Is Amazon starting to fall out of favor with American consumers?

Discussion
Nov 05, 2019
George Anderson

A new survey has found that a majority of consumers prefer shopping at Walmart (online, in-store or both) versus shopping on Amazon.com.

The survey of 1,000 consumers by the retail data analytics firm, First Insight, is in its third year. This year, it found that 55 percent of respondents prefer shopping at Walmart, up from 47 percent in 2018. Those preferring Amazon fell from 53 percent in 2018 to 45 percent at present.

“The excitement of the Amazon box coming to your house is kind of dwindling off,” First Insight CEO Greg Petro told CNBC. “I think the novelty of Amazon is wearing off.”

According to the survey’s findings, the frequency at which consumers shop on Amazon is also dropping. In 2017, 80 percent of those queried said they shopped on Amazon six times or more per month. Today, 40 percent answer the same.

While the number of Amazon Prime memberships has been estimated to be over 103 million in the U.S., the survey found that the e-tail giant may be losing members. Fifty-two percent of respondents in this year’s survey were Prime members, down from 59 percent during the same timeframe in 2018. While there is no additional verification to support the survey’s findings on this point, Amazon has taken two key steps this year to increase the perceived value of Prime members.

Last week, Amazon announced that it was adding free, two-hour grocery deliveries from Whole Foods as part of the $119 annual subscription program.

The e-tail giant announced in April that it was investing $800 million to cut the time it takes to make deliveries to Prime members from two days to one. An earnings miss in the third quarter — Amazon earned $4.23 a share, down from $5.75 last year — created some unease among the investor class, even as many retail industry watchers saw the news as more evidence of the e-tail giant attempting to buy market share, as it has in the past.

Amazon founder and CEO Jeff Bezos expressed nothing but optimism on the switch from two-day to next-day deliveries for Prime members.

“We are ramping up to make our 25th holiday season the best ever for Prime customers — with millions of products available for free one-day delivery,” said Mr. Bezos in a statement. “Customers love the transition of Prime from two days to one day — they’ve already ordered billions of items with free one-day delivery this year. It’s a big investment, and it’s the right long-term decision for customers.”  

DISCUSSION QUESTIONS: Do you think Amazon has a Prime membership recruitment and retention problem? Have you seen evidence that suggests consumers are changing their minds about the value of shopping on Amazon with or without a Prime membership?

Please practice The RetailWire Golden Rule when submitting your comments.
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29 Comments on "Is Amazon starting to fall out of favor with American consumers?"


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Mark Ryski
BrainTrust

As other major retailers like Walmart and Target roll out programs to compete with Amazon, it’s reasonable to expect Amazon’s growth to moderate. That said, Amazon is still a juggernaut and while growth will inevitably slow, I don’t see any evidence that there is a significant issue with membership recruitment and retention. Furthermore, Amazon continues to ramp-up offerings for Prime members that other major players are playing catch-up with.

Chris Buecker
BrainTrust

Amazon has always proven to be innovative and agile. When something needs to be adjusted, it will do it quickly. In the end, Amazon will always possess a better cost structure, be more customer-centric and take advantage of its outstanding supply chain.

Dave Nixon
BrainTrust

Let’s just call this “Amazon Brand Fatigue.” Their world domination has to end sometime, and frankly there are other online retailers that have it right. Walmart being one of the best. Consumers are starting to catch on that there are other options, especially one that has physical and digital retailing prowess that Amazon can’t match.

Cathy Hotka
BrainTrust

Consumers get free shipping from Walmart without paying $119 a year. Just sayin’.

Bob Andersen
Guest

Amazon is not always the cheapest option. If Walmart can beat Amazon’s prices they will continue to take share away from Amazon.

Peter Charness
BrainTrust

Changing consumer behavior sometimes requires a retailer to mess up for the shopper to consider change. I don’t see a lot of execution issues with Amazon. On the other hand, how many subscriptions will an average consumer support? Prime/Costco/Hulu/Ring/cable/phone/etc. Somewhere there’s a survey waiting to happen about subscription churn. Those monthly fees — often for products or services that are rarely used — are likely to be a target for review and reduce…

Bethany Allee
BrainTrust

Recruitment and retention are known Prime issues, and I’m sure Amazon is already significantly down a path to address them. Walmart is getting close to producing as seamless of an experience as Amazon, but they’re not there yet. Target has a ways to go. I haven’t seen evidence that suggests consumers are changing their minds about the value of shopping on Amazon with a Prime membership. I haven’t even thought about the fact that I have a Prime membership in years – our family considers it a sunk, well-worth-it investment.

Jeff Sward
BrainTrust

Amazon may be running out of ways to use “free” or “no charge” or “next day.” Amazon is the default setting in my household for many CPG replenishment items. They really do make it easy and painless. Do I really need dog food tomorrow? No. But since they insist. Spoiling the customer is certainly a great competitive weapon, but in this case it’s expensive and I question the sustainability of the practice. Maybe the practice of “free” is forever, but the Prime membership fee is destined for a hike. That will be an interesting moment.

