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The Impact of Amazon in Retail-A look back

2017-12-27

Anyone born in 21st-century America has likely experienced the Amazon Effect, a phenomenon that seems to ripple across industries and generations. The trailblazer of online shopping, disruptor of traditional retail, and now brick-and-mortar innovator, Amazon has certainly made its mark in history.

Millennial Marketing at FutureCast defines the Amazon Effect as "the impact the digital marketplace has on the traditional business model regarding consumer expectations and the new competitive landscape." With consumer expectations continuing to alter the retail landscape, Amazon likewise continues to develop products and strategies to offer frictionless and immediate buyer experiences.

In the retail industry, in particular, Amazon has stunned the market most recently with its purchase of Whole Foods Market and launch of Amazon Go. As we enter into the New Year, let us look at the many ways Amazon has impacted retail.
Books redefined
Originally launched as "Earth's Biggest Bookstore" in July 1994, Amazon quickly revolutionized the traditional book market with self-publishing, massive inventory, unmatched customer service, free delivery, and Amazon Kindle. Many traditional bookstores like Barnes & Noble have since restructured their business strategies while others were crushed under the pressure that Amazon brought to the book industry.
Shopping revolutionized
Amazon Prime helped pave the way for the revolution of shopping, not only for books but also for any kind of product imaginable. What used to involve a buyer journey of traveling to a physical store (coupons and competitors' flyers in tow) to possibly make a purchase, has been transformed into a one-stop shopping experience taking minutes online to comparison shop, apply coupons, and checkout. The waiting a day or three for product delivery has been less of an obstacle than anyone could have guessed. As Amazon led with free shipping, fringe benefits including streaming music and movies online, so other retailers have since followed, that is, into the online shopping arena with value, perks, and discounts.
Loyalty repositioned
Another way that Amazon has impacted retail has been in customer loyalty and brand awareness. Its logo is unmistakable, and along the lines of Nike's curved checkmark, can be easily identified, consistent in its branding efforts. However, loyalty goes beyond brand awareness. Forbes reported in June, 2017 that four out of every $10 spent online in the U.S. is with Amazon. In addition, approximately 80 million Americans are Amazon Prime Members, accounting for 64% of U.S. households.

The impact of Alexa/Echo may stand to be even greater than the impact of Amazon Prime. As a writer for Forbes explains, "The threat to other retailers is not necessarily that Alexa will become a mass shopping channel, but that its positioning will provide another reason for shoppers to lock in their allegiance to Amazon through Prime memberships and engender further shopper loyalty by providing even greater convenience."
Groceries reconsidered
Earlier this year, Amazon took two major steps toward affecting the grocery industry. Amazon Fresh and Amazon Go are only beginning to disrupt brick-and-mortar grocers with fresh food delivered straight to your home and grab-and-go, no checkout lines shopping experiences. CNN reports that while only about 2% of annual grocery sales were made online in 2016, experts anticipate that grocery will go to about 20% online in the near future.

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The Impact of Amazon in Retail-A look back

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2017-12-27 Anyone born in 21st-century America has likely experienced the Amazon Effect, a phenomenon that seems to ripple across industries and generations. The trailblazer of online shopping, disruptor of traditional retail, and now brick-and-mortar innovator, Amazon has certainly made its mark in history.

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8 Ways Brick-and-Mortar Retailers Can Compete With Amazon

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As Amazon rewrites the rules of retail, businesses must find new ways to get ahead.

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There are times of the year when people around the world start thinking about spending some extra money in retail stores. It can be the holiday season, or it can be such days as Black Friday or Cyber Monday. Or simply birthdays or the desire of wanting to reward oneself.

However, when the shopping bug demands some action, rather than heading to the streets and shopping malls as people used to do some decades ago they grab a cup of coffee and login into their computers for a session of e-commerce shopping.

This reality where more shoppers head to screens rather than to brick-and-mortar stores means that retailers in the physical world need to offer a better customer experience, perhaps a more personalized one, if they are to have a future.

