Got 99 Problems? Amazon Won

Got 99 Problems? Amazon Won

By Lee Peterson

The competitive challenge is no longer complicated to define anymore: Amazon is one of the fastest growing companies in the history of American business.1 This growth story—unprecedented, immense, rocket-like, (choose your superlative!)—does not come with a happy ending for most retailers. Stores are closing in rapid-fire fashion. An estimated 75,000 stores—clothing, electronics and furniture—will close by 2026, according to UBS.2 This after retailers have already closed more than 15,000 stores since 2017.

Capitalism doesn't have a mercy rule and Amazon is just getting started.

But here's the problem: Capitalism doesn't have a mercy rule and Amazon is just getting started. (This isn't high school baseball, after all.) The average U.S. household is now spending $5,200 online a year, up nearly 50 percent from five years earlier, and this consumer shift is almost entirely dominated by Amazon. For the first time, this metric will cross an important threshold, dominating more than half—52.4 percent to be exact—of ecommerce sales in the US. No wonder Amazon's trajectory of perpetual, seemingly unstoppable growth, continues.3 This year, worldwide, Amazon's ecommerce revenue will grow by nearly 26 percent, reaching $483.96 billion. In the US, ecommerce revenue will grow nearly 26 percent to top $317 billion. Amazon is increasingly dominant in all areas of consumer culture, with its growth expanding far beyond ecommerce, upending everything from cable TV to the advertising industry. Consider three stats: 96.6 million people now watch Prime Video, 47 million people talk to an Amazon Echo and 56 million are entertained via Amazon Fire TV.

In summary, Amazon has won.

Amazon's strategy has always been multi-pronged, aimed at total domination and merciless competition. Yet its emergence as an ecommerce juggernaut is probably most notable for unfolding with a swiftness capable of shocking the competition into submission.

It was early in 2013, over six years ago, when at WD Partners we released our landmark study, "Amazon Can't Do That." At the time, Amazon's ecommerce sales were only about $61 billion in fiscal year 2012, and we warned, "Amazon is not taking over the world. Yet, that is." Back then, Amazon was not yet one of the top five retailers in the nation. It still had formidable competitors in Target, Kroger, Walmart and Costco. We wanted to find out where, if any, runway existed for retailers. We sought to uncover what stores might do to stay competitive, and how they might best fight against Amazon undermining traditional stores. We asked 1,700 consumers what they wanted out of the store experience, so we might find a way to isolate Amazon's competitive weaknesses. Consumers told us the allure of "instant ownership" would keep them going to stores. They wanted the "touch and feel" of seeing objects they wanted to buy, the tactile rewards of being in a physical space.

 By almost every measure, Amazon engenders positive consumer sentiment.

This year, we surveyed consumers again, searching for a competitive weakness. The results were stunning, mainly because we were hard-pressed to find one. By almost every measure, Amazon engenders positive consumer sentiment. When we asked consumers, unaided, to name the BEST retailer, Amazon topped the results handily, beating Walmart out by double-digit points. When we asked consumers to name the WORST retailer, Walmart was mentioned most often by respondents, while Amazon garnered mentions from only a few dozen respondents (out of 4,000). When we asked Digital Natives (age 18-29) to tell us what retailer "gets me," 81 percent said Amazon did; only 56 percent said Walmart did. Walmart might be the only Amazon competitor with a faster ecommerce growth rate—43 percent,4 compared to 26 percent at Amazon—but consumers aren't satisfied with Walmart in the same way they are with Amazon.

The competitive ground Amazon has covered in less than a decade is massive. That's why we're working on a new study, "Amazon Can Do That. 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 dominate. Amazon has beat out almost everyone: Target, Kroger, Costco, Lowe's, Aldi and even Apple. As stated previously, Amazon has won. That makes the only question worth asking anymore: What are you going to do about it?

Lee Peterson
Lee Peterson
Executive Vice President, Thought Leadership & Marketing
WD Partners
Share

Comments

Leave a Reply

Your email address will not be published.

eight + 1 =