Photo: RetailWire
BrainTrust Predictions 2016: Amazon’s momentum
Amazon easily emerged as the most likely retailer to find success in 2016 in a poll of a RetailWire BrainTrust panelists. That’s understandable as research shows one out of every three online product searches now begins at Amazon.com, and that the website accounts for about half of all online sales.
“No conversation about the future of retail is complete without acknowledgment of Amazon,” said Dave Wendland, VP, Hamacher Resource Group. “This retailer has more than earned its place center stage among retailers … and that is not changing anytime soon. Variety, reliable/predictable delivery, fair prices, and constant reach toward their next ambitious goal.”
Lee Peterson, EVP brand, strategy & design, WD Partners, believes the onslaught of online shopping seen over Black Friday weekend will prove to be another tipping point for online shopping and Amazon ranks as the clear leader.
“As Mickey Drexler put it, ‘How do you compete with a giant that doesn’t want to make money?,’ right?” said Mr. Peterson. “There could be other major benefactors of e-com like Best Buy and even Jet, but without a doubt, this is Amazon’s time.”
Dick Seesel, principal, Retailing In Focus LLC, however, said Amazon not only benefits from scale, “but also because they continue to push the boundaries of category dominance and great execution.”
Ben Ball, SVP of Dechert-Hampe, felt Amazon would particularly benefit in the coming year from the continued growth in the same day/next day delivery model for immediate purchase occasions.
Added Arie Shpanya, founder & executive chairman, Wiser, “Amazon has the resources to constantly push the envelope, including its latest drone ideas and successful debut of Prime Day. Despite some bad press on working conditions in 2015, I think Amazon has a lot to look forward to in 2016.”
Keith Anderson, VP, strategy & insight, Profitero, predicts Amazon will continue to outpace e-commerce growth by one to two times, and potentially accelerate. Beyond maintaining price leadership and leading on selection with new initiatives like Merchant-Fulfilled Prime, Mr. Anderson notes that Amazon is investing aggressively in enabling ever more convenient ways of buying and receiving goods like Dash, Echo, and Prime Now.
Mr. Anderson added, “Unlike many retailers, they’ve invested over longer timescales in platforms that yield sustainable advantage and accrue value exponentially — and the cat is out of the bag that they’re more in control of their financial destiny than the critics acknowledge.”
Discussion Questions
Do you see Amazon gaining more momentum in 2016? What developments will be most critical to its success? Which initiatives are you most interested in following?
Poll
BrainTrust
Ken Lonyai
Consultant, Strategist, Tech Innovator, UX Evangelist
Adrian Weidmann
Managing Director, StoreStream Metrics, LLC
Yes! Amazon is definitely on the grow. And I believe Amazon Prime is one example of a game-changer that distances them from would-be competitors. I’m certain there are many initiatives planned around Big Data, shopper loyalty and continued category dominance.
Amazon will likely keep its momentum for a while, but it’s far from game over for other retailers. They have to know what battles to pick and be very effective at executing on them. Amazon having great prices is somewhat of a myth. For CPG items that we buy online regularly (about 20 now) for which price is our number one consideration (we know the products) only two come from Big A while the rest we get (delivered free!) from competitors with probably 10 to 15 percent lower prices.
Amazon will continue to gain momentum in 2016, further distancing itself from competitors like Walmart and Target. It will pick up where it left off in acquiring Prime members. Once a consumer has purchased Prime s/he has an incentive to shop Amazon (expedited delivery, etc.) and interact with the web giant (movies, audio, etc.). Amazon backs up Prime with best-in-class customer service, further distancing itself from many of its competitors. Ease of shopping, variety, quick delivery and great customer service — a winning formula for 2016.
While Amazon’s developments generally enhance its overall draw, I think 2016 will see that Amazon’s continued growth also comes from gaining new customers. Current Amazon loyalists enjoy the advantages of creative and unique services and therefore spend more of their dollars with the retailer. But bringing on new customers in 2016 will insure continued success and growth well into the future. Shoppers are more comfortable with online shopping. Amazon’s shipping/delivery programs and customer service smooths the way for all shoppers.
Amazon will gain more momentum in the media space in 2016. Amazon in retail is just too overstated. Like some of these quotes … “‘No conversation about the future of retail is complete without acknowledgment of Amazon,’ said Dave Wendland, VP, Hamacher Resource Group.” Good point Dave, but still missing on their retail front is solid margins. Also, their shopping categories and SKU arrangements, to me, are a mess. If I go to shop for socks I do not expect a power screwdriver to be suggested with the socks (that was one item I had looked at earlier and bought mine at Home Depot!)
Amazon will gain action and attention on the Prime video space and that area is key to their invisible margins. While Jeff goofs with drones the team needs to take on cable.
Amazon is going to continue to maintain its momentum and its growth for one simple reason: they remain true to the customer-centric commitment they made from the beginning. More than any other retailer on the planet, Amazon is obsessed with the customer experience it provides. This drives everything they do, from using drones to same-day delivery and video.
