The size and influence of Amazon is not news to anyone in the retail trade. Reporting profits in excess of $1bn a month and commanding as much as half the online retail market in countries like the US, Amazon has come to be viewed as a dominant, even overbearing presence in digital commerce.
Yet the Seattle giant’s reach is not yet as universal as we sometimes assume. In countries like the US, Germany, Spain and the UK, where Amazon has now established a firm grip on domestic ecommerce, it can be difficult to imagine a retail market where it plays only a minor role. Yet one of the fascinating insights we gained from our Future Shopper 2019 digital consumer survey was confirmation that such places do still exist.
Undertaking our biggest ever study of digital shopper trends, this year we expanded our Future Shopper survey to test the water of consumer opinion in eight countries - USA, UK, Spain, Germany, France, Belgium, The Netherlands and The Czech Republic. And in terms of attitudes towards the world’s biggest digital marketplace, what we found in those last two countries was in stark contrast to the rest.
For example, when asked what proportion of their overall online spend went to Amazon, the average across all 15,000 shoppers we surveyed was just over a third (36%). In The Netherlands, however, the figure was just 9%. In The Czech Republic, it was just 4%.
Similarly, we found that not far off half of all the people we surveyed (47%) were Amazon Prime members, rising as high as 68% in the US and Spain. In The Netherlands, only 20% of respondents said they were signed up to Amazon Prime, and in The Czech Republic, just 5%.
These figures should be put in the context of how Amazon operates in these countries. To date, it has no native presence in either The Netherlands or The Czech Republic. Consumers in both countries can access Amazon services via its German operations. That means that some of the key points of difference Amazon has built its reputation on - outstanding service and convenience - don’t always apply to the extent shoppers in other countries are used to.
For example, just 3% of Czech shoppers and 10% of Dutch rate Amazon as the best option on price. The survey average was 40%. Similarly, just 3% of Czech consumers and 7% of Dutch rated Amazon as best for speed of delivery, compared to 50% overall.
This might all seem like good news for other digital retail outfits in those countries. In The Netherlands, for example, domestic online marketplaces take a similar share of online spend (45%) to that which Amazon enjoys elsewhere. In the Czech Republic, general retailer sites and own brand websites between them control more than half the digital commerce market (compared to a third across all eight countries we surveyed).
But the story of Amazon’s success to date suggests that retailers, brands and other marketplace operators anywhere cannot afford to rest on their laurels. The question is, if Amazon decides to launch native operations in any given country - what then?
In every market it has gained a foothold, Amazon’s rise to dominance has been inexorable. If you were of a gambling persuasion, the smart money would be on Amazon eventually achieving similar results in The Netherlands and The Czech Republic.
So what exactly should you do when Amazon rides into town? Are markets like The Netherlands and The Czech Republic where the company hasn’t yet fully flexed its muscles simply the next destinations to be swept up in an unstoppable wave? Or are there things that other digital commerce players can do, and lessons they can learn, to stand their ground?
Understanding the Amazon effect
Amazon’s success in virtually every market it enters as a native player is no accident. Beyond its massive commercial achievements, what has characterised Amazon’s rise to prominence is the way it has torn up the rule book on retail and rewritten it on its own terms, fundamentally changing consumer expectations around choice and service in the process.
If Amazon threatens incumbent players in domestic online retail markets, it is because it has proven exceptionally adept at understanding what consumers want, and then delivering. The best defence against Amazon is therefore learning from it.
Some of the headline figures from our Future Shopper survey capture what it is consumers want from digital commerce outlets, which Amazon has been so successful in providing. First of all, the success of the marketplace model is largely about price and convenience. Nearly two thirds (62%) of our respondents said they were excited by the prospect of being able to buy everything from a single site, while 96% of consumers said price was the most important factor in making a purchasing decision.
Amazon not only offers virtually everything you could ever want to buy, all available from a single site - it offers multiple brands and items from different vendors, so consumers can choose the best price in one place. So popular is this aspect of the Amazon offer that 64% of our survey participants admitted they even check prices on Amazon when shopping on other sites or in store.
This underlines how well Amazon has sewn up the entire digital customer journey. Our latest survey found that more consumers now use Amazon for product search (56%) than search engines (49%). Again, it is all about convenience, with the path from search to purchase dramatically shortened within the same platform. And to cap it all off, Amazon has also radically changed expectations around order fulfilment, especially with Prime next day delivery.
