Philip Masiello, CEO, Hound Dog Digital
As far as e-commerce sales are concerned, Amazon is substantially ahead of the pack. Approximately 55% of consumers search Amazon first. Compare that to 24% of consumers who begin their search on Google. The remaining 21% is divided among all other search engines and e-commerce websites.
Interestingly, third-party sellers comprise nearly 82% of Amazon.com’s sales. So opting to sell through Amazon is a smart idea to build your sales and brand awareness.
Most people know the e-commerce side of Amazon, but it is so much more than that. Amazon also has a cloud computing platform called Amazon Web Services (AWS for short) that will end 2016 with approximately $10 billion in sales and an operating income of around $2 billion–all while growing at an annual rate of 28%!
AWS is nearly ten times bigger than 14 IaaS (infrastructure-as-service) providers combined—including Microsoft. Additionally, it has a sustainable growth rate, from its investments in promising technology like artificial intelligence, supercomputer-related projects, and various endeavors related to the Internet of Things (IoT).
Amazon is the fastest company in history ever to reach $100 billion in sales. It took approximately 20 years to get there. The projected growth trajectory of AWS alone is projected to reach $100 billion in 8 years.
“AWS, Marketplace, and Prime are all examples of bold bets at Amazon that worked, and we’re fortunate to have those three big pillars. They have helped us grow into a large company, and there are certain things that only large companies can do,” said Jeff Bezos.
Even when projecting out the numbers conservatively, results indicate that Amazon could reach over a trillion dollars in sales within the next decade.
Global Retail & E-commerce Sales
By the end of 2016, global retail sales reached $22 trillion. That is a growth rate of 6% annually. By 2020 it is expected to hit $28 trillion.
2016’s global e-commerce sales were around $2 trillion, showing a growth rate of about 20% per year. By 2020, this rate of increase is expected to double. And all of this is by a conservative estimate.
Additionally, 2016’s e-commerce global retail sales share is approximately 9% and is projected to be somewhere around 15% by 2020. That’s a huge chunk of the market!
Amazon Revenue
By the end of 2016, Amazon revenue totaled $128 billion, nearly 20% more than their 2015 totals. When looking at their total revenue, you can see that it has been exponentially increasing each year, averaging a growth of approximately 20% since its inception.
The other main factors in Amazon’s growth are their entry into the fashion market (a market which sees nearly $3 trillion annually), their opening of grocery stores, and the development and continued success of Amazon Fresh and Amazon Business.
When the market-dominating AWS is included in this equation, Amazon is essentially in a world all its own, without competition. When you take into account that these satellite businesses of fashion and grocery, are just starting out, you will see that the potential for growth is very significant. As of 2016, Amazon’s total worldwide share of e-commerce is 6.4%.
The Amazon Customer
Without a doubt, Amazon’s most significant accomplishment, and one that most e-commerce companies strive for is its customer retention. Much of this is because of its customer-friendly services and policies. Amazon is a customer-centric company.
You probably associate Amazon Prime with free 2-day shipping. But the truth is that it is so much more than that. Amazon has built a relationship of trust with their customers. Amazon is so far ahead of sites like Walmart.com or Jet.com in customer loyalty.
Another one of Amazon’s great strengths is the selection provided by their 3rd party sellers. These sellers have enabled Amazon to offer an extremely varied selection that is unmatched by any other e-commerce site. Additionally, Amazon features low prices on a wide selection of available items.
All of this contributes to what is perhaps the company’s greatest asset: their ease of use. A survey conducted in June 2016 revealed that approximately 50% of Internet users who purchased holiday gifts via Amazon did so because they found the site easy to use.
The Path to $1 Trillion in Revenue
Amazon currently enjoys 6.4% of the gross global e-commerce sales total. We know that the movement of sales to e-commerce from brick and mortar will only increase over the next couple years.
Next, consider Amazon’s 20% annual growth rate, which it has enjoyed since its founding. And that was achieved without AWS or brick and mortar. With these two services, Amazon is poised to increase its growth rate over the next few years.
The two above assumptions indicate that by 2027, Amazon will become the most valuable company in the world–reaching at least $1 trillion in annual revenue.
If its growth rate increased to 25%, it would take Amazon just eight years to reach $1 trillion in sales. With that kind of attention, do e-commerce retailers have a choice but to get on the Amazon platform?
Why It Matters To E-commerce
The more adept e-commerce brands become at learning the ins and outs of Amazon’s marketplace, the better they will become at using it to engage new customers. Building sales and profits are evident as well. But also consider the intangibles of building brand awareness and brand credibility with positive reviews and the SEO juice that comes along with it. Mastering this is vital because consumers seem to be more and more reliant on Amazon, and that attention does not appear to be going away anytime soon.
Amazon makes it quick, easy, and convenient for sellers to integrate into their marketplace.
The company has 20 years of experience with gaining and keeping their customers’ loyalty. That is not the kind of reputation that a competitor can just come along and wash away.
Philip Masiello is the founder of digital marketing agency Hound Dog Digital and former founder and CEO of 800Razors.com.