Lee Peterson
BrainTrust

No way. Amazon increased revenues in the last three years by over $100 billion – that’s *billion*! Walmart, Target, Home Depot, no other giant can touch that. What the survey says belies what people are actually doing and the numbers clearly back that up.

In terms of “luster,” which I take as making some mistakes, yeah, that’s definitely happening. But what would you expect from a company growing that fast? Perfection? Their growth is unprecedented and to stumble every now and then would be expected in my mind. Have they peaked? Not yet. I think this holiday is going to set all kinds of records for the Smiley Giant, especially if the weather is in any way poor.

Dick Seesel
BrainTrust

Both companies (Amazon and Walmart) have specific competitive advantages, and both models are sustainable in the long run. (It’s the rest of the world that needs to watch its back.) Walmart has a huge advantage in physical locations over Amazon, so the store-pickup option is much more powerful on top of other improvements to its site.

On the other hand, Amazon has created an Apple-style ecosystem — from order fulfillment to movie and music streaming to Alexa to its AWS business. And it continues to add benefits to its Prime program (often at the expense of gross margins) in order to maintain and grow market share. I wouldn’t read too much into one survey as far as Amazon is concerned.

Georganne Bender
BrainTrust

There is no thrill of the hunt, of finding something unexpected at Amazon like there is in a brick-and-mortar store. We shop Amazon because it’s convenient. It has become such a part of our everyday lives that it’s comparable to our cable TV. We expect it to work, and we only get upset when it doesn’t. Shopping on Amazon has become a commodity.

For the first time Amazon has viable competition. Personally, I choose BOPIS at Walmart or Target vs. ordering on Amazon when I can. I am sensitive to the packing materials that accumulate in my garage, and feel just a little guilty about the waste.

Dave Bruno
BrainTrust

This may be a point of contention with some commenters here, but I am not so sure that comparing Walmart preferences versus Amazon preferences is the best analysis. I think Amazon’s big-money shoppers are not typical Walmart shoppers. As such, I don’t know that Jeff Bezos will lose much sleep over these findings. What he should be losing sleep over is the investments he is being forced to make to retain Prime memberships, and where he goes from here once “free” one-day shipping loses its ability to entice/retain members. There comes a point of diminishing returns on these huge investments, and he may have already reached that point. I always thought the Prime Video service was a good retention buffer, but the quality and breadth of their content is falling far behind Netflix, Hulu is improving every quarter, and Apple and Disney are just ramping up streamers that target his bread-and-butter customers. I predict tough times ahead…

Paula Rosenblum
BrainTrust

No market is infinite, and Amazon seems to be reaching the edge of its market. Plus, you gotta give Walmart some props here. The company, under Doug McMillon has shifted its reputation and capabilities pretty masterfully.

In fact, I think retailers, who spent years terrified of Walmart, are taking note of how it deals with being the “underdog.” Innovate, expand, and follow the consumer.

Amazon isn’t going away, but I think the days of them saying things like “oh yeah, we’re re-investing our profits in R&D” and having analysts believe it are over too. Retail is going to be healthy.

Ian Percy
BrainTrust

A truism for sure Paula: “No market is infinite.” It’s hard to admit and respond to that truth when we’re rolling in success.

Ryan Mathews
BrainTrust

Ian, I agree with both you and Paula about the finiteness of markets, but Amazon’s great gift has been to embrace the necessity of moving into new markets — going from selling DVDs to creating media content, for example, or moving from selling consumer electronics to marketing the Echo line. To me, that is one of their greatest strategic advantages — they understand markets are finite and move on, continually adding new “eggs” to their multiple baskets.

Ian Percy
BrainTrust

While I wouldn’t schedule the Amazon wake just yet, the unavoidable truth is that nothing in this universe escapes the “S” Curve lifecycle. There’s birth, growth, maturity and demise. The only way to escape the inevitable is a major transformation or reinvention. The butterfly effect. Unfortunately, the decision to do so typically comes too late. When things are going well very few executives will urge people: “Let’s think outside the box!” Typically that siren call means you should start looking around.

Amazon is THE iconic example of retail transformation. At some point perhaps it will need to do it again. But can it? The more impactful and miraculous one’s metamorphosis, the less likely another is possible. Most world-changing inventors are known for one thing – the da Vincis and Teslas of the world being the exception.

Ron Margulis
BrainTrust

The combination of next-day shipping and entertainment options are just a start for Amazon Prime. I see them adding benefits like discount hotel and travel options, clubs for specific interests and even car repair options in the not too distant future. And when they get the whole healthcare thing figured out, they’ll be looking at the other retailers in the rear view mirror again.

Ryan Mathews
BrainTrust

Ron, I agree. Bezos’ genius is that he doesn’t fall in love with an industry or category, but rather keeps searching out new opportunities and consumer engagement points. While other companies are trying to monopolize categories, Amazon is trying to monopolizing consumer consciousness.

Rich Kizer
BrainTrust

Think this through with an eye on consumer behavior. Four new stores are the first to open in a new shopping center. Customers flood the new stores. Then more stores open, and customers spread out among all the stores. That’s consumer behavior; options spread their focus. And then, the original four start promoting new offerings and perceived advantages to attract customers, and customers follow. Today, that is retail. If we were to fall asleep today and wake up in four months, retail will be different, and our conversations will be different. Even if Amazon seems to be “falling out,” don’t bet against them. Watch carefully the unfolding of their new ideas and plans.

