Blog Post - Raghbir Rana, Dec 17 2019

How commerce leaders are working on their relationship with Amazon

How commerce leaders are working on their relationship with Amazon

It is difficult to overstate the impact Amazon has had on the world of commerce. The story of how Jeff Bezos and co took an online bookstore and grew it into the world’s biggest ecommerce company has already secured legendary status in the annals of business.

But it isn’t just Amazon’s phenomenal success that makes the company the standout exemplar of a modern commercial enterprise. It’s the way that Amazon has torn down the edifice of commerce and rebuilt it in its own image, time and time again driving innovations which end up becoming the new norm for how commercial operators do business.

From digital downloads to next or even same day delivery, Prime to Alexa, one-click purchasing to checkout-less stores, Amazon at times seems almost hell-bent on tearing up the norms of retail and commerce and doing something different. But behind the seeming chaos of invention there is crystal-clear purpose and strategy, a dogmatic adherence to the digital disciplines of data, lean and agile development. Everything Amazon does is intelligence-led and aimed squarely at improving the customer experience.

Given the fact that, in the US alone, Amazon now controls half the ecommerce market, its relationship with its competitors is a matter of keen interest. On account of its enormous size and rapid growth, it is hardly a surprise that the feelings of other operators towards Amazon should include a mix of alarm and envy. But at the same time, if you want a go-to example for how to do digital commerce right, you need look no further than the Seattle giant. Even for its most fierce competitors, Amazon is a valuable source of inspiration and education.

And then there is the fact that, as a one-stop digital marketplace, Amazon also acts as a key channel for brands and retailers around the world. They might fear and envy its gargantuan size as much as they admire and learn from its knack from disruptive innovation. But critically, tens of thousands of commercial operators the world over do business with and through Amazon, and rely on its enormous reach and popularity with consumers to reach their own customer base.

That’s why, when it comes to the relationships many commercial entities have with Amazon, it is fair to say - it’s complicated! Amazon will no doubt continue to exert a significant influence over the world of digital commerce heading into the future, which means its presence will be a factor in the future plans of many other businesses. As we rounded off this year’s series of in-depth studies into the future of digital commerce, we wanted to gauge exactly how digital commerce leaders view their relationship with Amazon and how they see that relationship shaping their own future commerce strategies.

Friend or foe?

Not surprisingly, amongst the 500-plus digital commerce leaders we surveyed for our Ready or Not? report, Amazon came out well on top in terms of who our respondents cited as their biggest digital competitor. The 34% who said Amazon was more than double the second most popular answer, brand websites (16%), although there was a marked discrepancy by size of company - just 11% of microbusinesses (1-9 employees) felt Amazon was their biggest competitor, with significantly more (26%) saying eBay. Amongst mid-sized companies (250-500 employees), however, 43% named Amazon as their biggest competitor, while this rose again to 45% of large companies (over 500 employees).

We went on to ask a long list of questions about how digital leaders view the state of competition between their organisation and Amazon. On whether Amazon represented a significant competitive threat to their business, we consistently found opinion split more or less down the middle, although larger businesses were more bullish about their prospects.

For example, 57% of respondents told us that Amazon did not represent a competitive threat to them, but this was slanted by the fact that the figure rose to just under three quarters (72%) when we asked large businesses. A slightly larger proportion of all respondents (61%) were confident they were able to compete with Amazon, rising less sharply to 66% of big enterprises. Just over half (52%) were even able to foresee a time in a decade or so when Amazon would no longer be the dominant force in the digital commerce space.

Flipping things around to a more negative view of Amazon’s influence, we found a similar 50-50 split across most questions we asked. 58% told us that Amazon did pose a barrier to the growth of their organisation, which interestingly rose to 64% of big businesses - a slight check to their confidence. Roughly half (51%) believed there was no way they’d ever be able to compete with Amazon, while a similar proportion (55%) told us they believed the digital commerce industry would be better off without the giant marketplace.

In contrast to these very close splits in opinion, we found a much stronger consensus when we asked digital commerce leaders about the need to work with Amazon. Two thirds (67%), for example, told us they had to work with Amazon in order to be competitive. Even more comprehensive, a resounding 81% told us that Amazon was a force for good in the digital commerce industry.

Digging down into more detail, more than three quarters (77%) said Amazon was an inspiration for their own business on how to use innovation to drive strategy. This increased to a near-unanimous 85% of mid-sized companies and 86% of large enterprises. And 72% told us that their organisation needed to invest more in Amazon because it is now the number one channel for product search.

So while we uncovered what is clearly a complex mix of views, it is noteworthy that the stronger consensus is around Amazon being a force for good, not a barrier to growth in digital commerce. This suggests that while businesses may instinctively worry about their ability to compete with such a massive presence in the market, more realise the practical benefits of working with Amazon and using it as a model for inspiration.

What Amazon does best

Our study revealed a number of key reasons why digital commerce leaders lean towards viewing Amazon as an inspiration and key strategic partner, rather than an overbearing competitor. When we asked our survey participants what they thought Amazon does best, top of the list with mentions from 41% of respondents was speed and delivery. This rose to nearly two thirds (63%) of microbusinesses and more than half of small businesses with 10 to 49 employees.

Around a third of participants also mentioned product range (34%), innovation (32%), customer experience (31%) and convenience (30%). For the largest enterprises, strategic planning for the future was identified as another key strength of Amazon’s (31%).

Of course, many of these areas - certainly speed of fulfilment, product range, customer experience and convenience - can all be attributed to Amazon’s fierce focus on customer service, which in turn is what drives its continuous push for innovation. Nearly three quarters of our respondents agreed that Amazon sets the benchmark when it comes to service, which is both a key reason to use it as an inspiration and to work closely with it.

Many of the great strides forward Amazon has made in service have come through its Prime subscription offer, a loyalty-plus scheme which provides everything from faster delivery to an on-demand TV service. Nearly two thirds of participants in our survey feel they miss out from having a Prime-like service - although the difficulty of setting up and running such a scheme for the majority of businesses again hints at the benefits of partnering with Amazon over trying to compete.

What most of the digital commerce leaders we spoke to seemed to agree with, is that whatever your views on Amazon, choosing not to engage is no longer an option. Whether you view the tech giant as an overbearing presence squeezing the life out of opportunities in the market or an inspiration that opens up opportunities for everyone, it is simply too powerful to ignore. Success in digital commerce these days demands at least in part having a coherent Amazon strategy.

Want to explore this further?

If you’d like to discuss any of the themes raised in this article, connect with one of our eCommerce experts. Alternatively, for specialist Amazon support, visit our Amazon service page.

A note about our new report

This article is based on findings from our new report “Ready or Not? The Digital Commerce Leader”. Research for this report was conducted by independent research consultancy Censuswide. A total of 503 senior decision-makers (including c-suites) in digital commerce were interviewed in October 2019; 252 in the UK and 251 in the US.

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