Amazon CEO Jeff Bezos has a knack for keeping his e-commerce site front and center of today’s headlines. Last week, the company announced it was acquiring Whole Foods. Before that, there were rumors it was also looking to buy Slack. And now, with Prime Day just around the corner, industry experts are paying close attention as Amazon’s online revenue market share continues to grow.
After owning a 38 percent share of online sales revenue during the 2016 holidays, Amazon topped its holiday success by growing its share of online sales to 40.9 percent during Q1 2017, according to Slice Intelligence, an e-commerce market research firm that tracks what consumers are buying online, the sites they are shopping and how online purchasing trends change over time.
Of the top 10 online retail sites, Amazon took nearly half the market share. Meanwhile, the remaining top nine e-commerce sites, including Best Buy, Target, Walmart, Macy’s and Nordstrom, each owned less than a 3 percent share of online sales during the first quarter of this year.
Slice Intelligence: Q1 2017 online sales market share
What’s driving Amazon’s dominance?
“It is almost impossible for another retailer to do something that would give it access to as many products as are available on Amazon across multiple categories,” says Ken Cassar, principal analyst and vice president at Slice Intelligence.
When asked what single factor he believes is responsible for Amazon’s dominance, Cassar says the site’s relentless drive to innovate and find new ways to deliver outranks its competitive prices and wide product selection.
“Amazon has really been defining the way we think about convenience, and that, I think, is more important than anything else,” says Cassar.
He says Amazon remains competitive on pricing, but the site has become less dogmatic about having the lowest price over the past couple of years.
“It’s a place where you know you’re always going to get a good price,” says Cassar, “But, whereas 10 years ago Amazon felt that it had to answer for absolutely the lowest price in order to win, today, it’s realizing what’s really more important to consumers is convenience.”
A consumer survey published in December of last year by the e-commerce platform Radial shows Amazon shoppers still rank price high on their list of reasons for shopping on the site.
Polling 1,000 Amazon customers, Radial found 38 percent said they shopped on Amazon for product selection, 29 percent for price, and 13 percent for delivery speed.
But Stefan Weitz, Radial’s executive VP of technology services, agrees that Amazon’s convenience is the real reason it dominates the e-commerce industry.
“What Amazon has done so well is to reduce friction at every single point in the e-commerce process,” says Weitz, “Selection, delivery speed, pricing — those are all really proxies, in my opinion, for a lack of friction.”
Weitz says Amazon’s strong suit is its ability to eliminate any reasons for a consumer to abandon a transaction – something a lot of retailers, brands and e-tailers are still struggling to overcome.
No signs of slowing down
While Amazon’s 40 percent share of the online market doesn’t shock anyone, Slice’s Cassar says the site’s consistent and continued growth has surprised him more than anything else within the e-commerce industry during the last few years.
“As an analyst that’s been watching the online market for 20 years now, everything I know about growth rates tells me that Amazon — because it’s big, because it’s got a 40 percent share — shouldn’t be growing faster than the channel overall.”
Yet, Cassar says that’s exactly what Amazon is doing — growing faster than the rest of the e-commerce sector despite its size. Even with 40.9 percent share of the online sales during Q1, the company saw a 30 percent year-over-year growth rate during the same quarter, according to Slice Intelligence’s market research.
Cassar calls Amazon’s growth extraordinarily impressive.
Slice Intelligence: Year-over-year growth rate for Q1 2017
Can traditional retailers compete?
Cassar and Weitz both believe there is room for traditional retailers online.
“Amazon doesn’t have the corner on friction-less commerce, you can’t go to a shop and pick up the pants you want,” says Weitz, “They don’t have that ability to have in-store pick-up, they don’t have the ability to do great showcasing of product, they don’t have a really good ability to bundle things today.”
He says that brands trying to compete on Amazon’s level — using Amazon’s established methods — is a losing game.
“You have to think about what do you have that is unique to you — whether it’s foot traffic, a lot of stores, a great loyalty program, interesting ways to curate items that won’t be sold on Amazon — those are ways that these companies can and are competing,” says Weitz.
Slice’s Cassar echoes Weitz’s comments. He says Walmart Grocery — the program that lets customers buy groceries online and pick up their order without coming into the store — is a great illustration of a traditional brick-and-mortar retailer staying true to their customers and understanding their value proposition.
“It is Walmart doing something to address consumer needs that happen to compete with Amazon, but not tearing a page out of Amazon’s playbook,” says Cassar.
Cassar says for the first time in history of e-commerce, he is seeing situations where Amazon is reacting to Walmart now.
“I actually believe that the reason Amazon bought Whole Foods is because they were afraid of what Walmart was going to be able to do as it quickly ramped up its Walmart Grocery offering,” says Cassar.
Cassar says Walmart began aggressively rolling out its buy-online/pick-up-in-store program to many markets in 2016, resulting in grocery products accounting for 10 percent of Walmart’s online sales.
Slice Intelligence: Walmart’s quarterly growth
Another weakness in Amazon’s armor, according to Cassar and Weitz, is its relationship with brands.
“There is a high degree of collaboration between brands and retailers,” says Cassar, “With Amazon, though, there isn’t the collaborative relationship between Amazon and its brand partners. Amazon basically tells its brands what it wants.”
Weitz says his company has witnessed a number of high-end brands leaving Amazon.
“Birkenstock wanted to pull out of Amazon and move to their own operated channel because they do recognize there is a risk to relying on them for their traffic, and relying on them for a lot of their sales,” says Weitz.
In the meantime, most brands are still leveraging Amazon to push their products. On July 11, Amazon will host its third annual Prime Day, now a 30-hour sales event that offers exclusive deals for its Prime members.
According to the announcement, Prime members will have access to “hundreds of thousands of deals” across various product categories. Amazon also recently rolled out Prime Wardrobe, a return program that lets shoppers purchase three or more clothing, shoes or accessory items and only pay for what they keep.
As much of a nightmare as Amazon is for the rest of the online retail market, it’s easy to see the benefits for consumers. While the e-commerce giant continues to expand its product offerings and digs deeper into verticals like the grocery market industry, traditional brick-and-mortar retailers will have to deliver what Amazon can’t to compete — creating a win-win scenario for online shoppers.
Go to Source
Author: Amy Gesenhues
For more SEO, PPC & online marketing news visit https://news.scott.services
The post As Amazon continues its rampant growth, will traditional retailers survive online? appeared first on Scott.Services Online Marketing News.
source https://news.scott.services/as-amazon-continues-its-rampant-growth-will-traditional-retailers-survive-online/
No comments:
Post a Comment