But perhaps not even personalization can stop retailers from going through a massive change. Or perhaps even extinction, if they are not fast enough to respond to the digital change and transformation that is evident in the retail industry.

In 2016, $1.26 trillion of retail sales were influenced by digital media, according to a report by industry analyst company Forrester Research. The firm projects that mobile devices alone are going to influence $1.4 trillion in local sales increase by 2021. And so, experts began to talk about the Amazon Effect.

The Amazon Effect

Since Amazon debuted back in 1994, the company has changed the way we shop and bring goods home. Since the beginning, Amazon has had some kind of impact on traditional forms of retail. The introduction of a simpler, faster online shopping process which saves time and requires no extra effort in mobility won consumers over almost immediately. This quickly became a global trend.

The added benefit of having the products delivered right to the front door became one of the best selling points. The technology driven way of shopping offered by Amazon prompted comsumers to demand the same from traditional retailers. However, retailers didn't count with the technology Amazon had at hand.

What is the Amazon Effect and what it means for retailers?

This increased e-commerce and the manifestation of the ongoing consumer shift to online shopping resulted in the evolution and consequent disruption of the retail industry. This evolution and the changes that have been affecting the retail market is called the Amazon Effect. It affects the retail industry as a whole and it affects the consumer economy.

For decades, Amazon has been expanding into new types of businesses disrupting and shaking the world of its competitors. Food and grocery delivery companies know the Amazon Effect has impacted their business, especially those who don't count with the technology that is characteristic in any Amazon new line of business.

Grocery stores and fast-food restaurant chains are now also seeing the Amazon Effect quickly approaching their doorstep. The Amazon Go stores were born.

The future of retail

The physical stores that wish to remain competitive in the digital future will have to offer something special to consumers, something that they can't get from online stores. Offering drone delivery could be a way to attract consumers. However, despite there are some ongoing trials with products delivered by drones, regulations are not there yet.

So, Amazon has gone a step forward with its Amazon Go cashier-less, automated stores. Something much less complicated to implement since it doesn't need to wait for new regulations as delivery by drone has.

By 2021, it's perfectly possible that other retailers are going to jump into the Amazon Effect wagon bringing global consumers to a new way of shopping. This is going to the change the future of retail at a global level. Changing the landscape of grocery shopping and of course changing jobs as we know them.

Amazon Go: Cashier-less store: How does it work?

Amazon, always a step forward in innovation, has been adopting new technologies in retail for years. This has created the Amazon Effect. Now the company's Go cashier-less stores are quickly expanding. After opening the first cashier-less convenience store for Amazon's employees, the company opened the Go stores to the public in January 2018.

There are currently six cashier-less store locations in the United States: Three in Seattle, Washington, two in Chicago, Illinois, and the latest which opened in October in San Francisco, California.

The Go stores feature the world's most advanced shopping technology such as artificial intelligence (AI), multi-sensors, and hundreds of state-of-the-art CCTV cameras. Amazon plans on expanding its cashier-less stores rather quickly. The company has announced that it will be opening 3,000 Go stores by 2021.

Amazon Go is now called the future of shopping. Going to an Amazon Go store involves customers entering to the Go store using the Amazon Go application previously downloaded on their smartphone.

After the QR code on the phone is scanned at the entrance point and the customer's Amazon account identified, customers are ready to browse the store and take the products they want. Sensors signal the movement of the product, which is added into the customer's virtual shopping cart.

When done shopping, with no cashiers or self check-out stations, the customer simply leaves the store. At home, customers can check the list of products they purchased and the total the spent on their Amazon account. Amazon sends a receipt and charges the purchase to the customer's Amazon account directly, which is linked to the major banks, credit and debit cards.

The technology behind Amazon Go: Just walk out technology

Amazon Go stores use the same type of technology used in self-driving cars. Amazon calls it 'just-walk-out' technology. Computer vision algorithms help Amazon understand why people choose certain products over others. Sensor fusion, and deep learning algorithms .

All the products have camera recognizable codes in the form of dots. Hundreds of cameras and electronic sensors keep track of every person who enters the store; they also track every product on the shelves, and how they move.

