Can retailers survive in the Amazon era?
You can order pretty much anything you like from tea cosies to turbo chargers, and you can get it within 24 hours. There only seemed to be one thing that Amazon didn’t offer, and that was your weekly food shop – but they’ve recently started delivering groceries with a new service called Amazon Fresh. Google might be the world’s most popular search engine, but in a recent BloomReach study conducted by Survata, it was revealed that 55% of buyers go straight to Amazon when searching for products. That’s nothing short of astounding. On top of this, sources speculate that Amazon retains a whopping 61% of all visitors to the site, meaning that the majority of people who browse the store end up completing a purchase. In comparison, most other sites don’t even manage 1%. Just let that sink in for a second.
Disruption to online retail… And more
So, what is this doing to the online retail market? Well, first and foremost it’s making all (yes, all) other online retailers compete fiercely for the remaining 45% of customers who don’t just go to Amazon. This is causing massive economic disruption, as companies have to spend more money to acquire customers from a far smaller pool. Amazon isn’t sitting on its laurels either – their policy of aggressive expansion is giving customers even less of a reason to go anywhere else. Imagine the effect that the birth of the first supermarkets had on local, independent stores… That’s exactly what Amazon is doing. Their business ambitions go well beyond the average consumer, too. According to research by McKinsey, the retailer aims to step into B2B with their Business Industrial and Scientific Supplies team (BISS). Basically, they want to build up the world’s biggest product selection, and become the global leader in industrial distribution.
From a business perspective…
As great as this unprecedented popularity might be for Amazon, it’s having a devastating effect on their competitors – and honestly, at this point, it doesn’t even seem fair to call them that. Of course, there’s a reason why Amazon is so popular, and it’s not just because it offers such a wide catalogue. According to Survata’s research, customers simply prefer the shopping experience. Over half of the time, the surge of consumers currently lapped up by Amazon are the direct result of bad experiences with other retailers. This obviously isn’t great news, but as soon as companies know why they’re losing out, they can start to make changes to their business models. With Amazon so far in the lead, however, it’s going to take a lot of head-scratching to find a real solution. Amazon’s success is also going to concern Google, as consumers are simply skipping the search engine. Despite partnering up to encourage the responsible development of Artificial Intelligence, the two tech giants are currently competing to offer domestic AI. Amazon’s dominance in retail is adding another point of tension to the relationship.
Ultimately, Amazon’s success is a huge worry for other retailers and companies, who have to fight for the remaining percentage of consumers. The reasons for this are to do with customer experience. If other sites can offer a competitive service, in theory they might stand a chance of catching up. Unfortunately for them, Amazon is, to say the very least, expansionist. New ventures including grocery deliveries, web services and B2B supplies are shaping up to create a globally dominant firm that is almost too successful. It may be too late to compete with the company in a business capacity, which will require the involvement of various competition regulators from worldwide governments… For now, though, unchecked Amazon is steaming ahead at an alarming rate.
Are Amazon good for retail?Do you skip the search engine and go straight to Amazon to make purchases? Would your business consider using their BISS services?