Amazon has changed the way people shop with its vast marketplace and two-day shipping promise for Prime members. Amazon accounts for nearly 40 percent of ecommerce sales today, and benefited from the rapid shift to ecommerce spurred by the pandemic, as the world hit pause on traditional in-store shopping, and online sales spiked.
Consumers have adapted to the immediate availability of shopping online, with the percentage of digital buyers increasing year after year. By the end of 2022, there are estimated to be 266.7 million online shoppers, with growth reaching 291.2 by 2025, and this accounts for U.S. shoppers alone.
Numerous Amazon web services have conditioned consumers to expect immediacy and optionality. Customers want to buy on their terms, when and how they want, oftentimes with the option to visit a brick-and-mortar store to experience the product before purchasing online. To remain relevant amidst changing consumer behaviors, brands should prepare to realign their sales channels, reassess inventory forecasting methods and evaluate their current retail fulfillment strategies to optimize for the modern shopper.
What Is the Amazon Effect?
So, what is the Amazon effect exactly? The Amazon effect is the impact of ecommerce shopping on traditional brick-and-mortar retail stores, resulting in a shift in how people shop and their expectations for brands and retailers. There’s been a steady increase in ecommerce retail sales in the U.S. over the past decade, set to reach nearly 14% by the end of this year.
As the percentage continues to grow, consumer expectations are rising as well. They are seeking a seamless shopping experience, which involves a quick and easy checkout process via their smartphone or other digital devices and rapid delivery or curbside pickup availability versus taking time to visit a physical store.
As a result, the Amazon effect also refers to the increasing closures of brick-and-mortar stores as the next generation of shoppers steers their attention toward online retailers for their buying needs. Amazon became a gamechanger in the ecommerce retail space due to three main strategies: optimal shipping speed, subscription incentives, and connected mobile devices, making for ease of ordering.
To compete, ecommerce brands must also maximize their shipping options, provide loyalty incentives, and deploy technology that makes it easy for consumers to shop whenever, wherever. However, it’s not to say the Amazon effect is making in-person shopping obsolete or that ecommerce brands can’t use the platform to their advantage, but rather it’s causing retailers to get creative with how they meet changing customer service demand.
How Does The Amazon Effect Impact Retailers
Retailers have begun to pivot in their business model to provide greater accessibility to their target markets, often securing a hybrid solution of in-store and online channels. By doing so, brands can ride the wave of ecommerce affinity that Amazon has ushered in and succeed alongside it by implementing a few practical strategies.
Track consumer behavior in-store and online
Using analytics based on customer insights helps drive business decisions for both in-store and online shopping platforms. Assessing customer data tells the story of what customers prefer, as well as what they’re deterred by, which enables brands to improve and adapt accordingly.
Using a centralized platform like Flowspace allows brands to have complete oversight over the entirety of their supply chain operations in real-time to make quick adjustments and long-term projections that align with a more focused customer-driven supply chain strategy.
Use brick and mortar to support online storefronts
Many brands are using brick-and-mortar storefronts to complement their online shopping portals and offering curbside or in-store pickup at a location most convenient for the customer. This provides versatility and convenience to the customer and also increases foot traffic to the physical stores.
Deploy mobile technology to improve the in-store shopping experience
The use of AI and machine learning can help customize a customer’s in-store shopping experience by sending offers and promotions based on previous shopping habits. Data shows that 92% of shoppers prefer stores that offer mobile experiences, and 73% seek out quicker checkout times with mobile point-of-sale systems, which means brands that provide these options are already behind the competition.
Optimize last-mile logistics
The core of the Amazon effect is the precedent set by its delivery model. When Amazon entered the market, consumers were greeted with fast, often free delivery arriving at their doorstep within a matter of days, if not hours. This speed and convenience have put pressure on ecommerce retailers to deliver the same. To compete, brands must have visibility over the entire fulfillment logistics process and be able to track deliveries from beginning to end to ensure they are shipped and delivered on time.
Amazon also incentivized consumers who became Amazon Prime members, for a fee, to receive automatic free shipping regardless of minimum delivery order, which increased revenue and loyalty for the brand even further. This has become the standard of what today’s consumer expects, which means ecommerce brands must consider the shopping experience as a whole to set themselves apart.
How Will The Amazon Effect Impact The Future of Retail & DTC?
What is the Amazon effect as it pertains to the future of omnichannel retailing? Shopping online provides an immediacy and convenience that consumers have established as a baseline for the overall buying experience, whether they’re shopping from their favorite brands on the Amazon platform or another digital storefront.