Sensors detect when a product is taken from the shelf and place it in the customer's virtual cart, or if the product is returned to the shelf.

Sensors also detect where people put the products when they change their mind, if they place them where they found them or on a different shelf. The system is also powered by artificial intelligence.

The success in the future of Amazon Go: Where is retail going?

Experts say the success of Amazon is in the vast amount of data the company has and the knowledge in consumer behavior the company has achieved thanks to the advanced machine learning technology.

According to Professor Daniel Raff from Wharton Management, Amazon is going to make a big improvement in the retail industry, ending up being a much more powerful enterprise than it is now. For retailers, it's difficult to know what to sell in a particular place at a particular time, especially when it comes to perecibles.

Using machine learning to make an improvement in the efficiency of the whole foods retail business is going to have a paramount impact in the future of the industry.

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what the amazon effect means for retailers

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amazon effect impact on shipping and retail

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The Amazon Effect: Amazon Go Stores and The Future of Retail

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There are times of the year when people around the world start thinking about spending some extra money in retail stores. It can be the holiday season, or it can be such days as Black Friday or Cyber Monday. Or simply birthdays or the desire of wanting to reward oneself.

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As Jeff Bezos expands the Amazon.com empire, its dominance is impacting consumer behavior as well as legacy business models across more business sectors than we could have originally imagined. It's been referred to as the Amazon Effect.

One notable ripple of the Amazon Effect has been felt by traditional retailers. The profound impact has been twofold. The first lesson to be drawn from Amazon's spectacular success in transforming e-commerce is the imperative for these companies to accelerate their own e-commerce programs. If people buying even light bulbs online through Amazon Prime is not a wake-up call, then nothing will be. Secondly, traditional retailers must re-imagine their physical retail spaces in response to the changes in shopping behavior wrought by Amazon Prime and modern technology.

Evolution often happens slower than it should, but here the sense of urgency isn't overblown. Retailers can no longer drag their heels; otherwise they risk huge damage. As a cautionary tale, one need look no further than Sears, which ignored the Amazon Effect and has struggled mightily to get shoppers back.

For those that have seen the light, Kroger serves as great inspiration. The grocery chain has embraced the mission of creating personalized customer experiences to drive top-line growth. Kroger has created a data technology infrastructure integrating customer signals, including purchase history in an omnichannel context. By so doing, Kroger is copying the Amazon playbook by gleaning new insights to craft personalized offers.

To loosen the grip of the Amazon Prime stranglehold, traditional retailers have expanded to offer click-to-ship. Walmart now offers free two-day shipping for those spending at least $35. For those who prefer click-to-pickup, parking areas have been altered to make this service convenient and quick.

The artificial intelligence-driven ability for retailers to create these real-time, always-on consumer signal feedback loops has opened the door to sculpt more engaging and useful merchandising schemes at a ZIP code level. Rather than settling for the relatively impersonal one-size-fits-all approach, retailers now can tailor individual stores by making crucial decisions on layout, lighting and overall aesthetics according to their customer data. Now you could have two different Kroger locations two miles apart that feel like two distinct stores.

Retailers can also bring the latest in video technology to bear on store shelves by offering dynamic pricing and visuals to increase affinity. For example, the skincare section on the store shelf lights up triggered by consumers' mobile apps. This seamless journey is leagues beyond what has been previously passed off as innovation - receiving an offer on your phone but then getting frustrated because you can't find the item in-store, the result of ineffective merchandising.

And this is just the beginning. In early January, I attended the PSFK Future of Retail event and was genuinely impressed by some of the new innovations on display, namely Pinterest's p-commerce, HERO'S video chat for e-commerce shoppers, and Amazon voice technology.

Pinterest has proven itself as the leader in discovery shopping innovation. It touts a sophisticated personalization tool based on visual curation. In the first 100 years of retail, window shopping was a major trigger to get people into stores. Pinterest is developing an offering that has the chance to replicate that same human desire, but now on a fully personalized, yet scaled manner to bring the emotions of discovery and desire into shopping. This is more evidence that Pinterest, which has been quietly going about its business, is on the cusp of giving Amazon a run for its money.

