Amazon and How It’s Beating You on Every Level

Posted on Jul 20, 2017 By kbormann Share:

How the number one marketplace in the U.S. is defeating you in partnerships, technology and Prime Day.

It’s no secret that Amazon is dominating the retail market in the United States. It almost seems like they never make a wrong move and everyone is constantly chasing their tail trying to catch up. What Amazon does well is seeking out opportunities and making the right risks so that they are ahead of the game with acquisitions, technology and shopping events. They’ve always kept the customer experience top-of-mind and continue to shape the expectations of today’s consumer. And if Amazon is the one shaping the expectations of today’s consumer, that means that everyone else is lagging behind.

Marketplaces as a Whole

The 10 largest U.S. marketplaces, which include Amazon, eBay, Etsy, and others, hit $387.71 billion globally in sales in 2016. This number is up 15.9% from 2015, although much of that was driven by Amazon, whose sales were up 8.5%.

Amazon, the Number One Marketplace in the U.S.

Download Holiday Shipping Strategies eBookDid you know that 59% of U.S. consumers say that they begin their online shopping searches on Amazon? That’s ahead of Google, the number one search engine. This is especially true during the crucial holiday peak season. Internet Retailer reports, “A BloomReach survey of 3,000 U.S. consumers during the five-day Thanksgiving through Cyber Monday period last year found that 87% of U.S. consumers said they would check Amazon at least once during their shopping process.”

  • 47% said they’d check Amazon for 50% or more of their holiday purchases overall
  • 73% said they’d make a purchase on Amazon during that five-day period

That means that other retailers are missing out on 73% of the market (ouch!).

Amazon by the Numbers

  • 335 retailers in the 2017 Internet Retailer Top 1000 Guide sell on Amazon
  • More than 350 million SKUs on Amazon are from marketplace merchants, compared with 13 million SKUs of Amazon’s own inventory
  • There are 80 million Amazon Prime members, up 38% from 58 million a year ago
  • In 2015, 1 billion products shipped through Fulfillment by Amazon (FBA)
  • In 2016, 2 billion products shipped through FBA (that’s 100% growth)
  • There was more than $1 billion in sales in 2016, with marketplace sellers receiving half the orders and Amazon accounting for the rest
  • Amazon has 400,000 business customers in the U.S.
  • Amazon’s marketplace for handcrafted goods offers more than 500,000 items sold by marketplace sellers, up from 80,000 when it launched in October 2015
  • Amazon Mexico launched in June 2015 and now has more than 20,000 sellers and offers 50 million products
  • Marketplace sellers sold $1 billion worth of goods on Amazon Canada in 2016

Amazon and the Competition [#shippingwar]

There are a couple of competitors that are continuously trying to take bites out of Amazon’s market share. Walmart and eBay are the frontrunners.

Though eBay hasn't been in the news much lately, the company has been working hard to attract more customers to the site. One of eBay's plays is its new price matching feature. In June of this year, eBay launched the Price Match Guarantee, which states that eBay will always offer the best price on qualifying products and if it fails, eBay will match select competitors' prices.

In March, eBay rolled out Guaranteed Delivery, a program that offers customers delivery in three days or less on around 20 million items, most likely challenging Amazon’s Prime offerings. The last feature eBay has launched is eBay Authenticate, which allows sellers and buyers to opt into a fee-based service to have a professional authenticator review a product before it’s shipped.

Walmart is another challenger that has made it clear that it’s not going away. At least, not without a fight. With the acquiring of and the launching of its marketplace in 2016, Walmart’s online SKUs have gone from 8 million to 50 million in 2017.

But, Wal-Mart may have one of the best shipping perks. While customers will have to spend $35 to receive free shipping, orders will arrive within 2 days (a perk that Amazon Prime members have to pay for). If your order doesn’t quite meet the $35 requirement, you can “upgrade” to free two-day shipping for just $5.99. However, eligible items are limited as Wal-Mart only offers around two million (48 million less than Amazon). Additionally, Wal-Mart is testing a new type of delivery to lessen the blow of shipping costs. Instead of carriers, they’re using their own employees to deliver packages on their way home, an innovative last-mile delivery technique. Will it work? Time will tell.

Amazon and its Acquisitions/Partnerships

There is one major acquisition and also one major partnership that are making headlines this year: Whole Foods and Nike.

