The Amazon Effect: How Retailers Are Impacted

Talking about retail and not mention Amazon these days is a difficult thing to do. Amazon seems to pop up in almost any conversation touching the topic.

As such, it should come as no surprise that there may not be a single day in the past few years without mention of Amazon in some capacity. The eCommerce company has grown significantly in the past few decades, and we’ve started to see the physical impacts of its innovative force on other retailers. To what level Amazon has impacted others may be up for debate. We’ve just passed the midway point of the year, and Amazon has made big strides in 2017 towards what some may call its strategic path to global retail domination.

Out of its 120 news announcements this year, here’s a breakdown of the more interesting numbers:

2 | Acquisitions: Whole Foods and Souq.com

19 | Fulfillment centers opened up across the U.S.

27,700 | Jobs created from fulfillment centers

13 | Number of new products / services announced

25 | Number of video-related announcements

1 million+ | Number of business customers Amazon serves

$3 billion | Amount loaned to 20,000 small businesses

85 million | Number of Americans that use Amazon Prime

And these are just the numbers Amazon itself chooses to put out into the retail sphere. This doesn’t encapsulate all other Amazon-related news announcements from other companies’ corporate sites. According to crunchbase, Amazon has acquired a total of five companies this year.

The impact of Amazon’s activities on retail are seeping through the industry’s cracks. As eCommerce sales become a seemingly more pervasive force than brick-and-mortar, it’s apparent that Amazon is showing no signs of slowing down in terms of its innovation and expansion efforts. This year’s Prime Day saw a 60 percent increase over last year’s event, and the company used Amazon branded cargo planes for the first time to make deliveries.

Just a week ago, we shared the news of Amazon buying up U.S. marketplaces to help with their global delivery efforts.

The eCommerce giant has entered a myriad of markets this year, helping to up their retail game considerably. From going back to its start with opening up physical bookstores to the wine business, real estate, instant messengers, a social media related effort, and yes, even the auto industry, Amazon’s growth seems to know no bounds.

It’s getting so deep in the retail industry that investors are starting to keep an eye out. As we reported earlier this month, investors are specifically looking to invest clients’ money in stocks that won’t be impacted by Amazon. This may be a result of its Whole Foods acquisition sending grocery stocks into a downward spiral.

Perhaps Amazon’s dip into the grocery market is what compelled Tesco to launch a one-hour delivery service in London.

In the overseas arena, Amazon has focused its efforts heavily in India, investing another $260 million into its India-based operations and launching the country’s first Prime Day.

How are all of Amazon’s actions having an effect on the retail industry?

Considering Amazon sales accounted for 53 percent of all U.S. eCommerce growth in 2016, and 55 percent of all consumer product searches start on the eCommerce giant (over Google), it’s hard to not delve into its impact on retail as a whole.

A majority of retailers surveyed by Total Retail and IBM in its research whitepaper, The Amazon Effect: How Retailers Are Adapting Their Businesses to Better Compete With The Industry Leader, were split with 38 percent thinking it’s a direct competitor and 38 percent believing Amazon is a partner. Interestingly, 31 percent of retailers do not have brick-and-mortar locations while 17 percent of those that do shared that their in-store sales have decreased by over five percent in the last few years. On the up side, 27 percent of retailers have said their in-store sales have increased in the past two years.

Nearly 77 percent of retailers see Amazon as having a direct impact on their customers’ online experiences.

As Amazon enters the physical world with its own brick-and-mortar locations, many retailers are unsure of what’s next for the industry. Effectively, Amazon is causing a ripple effect in the industry, and retail is as a result undergoing an evolution.

A number of big retailers like Macy’s, Sears, and J.C. Penney’s are either closing down several stores and/or filing for bankruptcy. Others are working tirelessly to integrate more technology experiences into the brick-and-mortar experience, while many are also optimizing for mobile transactions.

It may be safe to say that Amazon has rocked the retail industry, and the future for today remains unknown.