Amazon.com Inc. is taking a bigger share of e-commerce each year by ramping up its marketplace and expanding the number of products it sells directly.
Some estimates say Amazon accounted for more than 50% of e-commerce growth in 2016—and the e-retail giant is on pace to account for much more this year, according to David Spitz, CEO of ChannelAdvisor Corp., which manages client retailers’ and brands’ sales on online marketplace such as those operated by Amazon, eBay Inc., Wal-Mart Stores Inc. and others.
Amazon will drive the majority of online retail growth in the next 12 to 18 months, David Spitz said in his keynote address at the company’s annual Catalyst Conference this week. In the future, it could drive up to 80% of U.S. e-commerce growth, Spitz said. “It’s a pretty staggering rate at which [Amazon] is gaining market share,” Spitz said. “But the fact is the majority of people are looking for products on Amazon first when they begin their shopping.”
55% of U.S. consumers begin their product searches on Amazon last year, up from 44% in 2015, according to data released by BloomReach in September 2016. Just a few years ago, only about 11% of consumers began their shopping searches on Amazon, Spitz said.
While Amazon doesn’t disclose the total value of sales on its websites, Internet Retailer estimates Amazon accounted for 65.9% of growth in U.S. online retail last year.
“Amazon is maniacally customer-focused,” Spitz said. “They have identified three primary tenets that they believe their customers value: great prices, great selection and convenience.”
Amazon’s marketplace, he said, allows it to offer wide selection and low prices. While Amazon itself sells only about 13 million SKUs, the roughly 2 million retailers and brands that sell on Amazon.com offer another 350 million items, Spitz said. And the intense competition among sellers forces prices down.
One example of the robust competition in selection and prices on Amazon is that on Cyber Monday (the Monday after Thanksgiving), ChannelAdvisor’s technology handled 100 million pricing changes on Amazon. ChannelAdvisor’s service includes software that automatically lowers and raises client sellers’ prices on Amazon based on competitors’ prices.
To offer shoppers greater convenience in the form of fast and low-cost shipping, Amazon has grown its fulfillment services rapidly. The number of sellers using Fulfillment by Amazon, the program in which Amazon stores and delivers products for sellers, grew 70% in 2016. That compares with 50% growth in 2015 and 65% growth in 2014, Spitz said. When marketplace sellers use Fulfillment by Amazon, their products become eligible for Amazon’s two-day Prime shipping.
A challenge for sellers is and will continue to be competing with the products Amazon sells as the merchant of record—both its private-label products and products from retailers and brands that sell wholesale to Amazon. For example, batteries from Amazon’s own Amazon Basics brand account for roughly one-third of all batteries sold online, Spitz said in his keynote address.
In addition, Spitz outlined five predictions for Amazon in the next couple years:
- Amazon will follow the same growth and trajectory in the U.S. as Alibaba’s marketplaces have in China.
- Products sourced from China will account for the majority of unit volume on Amazon. (Chinese sellers already account for a significant portion of Amazon sales, and Amazon is recruiting more to Chinese companies sell on its global websites.
- 20% of Amazon’s sales volume will be from its own private-label products.
- Amazon will develop a global logistics network and find a way to make money from it.
- Advertising spending on Amazon will rival advertising spending on Google.