Narrative: Amazon Dominates E-Commerce

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    Narrative: Amazon Dominates E-Commerce (Dec 27, 2016)

    Written: December 27, 2016

    One of the clearest narratives in all of consumer technology is the way in which Amazon has dominated e-commerce and especially growth in e-commerce in recent years. It’s worth putting e-commerce in context – recent figures suggest it’s still under 10% of retail in the United States – but within that, Amazon has an incredibly strong and increasingly unassailable position. Its strength has also been a great challenge to traditional brick and mortar retailers, many of whom have struggled to find growth both in their retail stores and in their e-commerce arms.

    It might have been reasonable to assume that Amazon’s dominance would eventually fade as brick and mortar retailers mimicked Amazon’s successful strategy, caught up on the logistics side, and leveraged their own unique assets. But instead Amazon’s growth has accelerated recently, and its increasingly profitable AWS business has helped subsidize further investments in infrastructure. Meanwhile, the Prime flywheel strategy continues to pay massive dividends, with an ever increasing base of subscribers and ever higher spending by those subscribers. Additional perks are being added regularly, and Amazon is becoming the default shopping search destination for many, far ahead of Google. Third-party sellers are also an increasing force on Amazon, recently crossing the 50% mark as a percentage of total units shipped, with roughly half those shipments using Amazon fulfillment.

    Amazon also appears to be working its way through under-penetrated verticals within retail steadily, with clothing a particular focus in the last year or two, and a recent investment in a car marketplace. It continues to make and contemplate acquisitions to accelerate its entry into these markets, but its competitors – notably Walmart – are increasingly using these approaches too. For now, though, Amazon looks all but unassailable in e-commerce, with few exceptions.

    Amazon to acquire Souq, a Middle East clone once valued at $1B, for $650M – TechCrunch (Mar 23, 2017)

    This would be one of Amazon’s biggest acquisitions to date, ranking fourth behind Zappos ($1.2 billion), Twitch ($970m), and Kiva Systems ($775m) if it goes ahead at the price reported here. And given how Amazon is competing with local competitors such as Flipkart in India and Alibaba in China, it’s interesting to see it absorbing a smaller one in a region where Amazon itself has no presence. Local infrastructure is critical to Amazon’s success elsewhere, and an acquisition like this potentially gives Amazon a huge head start in the region. I could definitely see it taking out more second-tier e-commerce players in other regions like this over the next few years as a way to accelerate its international growth.

    via TechCrunch

    The retail apocalypse has officially descended on America – Business Insider (Mar 22, 2017)

    I’m not sure if it’s admirable restraint not to mention Amazon once in this article, or if it’s denial. The retail apocalypse described here is clearly driven by growing e-commerce spending, and indeed a number of the specific companies cited are closing physical retail stores while maintaining an online presence. Amazon is of course not the only online retailer, but it’s a major force in both the growth of e-commerce in the US and in the decline of physical retail stores and demise of certain physical retail brands (Sears looks to be the next – and one of the biggest candidates for that category). Of course, though Amazon’s success is one cause, retailers’ own inability to transform their businesses to compete more effectively is another major one.

    via Business Insider

    Instagram to Let Users Book With Businesses in Challenge to Yelp – Bloomberg (Mar 22, 2017)

    Instagram has had buy buttons and other e-commerce features for a while now, but it looks like it will be adding an appointment booking feature soon too, in another attempt to allow company accounts to turn viewing of pictures into actual business. It’s been fascinating to watch how Instagram has been able to turn something as simple as a photo stream into something much more like a shop window for brands, something that was inspired at least in part by how certain merchants in emerging markets were using the platform even before Instagram added these features formally. The headline here mentions Yelp as a target, but of course many of these businesses themselves compete with Amazon and other big online retailers, and so these features also enable smaller businesses to punch somewhat above their weight in that fight.

    via Bloomberg

    Amazon to expand counterfeit removal program in overture to sellers – Reuters (Mar 21, 2017)

