Amazon is the eighth-most valuable company in the world, according to the 2018 Fortune 500. The e-commerce giant now sells everything from refrigerators to handmade wedding dresses to video streaming, including products from more than 300,000 small-and medium-sized businesses.
Amazon has revolutionized shipping several times over. First, it made online shopping easy and straightforward for millions of people worldwide. Then, Amazon Prime normalized two-day shipping — and made it free. That made shipping seem cheaper and easier to customers, but forced shippers and carriers to move faster and more efficiently than ever to compete against the prime membership.
Now, the online retailer appears to be making moves into package delivery itself. The company has rolled out fulfillment center services for third-party sellers, parcel lockers for apartment buildings and offices and Shipping With Amazon, a true delivery service for its own packages.
There are a lot of rumors about Amazon. Here are the facts.
Is Everyone Shopping on Amazon?
A lot of people are shopping on Amazon, to be sure. About 90 percent of Amazon shoppers are between the ages of 18 and 55. But seniors are using the platform too. In a recent study, 82 percent of shoppers over 55 listed Amazon as one of their preferred shopping channels.
Home delivery can be particularly valuable to seniors who may be homebound or wish to avoid carrying bags from brick-and-mortar stores to their cars. But the convenience of Amazon, not to mention its wide variety of items with free shipping is appealing to customers of all ages.
That said, when the company announced in the spring that it had more than 100 million Prime members worldwide, analysts said that seemed like an overstatement.
Does Amazon Own The Whole E-Commerce Market?
No — but it’s getting closer. Last year, Amazon captured 44 percent of all U.S. e-commerce sales. JP Morgan predicts that number will reach 50 percent as soon as 2020. Amazon generates more online traffic than any other retailer, and visits are much longer and more detailed: Compared to the average e-commerce visit, the average Amazon.com visit is 2.5 minutes longer and takes the customer to five additional pages.
Amazon also captured 5 percent of all U.S. retail sales in 2017, and by 2020, JP Morgan predicts the company will hit 10 percent of retail sales.
Amazon’s Prime Day 2018 was the company’s biggest global shopping event ever — bigger than Cyber Monday, Black Friday or any previous Prime Day, Retail Dive reported.
Does Amazon Have The Lowest Prices?
Amazon has a reputation for being less expensive than competitors. After all, that’s how it grew its initial business as an online bookstore — by undercutting brick-and-mortar retailers to secure market share.
Today, Amazon isn’t necessarily the cheapest option online, but it is the best at monitoring prices across the internet. The website’s pricing algorithms check competitors and update Amazon pricing every 15 minutes.
Unlike most traditional retailers, Amazon benefits from venture capital, which means the company will survive even if it doesn’t make a profit. That allows Amazon to pour billions of dollars into developing new services, like Prime and Video, and subsidizing them until they’ve taken hold among customers.
Did Amazon Kill The Bookstore?
Amazon has been widely blamed for the “retail apocalypse.” Its low prices, high level of convenience and enormous selection of products have certainly led people to do more and more shopping on Amazon. Whether or not that “killed” an individual business is impossible to say.
But there is ample evidence for the Amazon Effect — the idea that Amazon forced brick-and-mortar retailers online. Some of those companies chose to list their products on Amazon as third-party sellers. Others designed their own websites to preserve unique branding. Some are even beating Amazon. Walmart has the #1 e-commerce spot in department store apparel, with Amazon at #2.
Resource: How “The Amazon Effect” and Changing Customer Behavior are Shaping the Parcel Landscape
But while Amazon was pulling global commerce into the online space, it reshaped global shipping. Customers now demand the same service expectations Amazon promises from every e-tailer. That means businesses large and small have had to find ways to deliver products with free two-day shipping, and carriers have had to design networks accordingly.
What is Amazon’s shipping network?
In the spring, several news outlets reported that Amazon had begun testing its own shipping method. Shipping With Amazon was proposed as a service for businesses who sell on Amazon.com. Third-party couriers would pick up packages for those sellers, deliver them to Amazon warehouses, and then deliver them alongside other Amazon packages.
For now, that massive distribution network still relies on traditional carriers (including the U.S. Postal Service, which President Donald Trump tweeted extensively about in 2018). But these third-party Shipping With Amazon couriers would have branded trucks, uniforms, and the like. That would remove packages from UPS and FedEx trucks and put them on Amazon trucks for part of their journey — and it’s easy enough to imagine an expansion of Shipping With Amazon in which the company takes control of all of its own shipping.
Every retailer will have to decide for itself whether Shipping With Amazon is the right fit. But the new service will present UPS, FedEx and other legacy carriers with their first new high-level competitor in decades. And if that means what competition usually means — lower prices and better service as carriers vie for customers — it could be very good for shippers.
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