HERO has built a very cool application for retailers to bridge their physical and online stores by repurposing in-store floor reps, with downtime, to video assist shoppers in the e-commerce realms (desktop or mobile) in real time. Stores are seeing amazing lifts in conversion due to the integration of this technology.

Voice technology is going to play a more important role in shopping and navigation in physical stores. Alexa is being piloted in the whiskey aisle right now in New York and Northern California liquor stores to help shoppers sort through a complex category currently exploding with choices.

Transformation in all industries is unavoidable in today's data-driven, technology-led world, but if a retailer can embrace change as a strategic imperative, it can actually enhance creativity, dedication and morale both within its corporate culture and, most importantly, with its customers.
Joe Lampertius is executive vice president, practice lead, shopper marketing at Momentum Worldwide, a global brand experience agency.

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Transformation in all industries is unavoidable in today's data-driven, technology-led world, but if a retailer can embrace change as a strategic imperative, it can actually enhance creativity, dedication and morale both within their corporate cultures and most importantly with their customers.

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How is amazon.com impacting traditional retailers?

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How is amazon.com impacting traditional retailers?

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Amazon.com (AMZN) is everywhere. By disrupting the way people shop, Amazon has created economic ripple effects that go far beyond the customer's wallet. Amazon, directly and indirectly, impacts inflation, jobs, and investment.

The Retail Giant

Amazon started with books and then added everything from engagement rings to jail cells for mobile phones until it became "the everything store." Add the convenience of having it delivered promptly to your doorstep, and customers have rewarded Amazon with open wallets.

According to Digital Commerce 360, Amazon's revenue from U.S. consumers' web purchases amounted to 30.7% of U.S. online retail sales in the first quarter of 2021. In 2020, ecommerce spiked to account for approximately 21.3% of U.S. retail sales, meaning Amazon accounted for about 6.5% of all retail spending. This huge increase can be attributed to the surge in online shopping as a result of the global pandemic due to the novel COVID-19 virus.

If you consider the macro picture, consumers spending more is a good sign because it contributes to the GDP. That being said, consumer spending on Amazon is not significant enough to tip the GDP scale. However, it could be in the future.

How Amazon Kills Inflation

Amazon has disrupted traditional retail and accelerated the demise of struggling players. Without storefronts, the company's overhead costs are significantly lower than other retailers. That gives Amazon the edge to undercut rivals on prices and operate on a thinner profit margin.

Some economy watchers are nervous about Amazon's deflationary impact. Ideally, low unemployment is accompanied by wage growth, which in turn fuels inflation as companies pass on the costs to consumers. That is the logic of the Phillips curve, but Amazon has disrupted it as well.

Greater competition and lower prices can limit the ability of companies to pass on any wage increases to consumers. Those worries were echoed in the wake of the Whole Foods acquisition in 2017. Chicago Federal Reserve President Charles Evans noted that mega-mergers can put downward pressure on inflation.

Jobs at Amazon

By the end of 2020, Amazon employed approximately 1.3 million employees worldwide. In 2020 alone, the company added 400,000 jobs. That includes both full-time and part-time employees. Although over one million seems like a large number, it is actually low by retail industry standards because Amazon does not have a significant storefront presence. A traditional store requires far more employees. For example, Walmart (WMT) employs approximately 2.3 million people worldwide.

Amazon also engages several third-party contractors and companies for tasks like deliveries. Those people go door-to-door, dropping off Amazon packages. However, they are not employees of the company. Does that matter-yes and no.

In a way, these are jobs for people. Therefore, some credit could go to Amazon for job creation. On the other hand, hiring contractual workers helps the company keep its costs in check. Some have criticized the company for harsh working conditions.

Another angle of the jobs conversation is how many jobs Amazon is eliminating. Consider how much the company is hurting other retailers, forcing them to shutter stores and cut back on costs. Job gains at Amazon may not mean anything for overall employment.

