A closer look at what the retail giant is cooking up for 2020 and beyond.
To say that Amazon has taken the retail world by storm is an understatement. Not only does the company capture 47% of all eCommerce sales, but it also maintains a customer retention rate of over 90%. Amazon.com is rapidly becoming the default product search engine for many consumers, with more than half (54%) of all product searches starting on the website.
We all know how massive Amazon is. What we don’t know is how big it will be, and what it plans to do going forward.
There’s no crystal ball that can tell us exactly what Amazon’s next move will be, but there are some signs and trends that can point us in the right direction.
Doubling Down on Physical Retail
Amazon’s mission to become the “Earth’s most customer-centric company” won’t be complete without an offline retail strategy. Modern consumers like to shop across multiple channels, often switching between physical and digital storefronts as they research, browse, and buy.
Amazon may have dominated online retail, but if it truly wants to be customer-centric, it needs a strong presence in the physical world. Amazon recognizes this, which is why it continues to expand its brick-and-mortar footprint.
The retail giant runs more than 600 physical locations (including Whole Foods), and we can expect that number to grow in 2020 and beyond. We can also count on Amazon to come up with new store formats. “I think we're going to see them continue to expand into physical retail, both in terms of expanding existing formats (i.e. Amazon Go, Books, 4-Star, etc.), but also coming out with new formats,” predicts John Ghiorso, CEO & Founder of Orca Pacific, a full-service Amazon agency.
Ghiorso anticipates Amazon to continue testing new formats and technologies in its stores, which will keep everyone—consumers and merchants alike—on their toes.
In response, retailers will need to vary and customize their store environments based on the needs of their customers, as well as trends around their local stores. In the same way that Amazon’s 4-Star stores have a section for products that are trending in the area, retailers would need to mine new and public sources of data to further localize their assortments and offerings.
Saying Goodbye to Cashiers
Amazon will expand its “just walk out” concept beyond its own stores. The company is reportedly in talks with Regal Theaters and CIBO Express to bring its cashier-less technology to cinemas and airports.
This move has major implications for other retailers. The cashier-less services currently found in other department stores and groceries are cumbersome, especially when compared to the Amazon Go experience.
Amazon expanding the technology to other locations may push retailers to do one of two things: develop their own cashier-less offerings or team up with Amazon to bring the technology into their stores.
Order Fulfillment Will Pick Up Speed
Amazon’s same-day and one-day shipping for Prime members is already a thing, and the company’s efforts to speed up order fulfillment won’t slow down anytime soon.
With the evolution of Amazon Fresh and Walmart.com’s success with Next Day delivery, Amazon Prime's shipping options no longer stand out. “So, in 2020, I believe Amazon will place a heavy focus on scaling its operations and logistics to roll out one-day shipping across the entire channel,” says Drew Kraemer, CEO of Marketplace Strategy, an Amazon marketplace sales acceleration agency.
Amazon’s move towards one-day and same-day shipping will increase subscriptions and orders from Prime subscribers, which will ultimately lead to more revenue. Analysts are predicting faster shipping times to increase Amazon's total revenue by 7% to 15%.
And let’s not forget about drones. Amazon is already testing Prime Air, a service that uses drones to deliver packages of up to 5 pounds in 30 minutes or less. The service, which will be deployed once Amazon obtains the necessary regulatory support, will be a game-changer.
Consumers (who already have high order fulfillment expectations) will be much more dependent on Amazon. Retailers that sell the same things found on the site will have a tough time winning over customers.
As such, retailers will need to find ways to compete in ways that Amazon can’t. This could mean selling products that can’t be found on Amazon.com, increasing their offerings around personalization, or creating experiences that are so compelling, that customers can’t help but visit the store.
Alexa Will Become Smarter and More Powerful
Amazon is gearing up for a world in which people shop with their voice and use devices that can talk to each other.
Ghiorso expects the company to make “a lot of iterative improvements to Alexa” in the coming year. “I think you're going to have more natural voice, conversational style interactions that are ultimately going to be powered by more sophisticated artificial intelligence.”
There’s also going to be “more interactivity,” he adds. As Alexa — along with other voice-powered devices like Google Home — becomes more ubiquitous, forward-thinking retailers will leverage voice technology to initiate conversations and interactions with shoppers.
Last year, for instance, H&M launched a voice-powered gift guide on Google Home, which enabled shoppers to browse various gift options offered by H&M. The application also allowed shoppers to pay via voice command.
We can anticipate more of these initiatives in 2020 and beyond.
Smarter Homes and Smarter Stores
Amazon doesn’t just want its gadgets to talk to consumers; it also wants its devices to talk to other devices. And this is where the Internet of Things (IoT) comes in.