There are two more things worth pointing out about how Amazon in effect creates its own digital retail ecosystem whenever it sets up for business in a new country. One is the impact of Prime. Described with some justification as the world’s most sophisticated loyalty scheme, Prime locks users in with a premium level of service above and beyond the choice and convenience Amazon already offers - free next day delivery, for example, access to vast libraries of digital music, TV and film content for unlimited streaming, cheap Kindle books and more.
And it is Prime membership perhaps more than any other factor that shifts attitudes to digital shopping in Amazon’s favour. We found that more than three quarters of Prime members (77%) started product searches on Amazon, compared to 37% of non-members. More than half of Prime members (57%) rated Amazon best on price, compared to 26% of non-members. And similarly, 49% of Prime members said Amazon gave them the best access to the brands they wanted, compared to 23% of non-members.
Related to the Prime effect is the way Amazon pioneers the use of new technologies in a bid to keep pushing the envelope on service and convenience. Examples include the likes of Amazon Dash one-touch branded re-order buttons, and the way it has used its Alexa smart assistant to get ahead of the game on ‘zero UI’ voice commerce - shopping through the power of speech alone.
Prime is important here because Amazon makes its latest innovations available to members first, effectively beta testing new technology and new services to a loyal audience. But this in turn has an impact on consumer attitudes around innovation. Half of our survey respondents told us they wished brands would be more technologically innovative to improve the shopping experience, rising to 58% of Prime members.
In countries like The Netherlands and The Czech Republic, it would be easy to conclude that the findings from our latest Future Shopper survey simply underline that Amazon is no threat - the message from consumers in those countries is they see better options from other channels.
But given Amazon’s track record in other markets, we would advise against complacency. Should Amazon decide to launch native operations in those countries, domestic brands, retailers and marketplaces don’t want to be left reacting. They want to already be in a position to compete if and when Amazon comes along.
That is, admittedly, easier said than done. Although we always preach learning from Amazon, trying to copy its methods exactly is extremely difficult - unless you happen to be a retail player with the resources of Walmart, which has invested billions in trying to claw back digital market share from Amazon in the US. For one, establishing product listings so extensive that customers rate you the best option for choice and price, and also use you as their preferred product search option over the likes of Google, is a mammoth undertaking.
Imitation, then, is not a viable goal for holding off the incursion of Amazon. Instead, we always recommend retailers and brands focus on ‘What Amazon Can’t Do’. A key example in this regard is blending online with in-store experiences, an area Amazon is only just starting to explore. Nearly half of our survey respondents (48%) said they would prefer to shop with a retailer that had a store as well as an online presence, and interestingly this rose slightly to 50% of Prime members.
The biggest lesson of all brands and retailers can learn from Amazon is focusing without compromise on the customer experience. 72% of our survey participants, for example, said they wished more brands and retailers offered services similar to Prime - including 63% of respondents from The Netherlands, and 66% from Czech Republic. Asked what would motivate them to choose another digital channel over Amazon, 61% said cheaper pricing, with 56% of respondents from The Netherlands agreeing, and 70% from The Czech Republic.
Finally, native brands and retailers can also find reassurance in the fact that a degree of Amazon fatigue seems to be creeping into consumer attitudes. Nearly half of our survey participants (47%) said they were concerned about the risk of Amazon and other big players coming to dominate retail too much - and this rose to 53% of Prime members. Where they can still be guaranteed the best levels of service, it seems that consumers still appreciate variety.
You’d be forgiven for thinking we're living in an Amazon-centric world. Yet, there are markets where Amazon’s penetration is very low – as per The Netherlands and Czech Republic. Unsurprisingly, there are opportunities for brands and retailers to thrive where Amazon is barely present, inactive, weak, or unloved. In this two-blog series, we look at the key areas where organisations should focus.
Written by Tim Bosch
Growth Marketing Director EMEA
Tim is a digitalist and versatilist with in-depth knowledge of ecommerce and PIM / MDM solutions. He has helped develop and implement over 30 commerce solutions for leading companies like G-Star, and WE-Fashion.
A note about the Future Shopper 2019 survey
Research for this Future Shopper 2019 report was conducted by independent research consultancy Censuswide. A total of 15,188 consumers, who shop online at least once a month were surveyed, across 8 international markets, led by UK and US.