid acceleration of AI technology across various sectors, including e-commerce. He believes that the impact will be felt significantly within the next five years, affecting not just hard skills like media buying but also softer skills related to task management and even personal assistance.
  • The Role of Brand Adoption (Simon): Simon offered a counterpoint, suggesting that the pace of change will also be influenced by how brands react. He believes larger brands, with more at stake and numerous AI challenges of their own, will likely continue to rely on expert agencies to navigate the AI landscape in the e-commerce space. These agencies will evolve into strategic partners, educating internal teams. Smaller, native Amazon brands might be quicker to bring some functions in-house.
  • Strategic Partnerships Evolving (Chris): While acknowledging the role of strategic partners, Chris maintained that even these relationships will be underpinned by smaller teams leveraging the most effective AI tools to drive results, ultimately focusing on sales.
  • The “Death” of the Traditional Agency Model (Chris): Chris clarified that the “death of agencies” often discussed in publications refers to the decline of the traditional model with large teams brainstorming creative ideas. He believes that while agencies will likely adapt and survive by embracing AI, the composition and roles within them will fundamentally change, particularly impacting roles like ACDs and copywriters in traditional creative agencies.
  • The Vulnerability of SOP-Driven Agencies (Simon): Simon echoed this, suggesting that agencies heavily reliant on rigid SOPs and offshore talent, focused solely on cost reduction, will be most vulnerable if they fail to adapt to the new AI-driven landscape.
  • The Risk of Vanilla Output (Danan): I raised the point that AI is only as good as its training data, predicting a potential rise in generic, “vanilla” content and imagery. While AI can produce seemingly perfect output, the unique strategic thinking and experience of human experts will still be crucial for brands looking to differentiate themselves.
  • The Importance of the Prompt (Chris): Chris countered this by highlighting the critical role of the prompt in AI output. Just as with human creatives, detailed and insightful prompts can yield highly effective and original results, suggesting that human expertise in guiding AI will be essential.

How Brands and Agencies Will Adapt

Our final and perhaps most crucial question focused on how agencies and brands can and should adapt to this evolving AI landscape.

Key Insights:

  • Focus on Efficiency (Simon): Simon emphasized the immediate need for agencies to focus on increasing efficiencies by leveraging AI to automate repetitive administrative tasks and proactively identify potential issues.
  • Embrace AI in the Tech Stack (Chris): Chris strongly recommended that agencies prioritize their tech stack, ensuring it incorporates the latest AI-powered tools for reporting, media buying, and even internal operations. He advised considering M&A sooner rather than later and highlighted the importance of a tech stack that appeals to potential acquirers by solving AI-related pain points.
  • Shift in Pricing Models (Simon & Chris): Both Simon and Chris touched on the likely shift away from traditional FTE-based pricing towards models that incorporate technology costs and potentially lean more towards performance-based billing.
  • Performance and Objectives (Simon): Simon suggested a blend of performance-based models with short-term project-based fees, particularly for areas like negotiation and operational improvements.
  • Continuous Implementation (Chris): Chris urged agencies to continuously explore and implement AI solutions across all aspects of their operations.

My Takeaway: As Simon and Chris eloquently pointed out, the AI revolution isn’t about replacement; it’s about augmentation and evolution. Agencies and brands that proactively embrace AI, focusing on efficiency, strategic integration, and adapting their service models, will be the ones who not only survive but thrive in this new era.

Connect with the Experts

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A big thank you to Simon and Chris for sharing their valuable perspectives on The eCom Growth Show! Stay tuned for more episodes packed with actionable insights to help you navigate the ever-evolving world of e-commerce.