Whole Foods
Amazon purchased Whole Foods for $13.7 billion in June of 2017. Though Whole Foods will continue to operate under its original name, the deal further shows Amazon's interest in moving into the brick-and-mortar retail market (the style most retailers are trying to move away from). The merger also shows Amazon's interest in grocery and will most likely aid in Amazon's delivery service, AmazonFresh.

A Bloomberg report published in June suggests that Nike has entered into a partnership with Amazon to sell its products directly on the latter's platform. Traditionally, Nike has only sold via their own storefront and e-commerce site, and Nike products currently sold on Amazon are sold by third party sellers only. Amazon is increasing its interest in clothing and accessories as the company recently launched "Prime Wardrobe," a service for Prime members where they can order a box of apparel to try-on before purchasing (much like other subscription clothing programs such as StitchFix and Wantable).

Clearly, Amazon sees a play in the subscription world with taking on newly-launched grocery and apparel programs. Customers are expecting these options and Amazon is delivering. Are you?

Amazon & Technology

Amazon Echo
One of Amazon’s most popular technologies is the Amazon Echo smart speaker. In fact, it’s Echo Dot (which saw a 30% price cut to $35 on Prime Day) was the single highest-selling item on Amazon, while Echo sales overall were seven times higher than 2016’s Prime Day. Amazon certainly saw the rise in smart technology and jumped on the opportunity to be ahead of the pack.

Amazon Lockers

Amazon Lockers

The omnichannel feature “Buy online, pick-up in store” (BOPUS) has been gaining popularity over the years. More people are shopping online and don’t want to wait or pay for delivery. So, instead of delivering a package to your home or business, you can select an Amazon Locker location and pick-up your package at the time that’s convenient for you. But, all packages delivered to Amazon Lockers must be picked up within three days, otherwise the packaged will be returned to Amazon for a refund.

Amazon Locker locations include brick-and-mortar stores and convenience centers such as Boston Store, 7-Eleven, Open Pantry, Cub Foods and Meineke Car Care Center, among others. The downfall of these lockers is that only Amazon packages can be placed inside them. For instance, Boston Store has zero ability to use these lockers for their own merchandise and click-and-collect function.

Perhaps this is one way that retailers can surpass the Amazon effect. It almost begs the question: Why aren’t retailers investing in this technology?? Today’s customers are part of the “I want it now” generation, and they don’t want to wait in lengthy lines for in-store pick-up, they don’t want to wait for a delivery truck, they don’t want to pay for shipping and they want convenience. Parcel Lockers provide this, and carrier agnostic lockers, ones which can hold more than just Amazon packages, are to be sought after.

Amazon Events

The only Amazon event to note is a huge one, Amazon Prime Day.

After Amazon Prime Day 2017, analysts are wondering if it’s the new Black Friday/Cyber Monday. This year, Amazon increased Amazon Prime day to 30 hours from 24 and generated $3 billion in sales. Digital Commerce 360 noted “ Inc. may have generated more in online sales on its third annual Prime Day than nearly every North American retailer will sell online all year.” Sheesh.

In fact, Amazon grew its overall sales by 60% YOY for 2017’s Prime Day. It’s become the most anticipated cyber event that everyone is now marking on their calendars every year. Market research firm, Market Track, found that about nine out of 10 Prime Day shoppers intend to shop Prime Day in the future.

Retailers haven’t been ignoring the success of Amazon Prime Day. An Internet Retailer analysis of the 100 largest e-retailers in North America (excluding Amazon) finds that 47 ran some kind of Prime Day promotion that day, whether it be a limited-time sale or incorporating “prime” language in promotional materials.

Retailers that don’t capitalize on Amazon Prime Day are passing up a huge opportunity. For three years, consumers have been “trained” to anticipate amazing Amazon deals on Prime Day and are now coming to expect the same from other leading retailers in the future. This is just another way that Amazon is shaping today’s consumer expectations.

Actually, retailers that don’t capitalize on any of these tactics that Amazon leads will soon be left in the dust. Retailers should be investing in the future customer experience and make sound decisions that fulfill the wants and needs of today’s consumer. As Jeff Bezos, CEO of Amazon said, “We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little better.” Make it your job too.

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