Amazon Strategies and the Amazon Shopper, 2nd Edition

Report Overview

Even while Amazon’s sales have surpassed $200 billion, its heady growth continues. Packaged Facts estimates Amazon’s U.S. gross merchandise sales will comprise 43% of U.S. e-commerce sales in 2019, up from 28% in 2015, propelled by a combination of increasing retail category depth and breadth; increasing depth and breadth of its Amazon Prime loyalty program; significant technological innovation; and a major foray into omni-channel retailing. And yet the tide may be changing, as more and more retailers adapt to omni-channel realities

How We Analyse This Topic

For participants in markets affected by its growth, understanding Amazon’s value proposition and its evolving relationship with the consumer across retail categories and channels is of paramount importance. This report provides that insight in four parts: The Amazon Landscape; Amazon Category Analysis: Grocery; Amazon Category Analysis: Pet Products and Supplies; and Amazon Category Analysis: Financial Services.

The Amazon Landscape focuses on Amazon consumer usage and engagement trends and related consumer usage and engagement strategies, as well as Amazon’s competitive positioning.

Focusing on Amazon products and services engagement over time, analysis includes portraits of the Amazon shopper, the Amazon media user, and the Amazon Prime member; as well as Amazon’s strategies to broaden its reach into U.S. homes and wallets. Analysis also includes total retail, e-commerce, and Amazon sales trends; retailer strategies used to fight back against Amazon, including Best Buy, Home Depot, Kohl’s, and Walmart; delivery and pickup trends, including click-and-collect and subscription services and related retailer leadership; retailer-specific mobile app usage and the Amazon app experience; Alexa voise assistant usage and usage methods; and rationales for not using Alexa.

Amazon Category Analysis: Grocery focuses on online grocery purchasing trends over time to assess purchase channel (online and in-store) shifts and preferences according to major retailer and retailer channel, and it considers Amazon’s foray into the online grocery market.

Analysis is devoted to the role Amazon plays in shaping grocery trends, with attention to Amazon cross-usage among major food retailers over time; consumer usage of Amazon services such as Amazon Fresh, Subscribe & Save, Prime Pantry, and Prime Now; and trends and strategies related to Whole Foods and physical store expansion. Data provided include Whole Foods and Amazon cross-usage and cross-pollination; online grocery usage trends; grocery retailer strategies used to fight back against Amazon, including Kroger and Walmart; Amazon cross-usage trends and online grocery potential among major supermarket/food retail chains; Amazon Prime Now usage by category and the Prime Now app experience; Subscribe & Save, Prime Pantry, and AmazonFresh usage trends; and meal kit and Amazon cross-usage and cross-pollination trends.

Amazon Category Analysis: Pet Products and Supplies focuses on consumer pet products purchasing trends over time to assess purchase channel (online, in-store, and multi-channel) shifts and preferences according to major retailer and retailer channel. As part of this focus, this report analyzes retailer loyalty over time and share of spend by purchase channel. Throughout the report, analysis is devoted to the role Amazon plays in shaping these trends, cross-usage of Amazon by customers of other major pet product retailers, and Amazon’s influence on online, in-store and multi-channel purchasing preferences. This chapter also analyses Amazon Subscribe & Save, Amazon Fresh, Prime Now, and other features and services as they relate to the company’s approach to the pet category.

Amazon Category Analysis: Financial Services focuses on Amazon financial services and payments consumer usage and engagement trends and related consumer usage and engagement strategies, as well as Amazon’s competitive positioning over time. It also assesses future opportunities and ramifications related to its current financial services and payments products as well as those in development. Much attention is paid to the Amazon loyalty and value proposition, its relationship to these financial services and payments products, and their mutual relationship to Amazon Prime. Content coverage includes the Amazon cardholder loyalty in action; growth strategies and rationales, such as branch banking, installment payments, debit, Alexa-based applications, Amazon Pay, and Amazon Business; how Amazon’s payment options to broaden the target audience; online payment method preferences among Amazon users and users of major competitors; and Amazon credit card usage and purchase value trends.

In addition to selling products directly, Packaged Facts estimates that Amazon’s U.S. third-party sales reached $130 billion in 2018, 70% more than the company’s $77 billion in U.S. first-party sales. Amazon has:

• a robust reseller program that allows participants to sell their products on its websites and their own branded websites and to fulfill orders through Amazon
• programs that allow authors, musicians, filmmakers, app developers, and others to publish and sell content

Chapters included in the study:

U.S. Grocery Market Focus: The Amazon Food Shopper

Strong commitments to developing online grocery services by Amazon and Walmart – the country’s two largest food e-commerce players – have helped boost market growth. Amazon’s acquisition of Whole Foods Market in June 2017 and its expansion into perishable items through AmazonFresh and Amazon Prime Pantry have prompted Walmart to increase investment in promoting online services and curbside pickup. Such activities have in turn helped convince other grocery retailers to adapt to e-commerce in order to remain competitive.

Amazon Strategies: Financial and Payment Services

More than 460 Whole Foods location locations translate not only to 460 instant distribution centers but also (potentially) the same number of in-store bank branches. Why not make them Amazon-branded branches? The key to offering financial services and products involves strengthening the Prime membership proposition. Amazon knows how to do this very well and has applied that expertise already to successful financial services forays. In light of its scale, historical success, and ambition, any of the following are possible:

• Amazon Prime checking accounts: Amazon Prime members get no-fee checking; non-Prime members must join Prime to qualify.
• Amazon Prime savings accounts: Amazon Prime members get very competitive savings rates; non-Prime members must join Prime to qualify.
• Amazon Prime financial services platforms, such as Amazon Auto. These programs could offer discounts on major purchases to Prime members.

U.S. Pet Market Focus: The Amazon Pet Food and Supplies Shopper

For all players—brick-and-mortar, multi-channel, and online-only alike—the good news is that the pet products market itself continues to grow. However, the sheer size of the Amazon user base, coupled with its aggressive growth, huge Amazon Prime membership base, ability to meet a very wide range of product needs within that category, and an Amazon Prime value proposition that is very hard to beat make Amazon very threatening competition.

To gauge the size of the shadow Amazon is casting over its pet market competitors, Packaged Facts trends pet owner purchase use of two key retailers, Petco and PetSmart, over time, while identifying the percentage of users who also purchase (any) products and services at Amazon.