Amazon’s momentum is attenuated by their sloppy customer service to both vendors and customers. They will have to spend more to streamline that sore point. That is where they are stumbling right now and in the foreseeable future if they do not address this area correctly.
Amazon must push the limits just to stay in the game. I doubt Amazon’s momentum will keep up over the near future. The problem with Amazon is it does not make a profit. 2011 through 2014’s profit was $625 million on $272 billion or 0.2 percent profit on sales. For the first three quarters of 2015 the same 0.2 percent profit on sales. No retailer can stay in business long-term without returning a profit to the shareholders. The growth number will not continue therefore this continued investment for sales will have to stop or the house of cards falls.
All signs point to Amazon continuing to gain momentum and market share in 2016. Continued international expansion, building out same-day delivery to more markets and growth among its 35+ separately-branded companies (think Zappos and AmazonFresh) make Amazon a global juggernaut. I’m personally interested in how the Echo device platform continues to be refined as a tool for making the consumer/Amazon relationship even more seamless.
Amazon is indeed a formidable competitor for established brick-and-mortar retailers. To compete, traditional retailers must focus on areas where they have advantages over Amazon’s model, such as providing fresh, locally sourced foods.
Moreover, traditional retailers should take on Amazon at its own game by using shopper information to deliver personalized and targeted offers. With deep customer knowledge and relevant offers, retailers can “out-Amazon” Amazon and retain the loyalty of their shoppers in the face of online competition.
Amazon will continue to grow but as said above, the pricing is not as sharp as it used to be. But the Prime service is hard to beat. Amazon Fresh will continue to grow in major cities, competing with Instacart, and some locals for the food dollar, but in most rural areas the local stores will still dominate, especially Walmart and Dollar stores.
Amazon has a cult following all of us in business can only dream of, and that is impossible to overlook. Making a profit on all of this is something they need to address, and it will come with higher prices for sure.
We live in an age where waiting more than 30 seconds for something is unacceptable for many consumers who demand value and free shipping on everything, and that will not change. How to deal with this is going to get complicated, as higher wages being created in most states will drive up costs, and the inflation will be baked into future pricing in order to continue profitably. Who knows if technology will offset it?
Going to be fun for small business, as they are scratching their heads trying to figure out how to stay relevant. Happy New Year everyone.
The entire channel will continue to grow. In my view, it’s moved well past a novelty or alternative to being the first choice for consumers for all but the more expensive and larger purchases. Amazon itself is virtually a search engine now as well. In some sense the revolution is over and the future is here. The time for denial or thinking it’s fringe is long over.
I think Amazon still needs to make “customer centric” progress in out-of-stocks. If you search their site for the term “out of stock” you get 80M results. And when you do encounter OOS you get the following message. To me, asking someone to order today with no info on when, or even if, the product will be available again is not a great user experience. Sure, you can watch for the email and cancel you order then, but I believe a better experience would be to promise to send the email and in it let the shopper decide to order or not, as many top retailers like Home Depot and WorldMarket are doing today.
From Amazon’s site:
“Temporarily out of stock. Order now and we’ll deliver when available. We’ll e-mail you with an estimated delivery date as soon as we have more information. Your account will only be charged when we ship the item.”
A good means to make decisions about companies strategically located and on the move is to look at the long-term new investments. At the present time, Amazon’s most interesting investment plans are in the Amazon Prime market and their plans to move into Air Cargo. Both of these efforts are focused on reducing the losses incurred for the free shipping that they so strongly embraced not so long ago. Investments like these are seen as stabilizers in a truly growing economy. The growth we have seen for the past decade or so has been largely on the deficit side of the spread sheet. This may not bode so well for these planned expansions especially considering the opposition they will face from the controlling competition factors.
The willingness to allow for large loss of market share to make room for Amazon in yet another slow year projection does not seem likely. What is interesting is that while Amazon continues to expand and increase its alienation from other very large corporations, the small and medium businesses are signing on and being rewarded in higher sales for just that. The clear winner for fiscal year 2016 will be the consumer, yet again.
As online shopping and buying continues to go up, Amazon will likewise, however, I always come back to the profit. How long can they keep on puttering along spending more money and not seeing a profit?
I have also had a hard time calling them a “retailer.” They certainly aren’t a smart retailer.
With that said, will they gain momentum? Yep, as long as ecommerce continues to grow. Will they grow profits? Doesn’t look that great to me right now.
And that’s my 2 cents.
Amazon will continue to gain momentum in 2016, with new, customer-centric services and product offerings. They will set the standard for the way the customer expects to be serviced. I’m not sure about drone package delivery, as it seems like 1950’s science fiction. But two-hour delivery in key cities is pretty amazing and will be a service to watch.
Amazon is the 800 pound gorilla of the future of retail. Ignoring it, their goals, and how they intend to achieve these in the retail world would be a gross mistake for anyone who is trying to interact with any facet of the retailing world. However, we cannot ignore the other “Non-Amazon” companies who have both a traditional model and an online model, and are making even more money than Amazon (Amazon is ranked 10th in the world of retailing). Their decisions might have even a greater impact, should they prove to cause a true shift in the retailing world.