The Amazon Trap
It’s hard to ignore just how much of our lives as consumers are in some way influenced by Amazon. The news earlier this year that the tech giant accounted for a monumental 44% of online sales in the US in 2017 was staggering and no doubt daunting for the huge range of retailers trying to keep pace with them.
Owning the Purchase Cycle
One of the main drivers of this unerring growth comes from Amazon’s ability to offer consumers everything they could possibly need - before, during and after the point of purchase. From starting out purely as an online retailer and delivery service, for many Amazon now exerts control over their entire purchase cycle, making using them irresistibly more convenient and effortless than going elsewhere.
Case in point was my Dad’s recent purchase of a new TV; a large portion of his research was done through Amazon customer reviews (which we know from numerous surveys conducted at TMc on electrical products typically has the greatest influence over online purchase decisions), all the options and advice on various accessories, where to install it, who to hire to do so, was all right in front of him and a mere mouse-click away from being incorporated into his order. For my Dad’s generation, this is a huge shift from the previous way product purchases would be researched, e.g. by trawling through intimidatingly large copies of Which, or visiting numerous DIY outlets to track down the perfect-sized wall mount.
But it is arguably my own generation for whom Amazon has become the ultimate shopping accomplice, particularly, as One Click Retail point out, this generation ‘grows up’, and are ‘increasingly owning homes, raising children, and buying a TON of stuff to go with it’.
Taking over our homes
Despite establishing such a firm foothold in online retail, it is arguably the company’s forays into other areas that are piquing competitors’ interests, and no doubt concerning for those lying in their wake. In 2016 Amazon launched the Echo and Dot, in effect giving birth to the voice assistant market, which after exploding last year now represents the largest growth category within consumer tech, one that analysts at Canalys predict will grow to ’56.3 million shipments by the end of this year’. Along with its Firestick, Amazon now has two flagship products that play an integral role within the living spaces of millions around the world, and as we heard at a recent WARC conference, ‘Once you control the pathway, you control what is bought’, essentially rendering it a ‘System zero’, or ‘no choice, choice’.
Taking on the traditional broadcasters
Amazon’s Prime service seems to be expanding its reach at a startling pace, with its video service last year outbidding Sky and BT for the rights to air ATP tennis tournaments and in the process issuing an ominous battle cry to the traditional broadcasters over future rights for sports events. Would any of these traditional broadcasters fancy their chances of competing with deep-pocketed digital players such as Amazon and Apple in a bidding war? Although their current streaming service is seen by many as a welcome - rather than deal-breaking - supplement to their next-day delivery service, this latest venture marks a significant expansion of their overall offer, one for which the sky really is the limit.
Not one to rest on their laurels, their delivery service seems to be in a perpetual state of evolution too, with one of their latest innovations being Amazon Key, a service which - using cameras linked up to an app on your smartphone - will allow you to remotely grant Amazon couriers access to your home so they can drop packages off without you having to be there. This neat video helps to explain how it works.
New advertising player in town
And if that wasn’t enough, Amazon also had the temerity to usurp John Lewis in the Christmas ad stakes; harnessing a winning, feel-good soundtrack and positioning the brand as the hero of the ad in a way most of the typical stronger performers neglected to. According to research by Marketing Week, Amazon’s ‘Give a Little Bit’ ad trumped all others on persuasion and performed well on a number of metrics; clearly others will have to up their game in time for Christmas 2018.
With additional, but seemingly inevitable, expansions into the worlds of grocery and fashion retail firmly underway one can’t help but wonder where the limit to Amazon’s ambition lies. But is there a risk of them doing too much? Harvard Business Review’s Michael Porter argued back in 1996 that, ‘the essence of strategy is choosing what not to do’, suggesting that delivering more than ‘one kind of value may lack credibility and confuse customers’. There were some warning signs of this for Amazon following their ultimately doomed foray into the smartphone market, but on the whole this logic doesn’t seem to have held Amazon back and it feels dated in the era of the all-conquering tech giants; after all Amazon are already the place where you do your online shopping, the channel through which you watch TV, the hub through which you control your home, and possibly in the not too distant future the high street store where you’ll do your grocery shopping and buy your furniture… Realistically who’d want to bet against them?
Alex Cass - Research Manager