The company came under fire from Sen. Bernie Sanders. He introduced a bill, Stop Bad Employers by Zeroing Out Subsidies, or the Stop BEZOS Act, in Sept. 2018. He proposed levying taxes on large companies to the extent that their employees relied on public benefits. Sanders had attacked Amazon and founder Jeff Bezos on account of worker pay and worker safety conditions. In response, Amazon raised its minimum wage to $15 per hour, on November 1, 2018, much higher than the federal minimum wage of $7.25 per hour.

Amazon's quest for innovation and technology to achieve operational efficiency has people worried about the elimination of jobs. Those worries are not far-fetched considering that the company has introduced cashier-less Amazon Go stores in several large U.S. cities.

The Facilitator of Small Businesses

Amazon's logistics infrastructure doesn't just help it ship to consumers all across the globe; it also aids another group of people: small businesses. Listing their products on Amazon helps them increase their customer reach, and the delivery essentially becomes Amazon's headache.

"More than 1.9 million small and medium-sized businesses sell in our store, and they make up close to 60% of our retail sales," the company said in its 2020 letter to shareholders.

As small businesses thrive, further job creation and spending are bound to happen. According to Amazon, 1.1 million jobs have been created outside of the company as a result of the Amazon Marketplace.

Amazon as a Taxpayer

Amazon does pay taxes, but it pays far less than some people believe that it should. For 2020, Amazon's effective income tax rate was 9.4%-versus the 21% statutory corporate tax rate. The company paid $1.8 billion in federal income tax on $20 billion in profits-versus the $4.1 billion that Amazon would have paid with the 21% tax rate.

Amazon saves billions on taxes using tax credits and stock option tax breaks. Over the three-year period, 2018 to 2020, Amazon paid an effective federal tax rate of 4.3% on income in the U.S. Longer-term, Amazon has been just as good at avoiding taxes, with an average effective federal tax rate of 4.7% over the last 10 years.

Amazon is structured to minimize corporate income taxes. The company reinvests profits into expanding its business instead. While some joke that this policy makes Amazon the largest nonprofit organization in America, reinvestment leads to increased market share and capital gains. Amazon's lower tax bill helps the company to expand, and expansion helps Amazon to reduce its taxes.

Not having a physical presence or employees in many states also saved Amazon from having to collect sales tax. Sales tax is a complicated subject with rates and rules varying across states. The most straightforward explanation in this context is that tax laws in many states need the physical presence of an online retailer in the state to collect sales tax. Therefore, Amazon saved on tax by not having its own warehouses or employees in certain states.

The problem was not specific to Amazon, however, as it applied to any online retailer shipping goods across state lines. As time passed, Amazon started collecting sales tax on all products that were sold in or delivered to states that have such a tax. The following do not have sales tax:

The sales tax issue gets even more complicated when it pertains to third-party sellers.

Investing in Amazon

Amazon became the second trillion-dollar company by market cap on September 4, 2018. As of July 2021, it holds third place behind Apple and Microsoft, boasting a $1.875 trillion market cap. Another milestone, in July 2020, the company crossed the $3,000 mark for its share price, which has been steadily increasing since. Amazon's founder and executive chair, Jeff Bezos, is frequently the wealthiest person in the world, depending on current market prices.

The multi-year run for Amazon shares has been phenomenal. The company made its stock market debut in 1997, and $100 invested then would have turned into six figures. Amazon has significantly outperformed the S&P 500 over the last several decades, but it has been a rocky road at times. In particular, Amazon lost more than 90% of its value when the dotcom bubble crashed.

Here, past returns are clearly not indicative of future results. Amazon's strong performance during the 2020 bear market is a sign that the company is maturing. The thousandfold return available to early investors in Amazon simply cannot be repeated. Without hyperinflation, a trillion-dollar company will never be worth a quadrillion dollars because that is more than the combined value of every stock market in the world.

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Amazon.com (AMZN) is everywhere. By disrupting the way people shop, Amazon has created economic ripple effects that go far beyond the customer's wallet. Amazon, directly and indirectly, impacts inflation, jobs, and investment. Amazon started with books and then added everything from engagement rings to jail cells for mobile phones until it became "the everything store."