By Lee Peterson
For most of the last decade, it was Amazon versus the world of brick-and-mortar. Now, the competitive challenge is no longer complicated to define: Amazon is one of the fastest growing companies in the history of American business.1 And this growth story—unprecedented, immense, rocket-like, (choose your superlative!)—does not come with a happy ending for most of the ecommerce giant’s competitors. Physical stores are closing in rapid-fire fashion; an estimated 7,500 have shuttered as of Sept 1, 2019, and a projected 10,000 total for that same year will close by NRF 2020.2
Capitalism doesn’t have a mercy rule, and Amazon is just getting started. Last year, Amazon crossed an important threshold, dominating more than half—52.4% to be exact—of US ecommerce sales in 2019.3 Worldwide, Amazon’s ecommerce revenue will grow by nearly 26%, reaching $483.96 billion. The New Yorker recently called them “unstoppable”, and their numbers are here to prove it.
Amazon is increasingly dominant in all areas of consumer culture, expanding far beyond ecommerce and upending everything from cable TV to the advertising industry. How? Their multi-pronged strategy that is aimed at total domination and merciless competition: 96.6 million people now watch Prime Video, 80 million people talk to an Amazon Echo, and 56 million are entertained via Amazon Fire TV.
The War vs Amazon is Over. You lost.
This isn’t merely a story of financial triumph; Amazon has altered consumer expectations of the retail experience for good. It was early in 2013 when we released our landmark study Amazon Can’t Do That and at the time, Amazon’s ecommerce sales were about $61 billion in fiscal year 2012. We warned, “Amazon is not taking over the world. Yet, that is” because back then, Amazon was not one of the top five retailers in the nation. It still had formidable competitors in Target, Kroger, Walmart, and Costco, but we knew this would not last for long. So, we sought to uncover what stores might do to stay competitive, and how they might best fight against Amazon undermining traditional stores. We asked 2,500 consumers what they wanted out of the store experience in an attempt to isolate Amazon’s competitive weaknesses. Respondents told us the allure of “instant ownership” and the “touch and feel” of seeing the objects they wanted to buy would keep them in stores, giving them the tactile rewards of being in a physical space.
This year, we did it again; we surveyed consumers—more than 4,000 of them for good measure—searching for a competitive weakness once more. And by almost every measure, Amazon engenders positive consumer sentiment. The competitive ground Amazon has covered in the 2010s is almost unfathomable, and that’s why we’ve titled our latest study Amazon Won. Now What? There is no longer any question as to whether Amazon will dominate ecommerce, grocery, publishing, entertainment, and, quite frankly, whatever additional category it someday decides it wants to take over. In the consumer’s mind, Amazon is (and has been) the victor. That makes the only questions worth asking: 1) Does that surprise you (doubt it)? and 2) What are you going to do about it?
Amazon’s Dominance by the Numbers
The survey results were unequivocal: Amazon won handily. Three years in a row. Not only did it dominate the Good brands (those brands that consumers feel ‘get them’, take care of them, and have great futures) identified by respondents by a nearly 50% margin, it has seemingly left the rest of the retail marketplace to battle amongst itself. The Home Depot, Walmart and Target are all vying for second place. Amazon’s slight decline in Good votes may indicate some weakening, although it was notably a marginal decline. When we asked consumers, unaided, to name the Best retailer, Amazon topped the results handily, beating Walmart out by double-digits.
The results of our study suggest a clear bifurcation in the consumer marketplace between Amazon and everyone else. This divide offers an object lesson: Focusing on the NEW consumer’s expectations—and then meeting those changed expectations consistently—is the fastest path to marketplace relevance and then dominance. Amazon has won by understanding changing consumer expectations and then meeting them without fail. Any brand that wants to win must not only ask, “What do customers really care about?”, but should constantly be asking that question.
What Does Our New Retail Nation Look Like Now?
That thing you have in your hand? You know, the ‘thing’ that gets you somewhere, that calls your kids/friends, gets you a car, orders you dinner and that helps you buy something? The thing that allows you to do, well, anything? We call that an Anything Engine, and for good reason. You can simply do anything, get anything, be anything with it. It’s your cell phone, your laptop, your iPad, your social media—essentially any tool that has changed the way consumers think and shop that in, compared to them, a space with stacked merchandise simply pales in comparison. Young people who grew up with these tools are especially in tune with their magnificence while store visits continue to decline at an alarming rate. But here’s the problem: your store is competing with them and losing spectacularly. Amazon knows this, young people know it, and in your heart, you know it too.
In the end, our physical stores and our brands in general, must start to think, act and ultimately compete with the Anything Engine or fade into obscurity. Gone is the idea of ‘permission’. Diversify! Your customer expects you to be able to provide new, exciting extensions of your brand at every turn. And why shouldn’t they? They’re one click away from anything you can think of. And after all, it IS all about them.
Who is struggling to adopt this mentality? Specialty retailers. Consumers mentioned brands under this umbrella most when they were asked about Ugly brands, which are defined as the retailers they wouldn’t miss if they simply went away tomorrow. While some brands like Hollister, Justice and Ann Taylor saw ups and downs, the majority of the brands saw steady increases in Ugly numbers. Express notably has seemed to have lost their way over the last several years and while ecommerce sales are consistently going up, net sales are consistently down.4 And while these declines are happening, Amazon is upping their game when it comes to apparel—investing in and rolling out their private label clothing brand Goodthreads. In addition to offering Prime Wardrobe, a try- before-you-buy program, to attract consumers away from specialty retailers and malls in general.
The Time to Act is Now
It’s not just about giving consumers what they want, it’s about doing so before your competitors do. Five years ago, we identified BOPIS as the new cost of entry; many retailers took years to adopt and rollout the tactic within all their stores (some are still rolling it out and poorly at that), and this lag time in executing on innovations in the store experience reflects a staid structure that dominates the typical retail organization. These old-school corporate structures are vertically organized. Amazon doesn’t operate vertically, but sideways and horizontally, bringing teams together to execute on innovations. Instead of pulling someone from each vertical function or silo, bring together an entire new team—one that’s empowered from the top to execute. Lag time matters. Speed-to-market matters. Organize around the consumer first and you will create a team that gets it done, rather than a vertical team obsessed with defending their own turf.
Stores can’t compete, in their current iteration, against Anything Engines. If stores stick to doing one thing—selling things—they won’t be selling anything very soon. Amazon does a million things. They are an Anything Engine just like a phone is today, and this is what the modern consumer expects. Expanding outside the box of the “store” into the mindset of an Anything Engine is a path to reinvention. The only thing the status quo offers is obsolescence. It comes down, in most cases, to your brand: Do consumers believe in your worldview? Do they believe you can make anything possible?
Download the full paper here to gain the Amazon and industry insights you need to help set your brand up for success in 2020.