Ryan Mathews
BrainTrust
I am not immediately alarmed by a perceived fluctuation in Prime Membership. A lot depends on whom you read, For example, in June of this year Statista estimated there were 105 Prime members in the U.S. alone, a 10 million domestic customer increase over June 2018. And this July, Consumer Intelligence Research Partners estimated that 82 percent of U.S. households have a Prime membership, and that’s not counting multiple members residing at the same address. Now, in fairness, Amazon’s “Don’t tell! Don’t tell!” policy makes it tough to determine exact numbers, but directionaly Prime appears healthy. And yes, obviously Amazon spikes membership through media services, “Prime members only” deals such as Prime Day, and other tricks it pulls from its digital sleeves. But troubled? Not yet. As to the idea of, “Amazon Fatigue,” I’m not buying that Americans are more bored with Amazon than they are/were with Walmart. But what may be hurting Amazon is exactly what threatened to hurt Walmart years ago — when you get to be Number One you get a lot… Read more »
Michael Blackburn
Guest
16 days 14 hours ago

Is Amazon a retailer or a logistics company? Clearly the latter, and if by any measure the former they are not particularly compelling. The question is about last mile profitability. As the tech to solve last mile profitability gains scale throughout the industry, it would seem the Amazon “logistics” advantage would fade, and those “compelling” retailers stand to win, as they always do.

Joel Rubinson
BrainTrust

Speaking as a seasoned researcher, when a survey is used to get facts that are available behaviorally, beware! Is Amazon falling out of favor? Well, last I looked it had 10 times the market share of walmart.com. Is the “novelty” of getting the Amazon box wearing off? Well, as of Q2 2019 e-commerce was up over 13 percent. So no, Amazon is not falling out of favor — no way, no how.

Ryan Mathews
BrainTrust

Joel, I agree. In my earlier comment I cited two sources that seemed to counter First Insight’s “insight.” Of course, given how close to the vest Amazon guards its actual performance numbers, within reason anyone can say almost anything about them. But that said, I don’t think we will be taking any collections up for poor Jeff Bezos too soon. Amazon continues to beat expectations by continuing to defy them. It seems to be working to me too.

Joel Rubinson
BrainTrust

And I’ll go one step further … the only way to validate an “insight” is by making the implied prediction and see if it comes true. If the prediction is accurate it is a valuable and proven insight. Otherwise it is empty calories. It think we are looking as empty calories here as Amazon stock, revenues and profits are on an unabated upward trajectory. Not to mention that they are now #3 in ad revenues. And wait until they take advertising (like Hulu) inside streaming video. Oh BTW, Alexa is now being built into cars and cable TV. I mean, how can a questionable survey compare to all of these signals?

Richard J. George, Ph.D.
BrainTrust

I wouldn’t be too quick to bury Amazon. While Walmart and Target have done a very good job of replicating Amazon’s efforts, Amazon continues to innovate. I do believe that “clicks and mortar” provides a benefit to Walmart and Target; despite Amazon’s Whole Foods option, which to date has been problematic for Amazon. This holiday season will provide a better snapshot of Amazon’s relationship with its customers.

Craig Sundstrom
Guest

The day that Amazon doesn’t appear as a RetailWire topic will be when I decide it has fallen out of favor.

That having been said, as the charcoal-colored delivery vans go from being commonplace to ubiquitous, I wonder if they might not create a certain amount of ill-will, simply by doing what delivery vehicles inevitably do (double parking, circling blocks, misdelivering packages, etc.) Of course this is an externality — one of many that already existed — that it will influence shoppers is a less compelling argument.

Ananda Chakravarty
BrainTrust

Too much Amazon? Not sure that’s really in the minds of consumers. Saturation of the market is more likely. Just as with any market, the cost of acquiring new customers and retaining earlier ones go up over time. There’s a smaller available market and competitors are catching up in terms of tech and convenience experience. The surveyed changes are minimal — 5% drop in members, 5% drop in pre-shop are still rounding errors at Amazon.

We forget this game can be pretty long term and Amazon’s got a long haul truck with their build team on board.

What is happening is other retailers providing at least as much in their customer experiences.

Harley Feldman
BrainTrust

Amazon’s growth might be moderating. The company and its programs are reaching a market maturity level and incremental growth is getting more difficult. Also, Walmart offers Buy Online Pickup in Store in over 4,000 stores whereas, Amazon has only about 400 Whole Foods stores to do the same thing. Any resistance to Amazon is coming from the cost and delay associated with home delivery.

Shep Hyken
BrainTrust

Answer to the first question … Hardly. Competition (Walmart, Target, etc.) is catching up in many areas, but Amazon continues to push for new offerings and better experiences for their customers and members. I believe you’ll see continued growth, although it could slow down as Amazon’s customer base starts to reach critical mass. Amazon will continue to offer new services that will help retain members.

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