It has been in operation since 1994, launched its mobile app in 2011 and quickly became the top online retailer. According to Internet Retailer estimates throughout 2016, the company captured more than 46% of every dollar spent online with sales over $107 billion. It has also been named in Fortune's 100 Best Companies to Work For list for the past 17 years.
Amazon is disrupting the retail business in several ways:
It is operating as a retailer (launched private label brands) and it acts as a manufacturer of products for other retailers. In fact, large companies across industries are now coming together creating strategic alliances to compete with Amazon (did you know Walmart acquired Jet.com?).
Amazon is a marketplace where people can buy products directly from or sell directly to consumers. However, independent sellers on its platform are increasing and that poses a real threat to traditional retailers. And as an added bonus, these sellers pay no fees for using the site! The company also owns Zappos, which creates an extensive database of shoppers' history and provides Amazon with access to premium content.
Finally, since Amazon is a transparent company, it doesn't try to trick users into buying products from them. It owns the customer relationship at every step of the way by providing accurate information about prices and service. Their website makes finding what you need very easy for shoppers making Amazon number one for the buy box!!
How is this revolution going to impact the retail industry?
Retailers need to take advantage of their strengths, for example: There are some companies that may focus on being a low-cost provider. Whereas, others might choose to specialize in providing superior customer service.
The key thing is that they must find a way of turning their weaknesses into strengths. For example: As Kroger, one of the oldest supermarkets in the U.S. is reinventing itself as a technology company by adopting personal shopping technologies like Amazon Go and Google Express, etc., it is going to be a tough challenge for all retailers out there!!
How can retailers compete with Amazon?
Several retailers now use enterprise level software to manage their supply chain, customer relationship management (CRM), and inventory. These tools also help them convert data into actionable insights by providing real-time intelligence about the business with analytics. Many of these tools are available as cloud services which enable transparency in your organization's processes to ultimately improve performance. Keep reading to see what Amazon has done to increase its revenue!!
Offering free shipping (Amazon Prime) is a major reason why people stick with and continue to shop at Amazon. This offering alone caused an estimated $3.9 billion of additional sales in 2014. Now, Amazon offers other perks for customers like streaming music and video to keep them coming back.
What are some of the biggest threats Amazon poses?
Amazon is expanding its warehouse facilities, which will increase its shipping capacity in order to ship products to buyers faster than any other retailer out there. It has a fulfillment network that spans across 13 North American countries, 27 European nations, 8 South American countries, and 11 east Asian countries. This means that it can provide cheaper prices since it is closer to most customers.
What are the biggest challenges Amazon will face in the next five years?
Amazon spends a lot of money on order fulfillment and shipping costs which, until recently has been hidden from consumers. However, Amazon announced they are experimenting with delivering packages via drones! They also acquired Whole Foods, while not a direct threat to other retailers it does give them a stronger brick and mortar presence. In addition, they have been testing out grocery stores that don't require human cashiers.
What's next for Amazon?
The company is expanding in industries beyond retailing including hardware (with its own line of smart home devices), food production, and entertainment. Amazon is expecting the acquisition of Whole Foods to close in the second half of 2017, which would mark an aggressive foray into grocery sales. As it expands its reach, the company hopes to maintain the convenience that fuels consumers' loyalty. All signs point to a bright future with more stores opening (check out Amazon Echo Tap, released Oct 2017) and more products being introduced.
One of the biggest problems with retailing is that it's a very competitive industry, and retailers must be able to adapt quickly to customers' shifting demands. It's not easy competing against hundreds of thousands of other businesses in an industry where price margins are razor thin.