In his podcast episode How Will Amazon Transform? Oliver Banks points out that Amazon is “way ahead of any other retailer” in terms of IoT patents. In fact, when it comes to patents relating to IoT, Amazon is almost 14 times ahead of the next retail-related company, which is Apple.
It’s safe to assume that Amazon will put out more IoT innovations in the coming years. “Smart home is going to explode,” predicts Banks. .
In the same vein, smart stores will likely make waves as well. As IoT technology and AI continues to mature, retailers will find new ways to incorporate it into their stores to provide richer and more personalized experiences.
Amazon Will Make Inroads into Healthcare
Amazon wants to disrupt healthcare. Earlier this year, the company teamed up with JPMorgan Chase and Berkshire Hathaway to offer “simplified, high-quality, and transparent healthcare at a reasonable cost.”
In September, the company launched Amazon.care, a healthcare program for its Seattle employees, which includes online doctor visits, in-home nurse visits, prescription delivery, and in-app chat with healthcare professionals.
This move, along with the fact that Amazon is looking to further develop Alexa as a healthcare assistant, tells us that healthcare is the next big thing for the company.
What does this mean for retailers and pharmacies? For starters, they will be pushed to offer more convenient and valuable services to their customers.
The good news is these retailers still have the opportunity to win.
While Amazon’s healthcare initiatives are still new and under development, established retailers like CVS and Walgreens already have existing apps and services that they can build on. By introducing services such as chat and personalization — and by lowering healthcare costs — they might just be able to win over consumers before Amazon does.
The Impact of Amazon Ads Will Be Massive
Another key thing to watch? Amazon ads.
“In 2020, I also expect programmatic media dollars to outpace projected growth,” says Kraemer.
“Amazon has become a place for many consumers to research and discover new products. Layering that trend with the ability for advertisers to leverage Amazon’s data to target new consumers and you have a strong case for pulling media dollars from other outlets, such as Google and Facebook.”
Kraemer isn’t the only one expecting Amazon ads to make waves. In his podcast, Banks says that “Amazon ads are going to be the next big thing.”
Amazon's advertising business is worth more than $10 billion, and the company is expected to make $38 billion from advertising by 2023.
“When it comes to retail and when it comes to selling stuff, Amazon ads are going to be where it's at," continues Banks. "You're going to be able to target deep down, using Amazon's rich data sources, using purchase history, using that personalization aspect. I think we'll be able to see Amazon ads go crazy.”
How Can Retailers Thrive in the Age of Amazon?
Amazon will undoubtedly make massive moves in the coming years, and retailers will need to bring their A-game to thrive.
But how exactly can you do that?
Leverage Your Physical Location
Amazon’s physical presence is still relatively small, and brick-and-mortar retailers have a solid opportunity to win over shoppers in the real world.
“Retailers that can figure out how to leverage their physical locations to add value to customers will have the chance of competing against Amazon,” says Kraemer.
“Retailers will need to figure out how to create value for in-store shoppers. Amazon knows it lacks in this area and has taken steps to fill in the gaps. For example, Amazon partnered with Kohl’s to provide free and convenient returns. Other retailers will need to offer unique services, returns, and special promotions to win over Amazon’s customers.”
Put Your Customer Data to Good Use
Leveraging customer data starts with organizing the information and adopting a single view of shoppers across online and offline channels. Doing so will enable you to better understand your customers, ultimately leading to smarter strategic decisions.
It’s also important to put customer data into the hands of the right people — such as your in-store teams. When associates have access to your shoppers’ preferences and purchase histories, they’ll be able to offer personalized recommendations, improve the in-store experience, and build stronger customer relationships.
Use Amazon’s Platform to Your Advantage
Amazon attracts massive traffic and product searches. So, if it makes sense for your brand, consider selling your products on Amazon. “I do believe there's a way for small, regional, national retailers to partner with and sell through the Amazon platform without having to give up too much control or put their core business at risk,” says Ghiorso.
“But they should also go into it eyes wide open, as they don’t want to let the wolf into the hen house.”
Amazon advertising can also be a big opportunity. It’s already been established how big of a business Amazon ads are, so retailers should use Amazon DSP to their advantage.
According to Kraemer, “By investing in Amazon DSP, brands and advertisers can target audiences that are active in the research phase and reach shoppers with high purchase intent.”
Thriving in the Age of Amazon
Retailers that want to take on Amazon shouldn’t do it head-on. Instead of competing with the company, you should identify your unique values and capabilities and use them to engage customers.
One way to accomplish this is through the use of data. Collect the right customer data and organize it into a single view so you can better understand your shoppers and strengthen your relationship with them.
Finally, recognize the opportunities that Amazon offers. By leveraging its reach and advertising capabilities, you could potentially put your brand in front of a wider audience and drive sales.