Understanding Amazon’s Success Factors

January 16, 2018

Ecommerce is gobbling up a growing share of total retail sales in the U.S. There was an 86% increase in its overall retail market share in the past 5 years. As of Q3 2017, ecommerce nabbed 9.1% of retail market share in 2017. (Q4 2017 data will be available in February.)

Amazon accounts for 43% of all online retail sales in the U.S. and for 53% of all growth in US e-commerce sales.

Why do consumers choose Amazon?

Product selection, free shipping and price are the top 3 reasons. We explore a total of 5 reasons shoppers spend money on Amazon, outline key facts about Amazon’s growth and discuss competing with Amazon in this article.

Why People Hate Online Shopping

Although 97% of American consumers shop online, not every shopper enjoys the experience. Here is a roundup of consumers’ top frustrations when researching products online:

43% poor product description

20% lack of photos/videos

18% no product reviews

9% arrival time

7% not enough product reviews

3% no user-submitted content like photos/videos

What shoppers hate about buying online:

58% paying for shipping

49% not being able to touch/feel/try a product first

34% difficult to return items

34% waiting for delivery

29% concerns about privacy

21% unattractive/difficult-to-navigate sites

19% entering payment info

10% overwhelming amount of products

9% not knowing where to search for a product

About Amazon

Amazon is seeing increases across its membership, sales and net income. We rounded up a few key numbers from a combination of online reports and Amazon’s 2016 annual report:

85% of consumers visit Amazon monthly but only 62% of consumers visit their families monthly

90 million US Prime members in 2017 which is a 39% increase from 2016

Amazon has 300 million users

80% US consumers buy something from Amazon at least once a month & 20% buy something at least once a week

27% overall sales increase in 2016 with a 25% increase in North America sales from the previous year

32% of 2016 sales occurred during Q4

298% increase in net income in 2016 and a 66% increase in North America segment net income, or $936 million increase from 2015

69% shoppers browse on retail/brand sites then purchase on Amazon v. 31% of consumers who start on Amazon and visit the brand/retail site to complete a purchase

Why People Shop on Amazon

What induces customers to spend their money on Amazon? We came up with 5 reasons based on 2 Amazon-specific reports released in 2017.

1) Product Selection

57% of Amazon shoppers are looking for a specific product

63% of all shoppers know what they want before they started shopping

Top Product Category Purchases on Amazon:

57% electronics

56% audio/video/books

39% toys/hobbies

37% clothing/accessories

28% housewares/furniture

25% sports/outdoors

24% beauty

20% hardware

13% automotive

10% jewelry

10% grocery

2) Free Shipping

84% of consumers say free shipping is why they buy from Amazon

82% of Prime members would cancel their prime account if it wasn’t for the free, two-day shipping

smarterHQ research shows that free shipping is among the top reasons customers bought a product via Amazon over directly from the brand

3) Price

6 in 10 shoppers start their path to purchase a product on Amazon because of better deals

Consumers’ shopping preferences by price category:

$1-$10 76% prefer Amazon

$11-$52 86% prefer Amazon

$26-$100 82% prefer Amazon

$101-$200 65% prefer Amazon

$201-$500 63% prefer retailer

$501/up 66% prefer retailer

4) Relevant Content

consumers rank the average star rating as the top review that helps trust a product, seller or service

1 in 3 shoppers say negative reviews are important for fostering trust in products and services

44% of customers buy from Amazon’s product recommendations

customers engage and purchase most often from recommendations if items are less than $100

60% of shoppers start their purchase journey on Amazon because of better deals

5) Other Freebies

62% of customers say Free Returns were their reason for buying from Amazon

33% of customers cite Free Samples as the reason for buying from Amazon

Competing with Amazon

Like it or not, Amazon is (probably) competing with you.

“Our businesses are rapidly evolving and intensely competitive, and we have many competitors in different industries, including retail, e-commerce services, digital content and electronic devices, and web and infrastructure computing services,” Amazon said in its 2016 Annual Report.

Given the scope of Amazon’s reach (and revenue), we don’t advise comparing your benchmarks directly with Amazon’s performance. But now that we know what factors make Amazon successful, we can re-evaluate our own strategies to see which Amazon success factors we can apply to our own businesses.

Amazon occupies 43% of the ecommerce market. That leaves 57% of the ecommerce pie to other retailers.  And that retail pie is growing.

Total retail U.S. ecommerce sales increased 14%, or $48,881 million increase, from 2016 to 2017. By 2022, online sales are expected to increase 56%, or by $228,843 million in the U.S. The average value of each online order in the U.S. is $86.30 per order.

So take some time before too much of 2018 passes to consider how you can claim your share of that retail pie. 

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