Retail Insights, Strategy & Operations

Amazon, Yada, Yada, Yada

Are we having fun yet? I don’t think so. Every day, and usually more than once a day, some new tidbit about Amazon blazing new trails and road blocking old ones screams out with news of disintermediating all industries. With the metric of Amazon growing at the rate of 20-30 percent a year, it’s hard to conjecture when it will ever slow down. What’s worse is envisioning the roadkill as Amazon stomps or steals a host of retailers’ or brands’ business. What’s even worse than the level of anxiety this causes CEOs around the world, is the fact that Amazon’s growth and its superior distribution platform almost forces consumer-facing businesses to join Amazon’s marketplace to enhance their growth. Be careful what you wish for. Dancing with Amazon is dancing with the devil, so to speak. Amazon is both a competitor and a controlling companion.

A recent metric was released by Slice Intelligence, indicating how rapidly Amazon is gobbling up share of market. The report cites that Amazon accounted for 43 percent of total U.S. online retail sales in 2016. This was up from 33 percent in 2015, and 25 percent in 2012. Is that fast enough growth for you? In 2016, they accounted for 53 percent of the growth in total U.S. e-commerce sales. OMG.

The chart provides a scary context for Amazon’s dominance in e-commerce, showing its market cap as larger than eight of the major retailers combined.

Source: Business Insider

While electronics drove 18 percent of the growth in sales in 2016, a big contributor was Amazon’s Echo. The number of households owning Alexa doubled in 2016 from 2015. The home and kitchen categories contributed 15 percent; apparel and accessories 12 percent; food 11 percent; and health and beauty, 10 percent. Hold onto your horses. Amazon expects the expansion of their one-tap dash buttons online and on mobile apps to further accelerate growth.

Are you sick of hearing about Prime yet? Talk about ramping up on new Prime subscribers, Consumer Intelligence Research Partners found that 20 percent of all U.S. households are members, and according to an Internet Retailer survey, more than half of these subscribers (52 percent) go directly to Amazon when they go online to shop, This speaks to both brand loyalty and luring in new traffic. Wouldn’t you like a piece of that customer base?

How can the old world legacy businesses catch up to this? And how do they avoid opting into Amazon’s marketplace, becoming subsumed into its ecosystem?

If you’re not Walmart, you will need to beat Amazon on the ground in your own physical spaces where you can provide wonderful social communities and experiences that consumers really want and willingly choose to spend time hanging out in.

But honestly, I am getting sick of hearing myself in this loop. If traditional, even luddite retailers don’t transform their spaces really fast, they will wake up one morning to see a physical Amazon “community” right across the street. And like kudzu, Amazon will spread across this country, really fast.

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