3 Amazon Effects on Retail: Are Businesses Adapting?

amazon-box-1.pngCustomer expectations are changing as a result of Amazon’s innovative technology that continues to fuel their growth. Whether it’s a shift in consumer attitudes towards order delivery (taking into consideration free shipping and delivery speed), customer experience or personalization—about 61% of retailers in a recent Total Retail and IBM survey “believe Amazon has significantly increased its position in the marketplace during the last two years.”

The force behind drastic changes in consumer purchasing behavior isn’t anything new. As consumers shop more and more online, the overall impact Amazon has on customer expectation is evident: customers today expect to get any product, anywhere, anytime.

Let’s take a look at three areas affected by Amazon and how retailers are competing against the mighty Goliath according to a recent Total Retail and IBM report:

1. Amazon Effects on Technology Spending

Retailers are taking steps to keep up with the pace and a focus on implementing new technology in order to compete is key.

However, according to this survey, about “47% of retailers say they haven’t changed their technology spend on personalization and customer experience tools as a result of Amazon.” This is surprising given the fact that a majority (77%) agree their online customer’s experience is influenced by Amazon.

Nonetheless, those who are making upgrades have done so in the following areas:

  • 26% of retailers surveyed have added customer recommendations and reviews in the past two years
  • 22% of retailers added a free or expedited shipping option due to membership in a loyalty program, order size or other criteria in the past two years
  • 19% of retailers added single-click or expedited purchasing capabilities in the past two years
  • 13% of retailers modified distribution center operations in the past two years

Clearly, personalization and order delivery expectations are fueling some of these upgrades.

Surprisingly, 53% of retailers have not invested in tech related to order fulfillment/delivery, even though 90% of respondents agree that Amazon has changed consumers’ expectations for order delivery. Only 7% of retailers have significantly increased their investment in this area.

2. Amazon's Influence on Brick-and-Mortar vs. E-Commerce Sales

While the never-ending talk around the brick-and-mortar retailers’ inevitable demise continues, about 27% of retailers surveyed reported an increase in brick-and-mortar sales in the last 2 years. While this statistic indicates a promising future for some physical retailers, we can’t deny the negative effects online consumer shopping habits have on other brick-and-mortar locations:

  • 25% of retailers reported a decrease in brick-and-mortar sales in the past 2 years
  • 31% of retailers reported they don’t even have brick-and-mortar stores

As more consumers are shopping online, it’s clear retailers focused on competing with Amazon on this channel are making significant gains. Based on this survey, about 34% of retailers reported a 5 percent increase or more in e-commerce sales over the past 2 years.

Looks like Amazon isn’t the only place people are shopping online.

3. Amazon's Move into Offline Retail – Are Retailers Concerned?

Ah, this is the real question we’ve all been pondering as the Seattle-based e-commerce giant begins opening its own physical stores. Based on this report (which was taken before Amazon announced their acquisition of Whole Foods), only 23% of B-to-C and 18% of B-to-B businesses reported this as a concern and saw Amazon as a significant competitive threat.

Even though a small percentage showed concern (which most likely increased after the Whole Food purchase), it’s important to note that consumer facing businesses are feeling the Amazon effect more than others.

The impact on consumer behavior and technology investments are evident given their influence as a leader in the e-commerce space, however, their push into brick-and-mortar seems to be less of a concern for most retailers. At least for now.

Retailer's Stores Offer Competitive Advantage Against Amazon

 Lastly, a large percentage of retailers believe in the competitive advantage their stores offer:

“Nearly half of the retailers surveyed (45 percent) feel their stores offer a competitive advantage against Amazon. If leveraged correctly, retail stores can provide the physical experiences consumers are looking for as well as the personalized service they’ve come to expect, while still being integrated with digital operations, from in-store apps to increased fulfillment options (ship from store; buy online, pick up in-store).”

While there’s a notion that retailers need to push their customers online, this isn’t always the case. In reality, a balance between the online and in-store shopping experience is necessary to compete with Amazon. Retailers can leverage their stores intelligently to meet evolving customer expectations and make sure the right product is available to the right customer at the right time. 

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Topics: customer experience, retail technology, personalization, amazon, e-commerce, retail stores, in-store experience, order delivery

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