After all Amazon’s efforts to please the customer, could customers be turning their backs on Amazon? Is Jeff Bezo’s famous “obsessive compulsive” focus on customers over competition the secret sauce to Amazon’s success, or a long-term strategy going awry? Amazon's Q3 earnings fell for first time in over two years, and a recent consumer study provided new evidence on consumer's growing disinterest with the platform.
In this blog, Pattern’s Amazon experts consider First Insight’s consumer study, recent events, and other data exploring why Amazon might be losing favor with consumers. George Hatch, Pattern’s Director of Marketplaces, indicated the following five areas could be contributing to the decline of Amazon—at least in consumers’ eyes.
1. Increasing competition
Make no mistake, Amazon is still the 800-pound gorilla of American ecommerce. However, key players like Walmart and Target are starting to catch up by offering services like BOPIS (Buy Online Pick-up In Store), faster delivery options, robust mobile shopping platforms, and an ever-increasing consumer selection. In fact, Forbes reported that last weekend's Black Friday sales had a 43% increase in BOPIS orders by consumers.
While Walmart hasn’t quite yet reached Amazon-status in the ecommerce world, it certainly seems to be heading in that direction. Rather than building its own tech brick-by-brick like Amazon, over the last few years Walmart has slowly but surely been building up its technology and capabilities by buying and incorporating what it doesn’t have time to create.
In fact, First Insight’s study found that the majority of customers prefer shopping at Walmart (in-store or online) over Amazon in 2019—a flip from just last year. Plus, in-store visits to Walmart have been increasing.
2. Little loyalty to Amazon
In the same vein, it seems that Amazon customers aren’t so loyal to Amazon as they are to the benefits that Prime accustomed them to. A Dropoff survey found that 65% of Amazon shoppers would order from other retailers with the same delivery options.
Additionally, consumers are shopping on Amazon less in general. For example, consumers who never or rarely shop on Amazon increased by 6% from 2018 to 2019, and consumers who shop 6x or more per month on Amazon dropped from 49% in September 2018 to 40% in September 2019.
Even Amazon’s sales from physical stores has decreased by 1.3% as customers increasingly favor pick-up options to delivery.
3. Prime subscription cost increases
The cost of Amazon Prime keeps increasing and may be turning off customers. Prime cost $79 originally, was raised to $99 in 2014, and currently costs $119 per year. And as costs have continued to tick upwards, membership has started to plateau—subscriber growth declined from 43% in 2016 to just 11% in 2018.
Prime membership may simply be hitting a saturation point (some 82% of U.S. households have Prime already), but it may also simply be on the decline. For example, despite Amazon announcing its new one-day shipping standard back in April, Prime subscriptions still decreased by 7% from the year prior.
4. Fake items
Nike’s recent announcement about parting ways with Amazon gives insight not only into retailers’ frustration with the lack of control on the platform, but also customer’s frustration at counterfeit goods on the site (which was a large reason why Nike decided to end its relationship in the first place).
Amazon gives 1P retailers little to no control over pricing and enforcing product listings, and although consumers benefit from low prices and larger product selection, they are ultimately the ones taking on the risk when, say, a counterfeit health or childcare product springs up. And while Amazon may tout a customer-first mentality, more and more customers are wondering whether Amazon cares all that much after all.
5. Late deliveries
Finally, late deliveries have been on the rise as Amazon has increasingly taken on the burden of shipping from outside partners. A recent report from Rakuten Intelligence showed that 16.6% of items were delivered late in 2019, up from just 4.6% of items between January and mid-June in 2017.
Additionally, Amazon also retired a Prime feature that gave members a free month of Prime if an order with a guaranteed delivery date came late. Now, members can receive credits if orders arrive beyond their guaranteed delivery date, but the process can be cumbersome.
Free, fast shipping has long been a key differentiator for Amazon, so an inability to keep customers happy on that front could be a top factor why customers would take their business elsewhere.
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Entering the ecommerce landscape is a huge undertaking for any brand—it usually requires a large investment in resources and expertise to really be successful. Any brand can quickly get in over their heads trying to navigate the nuances of SEO, fulfillment and logistics, distribution control, listing optimization, and meeting the numerous other requirements and administrative tasks to show up well on marketplaces.
Unfortunately, because it’s so easy for third party, gray market, and unauthorized sellers to obtain and sell products online, many brands find themselves pressured to execute an ecommerce plan without the right resources to succeed on marketplaces and their other channels.
So, for brands looking to enter the ecommerce space or improve their current and future performance, it makes sense to partner with an ecommerce consultant.
Pattern’s global presence and proven success with hundreds of brands has allowed us to develop highly effective ecommerce consulting services. We can guide your brand to navigate issues both large and small in marketplaces worldwide. To maximize your ecommerce efforts, you’ll need to understand what an ecommerce consultant does and how to select one who drives the right value for your brand and products.
An ecommerce consultant is a specialist in the ecommerce space who can give you personalized guidance on how to market your products and grow their presence on digital marketplaces.
An ecommerce consultant should be able to analyze your brand, audience, category, opportunity, and current roadblocks and help you understand how to utilize your resources (or what resources are missing) to be most effective in capturing your opportunities in the ecommerce space.
Not sure how to evaluate a consultant? Here are 4 key attributes to look for as you make your choice.
At Pattern, we prioritize brand obsession for a reason—we know that a brand-centered mindset makes a crucial difference in the outcomes and results our partners achieve. So in our experience, when you begin your search for an ecommerce consultant, it’s important to look for a partner who is specialized in ecommerce, invested in the product, and passionate about helping brands build and improve their strategies. Typically, this means finding someone that consults exclusively for ecommerce marketplaces, rather than choosing a consultant who offers many different services.
It’s also important to avoid choosing a consulting partner who can’t deliver the right experience for your brand. The best indication of whether your potential consultant can do that is to review their history, data, and results with other brands. Ask if they’ve helped others in your selling category, if they’ve solved specific issues your brand is facing, and why they feel you are a good fit. The key is to leave the conversation feeling confident that you understand your consultants’ capabilities and whether or not they match up with your needs.
It’s best to pick a consultant who knows how to guide a brand onto and through multiple marketplaces worldwide. You’ll want to take a look at your long-term strategy and think about the regions and platforms you’re currently on and where you might want to take your brand in the future. If your consultant is truly great at what they do, they’ll be able to help you perform well enough with your current product roadmap that it’ll be a no-brainer to expand your presence at the right time.
The most effective partnership with an ecommerce consultant will be able to give you both recommendations and point you to solutions for making those changes in your planning, processes, and execution. Your time and money is valuable, so you want to make sure that you’re spending it as efficiently as possible as you follow your consultant’s advice. So, before you commit to an ecommerce consultant, ask about the resources and concrete solutions they typically recommend to the brands they work with.
Finding an ecommerce consultant that checks the boxes can be a difficult task. At Pattern, our entire focus and drive centers around giving brands the tools and resources they need to succeed on domestic and international ecommerce marketplaces.
With over 100 global ecommerce consultants across 10 global offices, we have the right tools to partner with brands across the world to achieve better ecommerce success. We give specialized advice, then make sure our partners have all the adequate SEO, social media, CRM, Amazon multi-channel fulfillment services, and ecommerce outsourcing services they need.
Interested in ecommerce consulting services? Set up a call here to learn what Pattern can do for your brand on global marketplaces.