    I joked on Twitter earlier that this is basically Content ID for the physical world – Amazon is now allowing brands to register their intellectual property in physical goods, so that Amazon can more easily identify and remove from its listings any counterfeit goods. That’s important because the company has been increasingly criticized in recent months for selling knockoff items from counterfeiters without doing much about it, and in some cases those goods have even been dangerous (for example fake iPhone chargers and cables). This feels like a step in the right direction, but to draw another Google analogy, this is a bit like Google policing videos on YouTube – the raw scale here is impossible for human employees to monitor alone. In this case, Amazon needs customers and brands to flag counterfeit items, but at least this registry makes it easier to match those items to copyrighted originals and therefore to take them down more quickly.

    via Reuters

    Wal-Mart Unveils ‘Store No. 8’ Tech Incubator in Silicon Valley – Bloomberg (Mar 21, 2017)

    It’s interesting to see Walmart dialing this kind of thing up, while Target recently discontinued several efforts along similar lines. Walmart’s approach certainly makes a lot more sense – retailers absolutely have to be innovating around the in-store experience if they’re to preserve and build whatever advantages physical retail has, and technology is going to be central to that effort. That’s not to say Walmart will succeed – arguably most of its past innovations have been about merchandizing rather than technology, but it’s certainly got the resources to invest significantly in figuring things out.

    via Bloomberg

    eBay: Yes, speedy shipping really is a thing with us – CNET (Mar 20, 2017)

    eBay is announcing that it now offers guaranteed 3-day shipping on 20 million items, compared to Amazon Prime’s two-day shipping for over 50 million items. The difference in the range and timing here highlights another big difference: whereas Amazon increasingly controls its logistics infrastructure, eBay has very little control at all, which is why it’s been reluctant in the past to commit to delivery dates even though it says almost two thirds of its sales already reach customers in three days. That’s because eBay buyers are responsible for shipping their own goods, while Prime and Fulfillment by Amazon leverage the company’s massive distribution infrastructure including an increasingly deep investment in its own shipping. Yes, eBay is making progress here, but it’s going to be hard for customers not to notice both the difference in the number of items and the speed of delivery and spend their money accordingly.

    via CNET

    Amazon Plans Air Cargo Service for Chinese Customers – WSJ (Mar 15, 2017)

    There have been lots of stories about Amazon expanding in logistics over the last couple of months – see here (chartering planes), here (ocean freight), and here (an air cargo hub in the US), for example. Now it seems it’s investing in both sea and air cargo for Chinese sellers. That should allow Chinese companies to sell more easily and potentially cheaply to US buyers, but another interesting angle would be US sellers who source their goods from China – I know of several businesses which basically scan Amazon’s top seller lists for arbitrage opportunities and then have goods made in and shipped from China. So those would be other potential users of these new services. Overall, though, this is just another investment in unique logistics infrastructure and more of a competitive moat versus other retailers.

    via WSJ

    Documents reveal ‘AmazonFresh Pickup’ as the tech giant’s next physical retail concept – GeekWire (Mar 14, 2017)

    The concept here isn’t new, either for Amazon or in general. With regard to Amazon, it was one of several physical retail concepts discussed in an article last year, and looks like it’s now coming to fruition. But the concept of ordering groceries online and picking them up outside a store isn’t new either – my local Smith’s grocery store (part of the Kroger company) does this today. The big difference will be that this AmazonFresh Pickup store won’t be a regular grocery store, but just that pickup experience. This would fill a gap in the current AmazonFresh service for those who won’t be home (or don’t know when they’ll be home) when groceries might be delivered, but can schedule a stop at a grocery store on their way home. I think we’re going to continue to see Amazon experimenting with lots of physical retail models until they get the right mix to complement their online presence.

    via GeekWire

    Millennials buy more clothes on Amazon than any other website – Recode (Mar 11, 2017)

    Groceries and clothing are two categories where I and others might once have assumed Amazon would never be a serious force, because they appear to lend themselves so poorly to online purchases. On the grocery side, Amazon still is a minor presence, but in clothing it’s now starting to make real inroads, especially among younger age groups. Of course, this data says nothing about total online purchases as a percentage of clothing purchases, and it’s likely that physical retail still dominates, but within e-commerce Amazon is now the biggest retailer among millennials, which is quite the achievement. It continues to feel like Amazon is methodically looking at those retail segments where it’s underrepresented and methodically breaking down the barriers to growth. And of course even in the groceries category it’s doing some interesting things.

    via Millennials buy more clothes on Amazon than any other website – Recode