The 'Amazon Effect': How Ecommerce Will Change in 2019 and Beyond
For better or worse, the U.S. economy and the global economy are in the throes of the “Amazon Effect,” a term used to describe Amazon.com’s success, which has upended retail practice and customer expectations, both online and off. By mid-2018, Amazon was already responsible for roughly 50 percent of the nation’s ecommerce sales and 5 percent of all combined offline and online sales.
Boasting 11 straight quarters of profits, a record $1.9 in sales for the just-ended holiday season, and the richest man in the world as its CEO, Amazon certainly saw its way of doing things work out for the company.
What the Amazon Effect Is
So, what is the Amazon Effect? The meaning of the phrase can vary depending on the industry being cited, but it generally refers to the difficulty many stores -- particularly brick-and-mortar outlets -- face when they compete with Amazon. The online retailer's vast selection, fast shipping, free returns, low prices and "Prime" subscription service all serve to create high customer expectations for any retailer hoping to compete.
Does that mean Amazon is obliterating the competition? Studies show that Amazon’s success has led to some business closures, but many companies, in fact, have tackled the Amazon effect creatively and effectively to compete for customers and hold their ground. In short, the Amazon Effect is just another reason the retail environment is always in flux.
Certainly this phenomenon doesn’t affect ecommerce providers solely; however, it's these providers that are most on the front lines and need to stay agile lest their behemoth competitor, Amazon, swipe in and take their customers. With that in mind, here are my predictions for how the ecommerce scene will evolve in 2019:
The “last mile” logistics race will grow more competitive.
Amazon’s delivery network is a logistics phenomenon that allows for the delivery of virtually any consumer good to a shopper’s doorstep in a matter of days or even hours. Ecommerce providers have been under ever-increasing pressure to match Amazon’s speed and efficiency, and there is no evidence consumer expectations are easing; a 2018 study found that 43 percent of consumers surveyed expected “much faster” delivery times that same year, a sharp increase from 2017.
To meet this consumer expectation, expect more ecommerce companies to turn to courier software to match or exceed Amazon’s delivery performance in 2019.
The “mobile-first” switch will finally happen.
Ecommerce providers have had to think about mobile-users for a while now, but 2019 may be the year mobile applications become a priority over desktop-user interfaces. A late 2017 report from Criteo showed that at that time ecommerce stores with successful shopping apps were making the majority of their sales through mobile.
Salesforce predicted that mobile would drive 68 percent of ecommerce visits and 46 percent of orders for the just-ended holiday season. Mobile was already a high priority, but by this year's holiday season 11 months hence, we could see it becoming priority number one, as the share of ecommerce visits commanded by desktop sites continues to shrink.
AI and ecommerce will grow even closer.
Amazon has never been one to rest on its laurels, so one of the significant avenues of expansion it's explored over the past few years has been artificial intelligence and its application, machine learning. Machine learning notably drives Amazon's Alexa smart speaker, and its immensely profitable Amazon Web Services division provides AI cloud computing for paying customers.
But AI has played a growing role in Amazon’s direct ecommerce activities, as well; here, Sunny Singh from GoBeyond.ai lists some of Amazon’s AI ecommerce tools, such as algorithms for detecting marketplace trends, upselling via custom recommendations and the testing of copy.
Fortunately, other ecommerce retailers can also unlock AI tools; Towards Data Science lists “shoestring” AI options such as simple chatbots to provide customer support and AI-based marketing strategies. In 2019, expect to see even more AI deployment at Amazon and other companies.
The online grocery battle will continue.
One of the biggest ecommerce stories of 2017 had a lot to do with brick-and-mortar locations -- namely, Amazon’s $13.7 billion purchase of Whole Foods. A year later, pundits are wondering if Amazon’s move into groceries was a misstep; the number of Amazon Prime members who used the service to shop for groceries at least once a month dropped between 2017 and 2018.
One study showed that households which used online grocery delivery based on a nearby physical location spent about $200 per month, while the average Amazon grocery shopper spent $74 per month. That was certainly disheartening news for Amazon, but for the rest of the grocery and ecommerce world, the takeaway is clear: The war for the immensely valuable online grocery market continues.
Overall, online grocery spending is increasing -- a mid-2018 report concluded that online orders take up about 5.5 percent of total U.S. sales. This indicates that 2019 could be a prime time for other ecommerce providers to get into the online groceries game.
Overall, the Amazon Effect is real, but it doesn’t mean that Amazon is the only ecommerce player that will matter in 2019. The competition will remain fierce through 2019 as the current various trends play out and as the ecommerce world continues to shift.