Phew. This is a big topic. This post will be the first of a series on the topic. In case you haven’t been shopping on the internet lately (or paying attention), Amazon is CRUSHING it.
The company has done a phenomenal job of increasing its footprint in Global Commerce, going from $619 million in revenue in 1998, the first full year after it went public, to a projected $100.59 billion projected revenue for 2015.1
Perhaps the most noteworthy trend is that more and more US consumers are using Amazon as a starting point to search for products (as opposed to Google or another search engine). In a recent survey of 2,000 US consumers, 44% go to Amazon, 34% use a search engine like Google or Bing and 21% start on a retailer’s site.2
Anyone selling in retail these days should be rightfully concerned about Amazon. They offer virtually every product in the world, in just about every size, color and option you might imagine. Their sheer size allows them to win major concessions from vendors, making competing on price next to impossible. During just one week of the 2015 holiday shopping, Amazon Prime added 3 million new members.3 According to a report from the Cowen Group, Amazon’s growth in the apparel purchase market could see it replacing Macy’s as the number one apparel retailer in the US. (Just 4 years ago, Macy’s apparel sales were five times greater than Amazon’s). 4 As of January, 2016, Amazon’s distribution network totaled 138 active facilities with over 66.2 million square feet in the US and 237 worldwide, occupying 107.8 million square feet of space.5
Most of the advanced thinkers that I know in retail are starting to form ‘Amazon strategies’ that encompass their strategic thoughts about how to compete, going forward.
There is no one right answer to this question. Here is a quick sketch of the the primary ways that I can think of to compete, going forward:
Retail is changing. Commoditized products are going the way of Amazon and other marketplaces. To win, you have to have a clear strategy of what will set you apart. That, or you better have plans to start selling on Amazon.