New technologies and changing shopping habits are redefining the retail business globally with online being an important strategy for any retailer who is focusing on reaching a wider audience. And for those who are online, the convenience of reach and profits amass…, such is the case with the online retail giant Amazon. The retailer kick-started this year with fresh rounds of announcements which included its plan of hiring more than 1,00,000 people in the US in the next 18 months. This is particularly not surprising for a company pushing into multiple categories – from groceries to hardware, online videos, fashion, cloud services and multiple tiers of delivery. This e-commerce juggernaut is continuously dominating and is the world’s eighth largest retailer that is aggressively expanding its delivery network to get packages to prime members faster. Nevertheless, it recently announced its foray into private label groceries also.
According to the Wall Street Journal, Amazon generated 27 per cent of total retail growth last year and accounted for US $ 0.42 of every US $ 1.00 of growth in e-commerce. Despite its size, Amazon managed to increase its worldwide revenue by 28 per cent in the first quarter, to a total of US $ 29.1 billion. In addition to its retail success, Amazon’s cloud service and Amazon Web Services saw 64 per cent revenue growth year on year, accounting for 56 per cent of Amazon’s operating income in the quarter. Over the past five years, Amazon has created more than 1,50,000 jobs in the US, growing its workforce in the country to 1,80,000 by the end of last year. Its other businesses, such as Marketplace and Amazon Flex, will also create hundreds of thousands of jobs for people who want the flexibility to be an entrepreneur and set their own schedules.
Employing 45,000 robots, up by 50 per cent year-on-year, Amazon is also building a US $ 1.5 billion hub for its own cargo airline, capturing 0.7 per cent of the UK grocery market in a mere six months after launch, and showed a record holiday season in 2016 by shipping over 1 billion items.
So what makes Amazon successful?
Aggressive push in apparel and fashion businesses
The online retailer is aggressively expanding in the fashion business, owning seven fashion brands in addition to Zaapos footwear brand and is working hard to grow these numbers through acquisitions. According to Cowen and Company, the gross merchandise value of the Amazon US apparel business will grow from US $ 15 billion in 2016 to US $ 50 billion by 2020. And Cowen also predicts that Amazon will be the No. 1 apparel retailer in the US next year, achieving 14 per cent market share.
Growing Amazon Prime
According to Piper Jaffray (a full-service investment bank and asset management firm focising on mergers and acquisitions, etc.) Amazon Prime grew by 51 per cent globally in 2015 bringing its total membership to an estimated 55-60 million. And this growth contributor is not just to the US, but also Japan and Europe that have started demonstrating traction. With more than 1,00,000 customer reviews, out of which 62,000 include a five-star rating, the Fire TV Stick is the most-reviewed product ever offered on Amazon. On Amazon’s first-quarter earnings, the management reiterated its commitment to invest in content, and said that the company had spent nearly US $ 10 billion in capex in the past year to grow its fulfilment capacity.
Same-day delivery service
Amazon grasped the importance of speedy shipping earlier than many rivals and invested accordingly. With more than 100 warehouses in the US alone, it has kept accelerating its delivery from 48 hours, to next day, to the evening of the same day. The company has recently expanded its same-day delivery service, Prime Now, to Italy, Japan and the UK. Cowen and Company estimates that 25 per cent of Prime members have used Prime Now. Recently, Amazon has also signed two separate agreements covering the leasing of 40 Boeing cargo planes to be used for Prime Air deliveries.
Apart from the above listings on Amazon’s success, 2017 is going to be another exciting year for the e-tailer which plans to increase its emphasis on logistics, open brick and mortar stores, invest in original content such as movies, documentaries, etc. and looks at an overdrive in India. With a remarkable end in 2016 marked by the opening of Amazon Go, its first store that sells prepared food and grocery staples in Seattle, Amazon is also making a small push towards bookstores, which one can expect to grow more from four in 2017.
While globally Amazon is putting together specific strategies in place, it became the second largest online marketplace in India by shipments and gross merchandise value, after Flipkart. The e-commerce giant also announced an additional US $ 3 billion investment, taking its total investment in India to US $ 5 billion. It also launched its popular subscription-based program Amazon Prime to drive customer loyalty and announced to soon introduce its Prime Video Service. Recently, in October, the firm launched its ‘Global Store’ for Indian customers enabling them to buy products sold on its US website while paying in Indian currency. Prior to this, when customers from India bought things on Amazon’s US website, they had to pay in dollars.
With its growing focus on a seamless logistic support and assortment of products driven by technology, Amazon has been able to clock a good holiday season sales as compared to other retailers. However, for this resolute e-tailer, the journey doesn’t stop here as it seeks to expand in other areas of the retail industry globally.