Now, successful ecommerce retailers are taking this model and making it their own by creating a more customized experience that fits their unique brand. The internet has provided an endless lineup of stores customers can choose from, but there are certain characteristics that make some stand out more than others.
The Amazon effect has driven customer expectations when it comes to fast, free delivery. However, consumers today want greater accessibility and options that best suit their needs when making purchases. Therefore, retailers that offer various shipping and delivery options will benefit most. This includes fast, accurate delivery, pick-up options at nearby retailers, and traditional in-store shopping availability.
To smoothly operate an omnichannel retail business, it requires a flexible distribution network, which the Flowspace platform provides. With the Network Optimization algorithm, fulfillment centers are automatically chosen which are closest to the customer to create fast, affordable shipping. The platform also offers real-time order management insights across all channels to see data in one place allowing brands to better access how to allocate inventory.
A major contributor to the spike in online sales is social commerce. For example, statistics show that 74% of TikTok users have been inspired by the platform to learn more about a product or brand, and 67% agree the platform has motivated them to shop even when they weren’t looking to do so. Ecommerce or online retail brands active on social media and making genuine connections with their audience will have greater revenue opportunities than those only focusing on a single selling channel.
The Flowspace platform enables brands to connect all shopping carts, storefronts, and marketplaces with a one-click integration, ensuring that real-time availability is presented for customers regardless of where they shop. This connectivity also empowers brands to look at which channels and products are performing best and allocate costs and efforts accordingly.
Many ecommerce brands are also taking control of their own distribution versus relying on the Amazon platform alone. In 2019, Nike decided to sell directly to its consumers through their own platforms, which resulted in 50% DTC growth year over year.5 Through its online retail store and ecommerce mobile apps, the brand offers shoppers a chance to receive popular Nike sneakers in advance of other shoppers. Incentives and rewards like this encourage customer loyalty, which equals repeat sales and instant brand ambassadors.
A Fulfillment Solution Keeping Ecommerce Brands Competitive
The Flowspace platform empowers brands to have complete control over their inventory management in one central place. Real-time data allows operators to make decisions about restocking, item popularity, and inventory that may need to be canceled to save on storage and production costs. It also ensures inventory is picked, packed, and shipped from the distribution network closest to its customers to provide a seamless customer experience. Additionally, with automation, alerts of low stock can prevent stockout that can deter buying behavior.
Meanwhile, taking a close look at customer insights on a daily basis and evaluating the real-time ebb and flow of inventory will help brands continually anticipate their audience needs and create a customer base that will remain loyal. And honing in on which products sell best, providing suggestions for similar product types, and delivering a seamless customer experience will also serve as significant contributors as well.
Using machine learning and automation will provide consumers with the best possible shopping experience and create a more seamless supply chain for brands. Flowspace fulfillment technology simplifies systems by standardizing SLAs and SOPs to adhere to all retail compliance requirements and ensures shipping accuracy to minimize the risk of chargebacks.
Amazon may have changed the landscape of ecommerce forever, but rather than try to compete with the company’s offerings, brands that learn how to adapt their business models to what their customers want most, whether they are DTC, B2B, or both, will create long-term ecommerce success.
- Oberlo. How Many People Shop Online. https://www.oberlo.com/statistics/how-many-people-shop-online
- Statista. Ecommerce as share of total U.S. retail sales from 1st quarter 2020 to 4th quarter 2021. https://www.statista.com/statistics/187439/share-of-e-commerce-sales-in-total-us-retail-sales-in-2010/
- Forbes. What the Amazon Effect Means for Retailers. https://www.forbes.com/sites/forbescommunicationscouncil/2018/02/22/what-the-amazon-effect-means-for-retailers
- Embed Social. TikTok Statistics. https://embedsocial.com/blog/tiktok-statistics/
- DigitalCommerce360. Nike’s Q4 online sales jump more than 50%. https://www.digitalcommerce360.com/2021/07/01/nikes-q4-online-sales-jump-more-than-50/
- Investopedia. Amazon Effect Definition. https://www.investopedia.com/terms/a/amazon-effect.asp
- Entrepreneur. The ‘Amazon Effect’: How Will It Change in 2019 and Beyond. https://www.entrepreneur.com/article/325556
- Economist. How American retailers have adapted to the Amazon effect. https://www.economist.com/leaders/2021/08/21/how-american-retailers-have-adapted-to-the-amazon-effect