What is the Amazon Effect? ​​Amazon Effect Review

The Amazon effect is when your company is destroyed by Amazon’s entry into your industry, with retail being a prime example.

About the Amazon Effect

The term has different meanings depending on the industry you work in, but generally speaking, it refers to the difficulties that retail stores, especially brick-and-mortar stores, face when competing with Amazon. This is mainly because Amazon provides consumers with more outstanding services in terms of logistics, returns, product prices, membership services, etc., which invisibly raises consumers' expectations of other retailers. Although this result has led to the closure of some retail companies, it has also promoted the development of some companies that responded to the Amazon effect in a timely and creative manner, won the favor of customers with higher expectations, and gained a firm foothold.

The Amazon Effect

1. In June 2017, Amazon announced that it would spend $13.7 billion to acquire Whole Foods Market, the largest natural and organic food chain retailer in the United States. The stock prices of other food retailers fell immediately. Especially after Amazon announced that the acquisition was about to be completed and the maximum price reduction of some popular products was as high as 43%, the market value of the six major food retailers in the United States evaporated by nearly $12 billion in one day.

2. In August 2017, retail giant Walmart and Internet giant Google announced that they would cooperate to launch voice shopping services to fight against their common enemy Amazon. However, Amazon's market share continues to rise. During the Christmas season, more than 6,000 trailers and 32 Amazon planes were busy delivering orders in the United States.

Sears announced that its home appliance brand Kenmore will be connected to Amazon's voice assistant Alexa and will be sold on Amazon.com. As soon as the news came out, Sears' stock price, which had almost collapsed, rose sharply by 24% at one point, but the increase narrowed to 10.6% at the close of the market. Other home appliance and home product retail stocks (such as Home Depot, Best Buy, Whirlpool, etc.) fell sharply...

3. After the news that Amazon might enter the pharmaceutical industry came out, the stock prices of American pharmaceutical retail giants such as CVS and Walgreens plummeted. The fear of Amazon, an "outsider", directly prompted CVS to announce in early December 2017 that it would spend $69 billion to acquire the century-old health insurance company Aetna. The New York Times commented that if the deal is approved, it will "reshape the American medical industry."

4. On Prime Day 2017, some online shoppers noticed a new service called "Hire a Realtor" on Amazon's homepage. Screenshots of the service quickly spread throughout the trade circle, and the stock price of potential competitor Zillow fell 3.5%.

A day later, the page disappeared quietly, and the entire real estate industry breathed a sigh of relief. The National Association of Realtors explained that Amazon did not have the right to use the trademarked word "realtor" - only then did Zillow's stock rebound. This farce seems exaggerated

Impact Level

The first level of impact is on business models.

The second level of impact is on social forms.

Impact

Analysts from all walks of life are studying the impact of the "Amazon effect" on their industries: banking, commercial real estate, express delivery, etc. The "Amazon effect" is not limited to the United States. The huge changes in business forms caused by this technological innovation are a global trend.

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First, Amazon came back from the tech bubble and disrupted the entire retail industry.

Secondly, Amazon's huge success in hardware and AWS (cloud computing business) has made technology giants feel inferior, laying the foundation for the widespread influence of the "Amazon effect."

Some possible impacts of the Amazon effect on the e-commerce market in 2019

1. Intensified competition in the “last mile” delivery

Amazon has invested heavily in building its logistics network, and now it can deliver almost any consumer product to customers' doorsteps within a few days or even hours. According to a 2018 study by marketing technology company Criteo, 43% of consumers surveyed expect e-commerce companies to significantly increase delivery speeds in 2018, a much higher proportion than in 2017. This has put tremendous pressure on other e-commerce companies. In order to meet this expectation of consumers and catch up with or even surpass Amazon, it is expected that more e-commerce companies will apply express delivery software in 2019.

2. The shift to “mobile first” is solidified

2019 will be the year when shopping app traffic truly surpasses PC traffic. A report released by Criteo in 2017 also pointed out that most of the sales of e-commerce stores with successful shopping apps come from smartphones. Although many companies have given high priority to mobile development in 2018, you may need to put it first in 2019 because it will bring you more traffic and sales than PC.

3. Artificial intelligence plays a more important role in the development of e-commerce companies

Artificial intelligence is also playing an increasingly important role in the development of Amazon's e-commerce business. Amazon has launched various e-commerce tools, including the ability to calculate and predict market trends, increase sales through customized recommendations and advertising copy testing, etc. Fortunately, other e-commerce companies can pay for artificial intelligence tools even if they cannot develop them themselves. For example, Towards Data Science provides e-commerce companies with chatbots for customer service and marketing strategies based on artificial intelligence. It is expected that by 2019, Amazon and other companies will deploy artificial intelligence more widely.

4. The e-commerce grocery sales war will continue

Another study by research firm Brick Meets Click found that households that use grocery delivery services from physical retailers spend about $200 per month and place orders more frequently than Amazon grocery shoppers, who spend $74 per month. This is not exciting news for Amazon, but it means opportunities for other grocery retailers and related e-commerce sellers, and it also means that this "grocery war" will continue.

Implications

1. It is showing its power in the US and changing the business model.

Michael Purvis, a strategist at Weeden Research, believes that the changes brought about by Amazon could disrupt business models that have been around for centuries.

2. With technology as the core, data leads the future.

After more than a decade of development, Amazon has accumulated a large amount of big data, and "it has applied the advantages of this technology platform to every field." The impact of digital technology is so great that it is unimaginable. For example, it will bring permanent and disruptive changes to various professions. According to EU statistics, 90% of jobs currently require people to have some kind of digital skills, and 65% of new children in the EU will work in professions that do not yet exist when they grow up.

3. China has other strong players, and global trends are taking effect.

Amazon's share of the US online retail market has reached 34%, and is expected to rise to 50% in 2020. However, in China, Amazon's market share is less than 1%, far behind Alibaba and JD.com. In many ways, Chinese companies are even ahead of Amazon, making it impossible for the "Amazon effect" to work in China. Behind the "Amazon effect" is not a single company, but the general trend of global business model changes. It may not be accurate to regard Alibaba as the "Chinese version of Amazon", but it can be seen that their development directions have many similarities, which actually reflects the development direction of the entire era. In the continuous evolution of the business world, the "players" who can grasp the trend most profoundly will become the "kings", and this will also be a continuous competition and experience.