The company wrote down the rules of modern retail. After a disappointing year, it may not be able to keep winning at its own game.
Founder of Amazon.com Inc. has long been haunted by the company’s beginnings — and its end.
In 2013, Jeff Bezos told 60 Minutes that companies were shorting life lasting, “even the most beautiful and important of any time.” In his final letter to shareholders as CEO in 2021, when Amazon is valued at more than $1.5 trillion, he cited a book by evolutionary biologist Richard Dawkins to suggest that the e-commerce giant is always in a “waiting to die” state.
The idea seems absurd in the midst of a pandemic. Amazon’s online sales have exploded as people stay away from stores. The restless consumers, excited by the stimulus payments, shopped in a frenzy. Between 2019 and 2021, Amazon’s online store sales grew 57% to over $222 billion; subscription sales, including the highly rated membership Prime service, increased by 65%; and consumer retail spending skyrocketed to overtake its biggest competitor, Walmart Inc. It becomes more of a convenience in the consumer’s mind than an online store. What do we do if there is no online delivery? No Amazon? At the same time, retailers lagging behind in e-commerce are forced to catch up — and fast. Nearly everyone from luxury names to department stores is rampant online. For example, Walmart has expanded its online assortment, opening its marketplace to international sellers, rolling out curbside and in-store pickup, and ramping up online outbound order fulfillment. its stores. In the first nine months of the pandemic, its online sales doubled that of Amazon, despite being much smaller, according to data from retail technology research firm YipitData.
Fast-forward to today and Amazon doesn’t seem to be available anymore. This year saw the world’s largest e-commerce company at one point lose a trillion dollars in market value as it grew in Online Shopping slowed dramatically and its forecasts for the most important holiday season were disappointing. Prime membership has stabilized following the rise of the pandemic. And the company is in the midst of its biggest layoff ever, targeting around 10,000 job across devices and retail businesses.
Inflation-squeezed shoppers are more cautious about what they do with their wallets and are less willing to spend on novelties like $20 for an avocado cutter or $25 for a few. wand removes histamine from the wine glass. Instead of impulsive shopping, people are spending more on groceries and other essentials — Walmart’s appeal. Amazon’s prices are still generally cheaper than Walmart’s, but Walmart matches prices year-round, and their annual Walmart+ membership is $99 compared to $139 for Prime. With some napkin math, a pack of toilet paper will likely be cheaper to buy from Walmart than Amazon. The dramatic shift in sentiment coupled with stiffer online competition has forced Amazon to back down in the battle for consumers’ wallets as Walmart takes advantage of being the country’s largest grocery store. . As long as we’re in an inflationary environment, Walmart’s lead in groceries and Prime’s rising costs has put Amazon in trouble, according to Tom Forte, senior research analyst at DA Davidson. Research firm Insider Intelligence estimates that the brick-and-mortar giant will generate about $39 billion in online grocery sales this year and extend its lead over Amazon through 2024.
That’s partly because many consumers prefer to receive recurring grocery orders in-store rather than pay for delivery or surcharges — a clear advantage for Walmart, whose stores are within walking distance of 90% of Americans. short car. Amazon and its Whole Foods unit also offer a wider selection of food and household items available for delivery than Walmart. And despite the fear and optimism in the industry after Amazon bought Whole Foods in 2017, the e-commerce giant still has a hard time running physical stores.
More broadly, Amazon’s largely online retail business is going against consumer behavior. After two years of pandemic restrictions, people are eager to return to physical stores, many of which have dramatically reconfigured their spaces to better serve customers. Target Corp. and Walmart have refocused part of their store operations on online order fulfillment, turning some areas into packing spaces or pickup points. Shoppers on their way out might stop by to buy a tube of toothpaste or something else from Target’s US dollar. Businesses from Aldi to Foot Locker Inc. added self-checkout and tap-and-move smartphone checkout counters to keep stores clean with a contactless system. The more dollars people spend in stores, the less they spend with Amazon. That said, Amazon can only grow when it comes to spending on e-commerce, as Juozas Kaziukenas, CEO of e-commerce data intelligence firm Marketplace Pulse, points out. Census Bureau data shows that e-commerce sales have hovered around 14% of total retail sales over the past 18 months, in between the peak of the pandemic and pre-pandemic levels. Even Amazon’s Prime gem is showing signs of stagnation, growing only 5% from 2021 to 2022, according to Consumer Intelligence Research Partners. With an estimated 168 million members in WEAmazon has little choice but to seek growth among its consumers ChinaIndia and Mexico, where it has faced a barrage of competition.
In its e-commerce stronghold, Amazon finds itself in an unusual position in its pursuit of innovation. This month, it launched Inspire, a TikTok-style service that allows shoppers to purchase goods from curated feeds of photos and videos, catching on to the social commerce space alongside Alphabet Group Google and Meta . Platform Group Facebook and Instagram. Here, TikTok has a natural advantage, charting a path that has been laid out by sister app Douyin in China.
It’s no secret Amazon’s competitive advantage is more a technology company than a retailer. 2021 operating income from Amazon Web Services, the company’s cloud platform, at $18.5 billion, more than double its North American retail business of $7.3 billion. Amazon has had more “retail” success as an online advertiser or host than selling those things themselves. More than half of its online sales are made by third-party sellers, which are small businesses that pay to sell on Amazon’s website. When it comes to operating a marketplace where third-party sellers make their sales online, Amazon primarily charges for their advertising, storage, and shipping — a $103 billion business.
When it comes to the pure retail world, Amazon may be making the transition from disruptor to disruptor that Bezos has long warned of. Not many retailers are lucky enough to have avoided that fate for more than a few decades. Iconic names including Sears, JCPenney, Neiman Marcus Group and Lord & Taylor have all filed for bankruptcy in the past few years and emerged as smaller or tattered forms. Sears Hometown Stores Inc., a subsidiary of Sears, filed for bankruptcy this week. The retail industry is fiercely competitive, and as fickle consumers are offered ever more choices, even giants like Amazon could lose ground. Still, it’s hard to imagine what the retail industry would be like without Amazon’s influence. Amazon is synonymous with online shopping. Years after achieving success in pitting third-party vendors against each other in the marketplace to lower prices, Walmart and others have followed suit. Amazon has re-imagined what store memberships would be like with Prime. Before Amazon, delivery in one and two days was unprecedented. Now it’s just part of internet shopping.
It’s not clear whether 2022 will go down in Amazon’s history as a blip or the beginning of its slide against its peers. Brian Oslavsky, Amazon’s chief financial officer, told investors that Amazon’s moderate sales growth was partly due to consumers tightening their wallets and business “normalizing” after a year. time sales skyrocketed. Either way, Amazon has written down the rules of modern retail. The question now is whether it can continue to win at its own game.
