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.