Amazon's Impact on Retail Market
In 2018, retail sales in the United States was $6 trillion out of which, 9.9% were done online via e-commerce retailers such as Amazon. Thus, between 2000 and 2018, online retail sales have grown 300%, causing the closing of 9,400 brick and mortar stores in 2017.
Traditional vs e-commerce retail market
Amazon started in 1994 as an online bookstore. In 1998, Amazon expanded its retailer services to cover videos and music. Prior to this step, in 1997, the retail market sales were $2.610 trillion in the United States. A year after, the retail sales reached $2.994 trillion in 1999, out of which, only 0.6% were done online via e-commerce retailers such as Amazon.
In less than 20 years, Amazon was able to get a place in the retailer leader board skyrocketing from no. 157 in 2001 to no. 6 in 2016. The leader board included Wal-Mart, Carrefour, Ahold, Home Depot, Kroger, Metro, Target, Albertson’s, Kmart, and Sears in 2001. The updated list of 2016 included Wal-Mart, Costco, Kroger, Schwarz Group, Walgreens Boots Alliance, Amazon, Home Depot, Aldi Group, Carrefour, and CVS Health.
According to the United States Census, retail sales reached $4.4 trillion in 2007. After the recession in 2009, it recorded a decrease in sales accounting $4.06 trillion. In 2018, retail sales in the United States was $6 trillion out of which, 9.9% were done online via e-commerce retailers such as Amazon.
Thus, between 2000 and 2018, the online retail sales have grown 300% according to the United States Commerce Department. "In 2016, $1.26 trillion of retail sales were influenced by digital media. The firm projects that mobile devices alone are going to influence $1.4 trillion in local sales increase by 2021. And so, experts began to talk about the Amazon Effect."
Since its beginning in 1994, Amazon has changed the traditional retail market introducing a faster and simpler online shopping process. Amazon-like stores became a global trend aiming to save consumers' time and effort in mobility.
Amazon affected the traditional retail market in two different ways: by hitting the traditional retail stores' revenue and by leading to significant changes in the market's consumer shopping behavior and patterns.
"Today’s traditional brick and mortar retailers are facing extensive change and like many other industries are seeing market share taken by online outlets." Online retailers like Chewy and Amazon are bringing the consumers-needed convenience to meet their busy schedules. To survive the Amazon Effect, a physical retailer outlet must become more specialized showcasing "products that cannot be found elsewhere."
Amazon Effect: traditional retail sales
"Among other factors, the Amazon effect is cited as the primary reason street-based stores' declining sales, which have often foreshadowed the stores' eventual closure. A WWD report cited more than 9,400 store closings in 2017, up 53% from the number that shut in the wake of the Great Recession in 2008."
Meanwhile, physical stores' sales grew by 3.7%, online retail sales in the United States increased by 15% between 2017 and 2018. Therefore, after only a decade, e-commerce now doubled its share of the retail market.
According to the United States Census Department, department store sales rose by 0.5% in February 2019 which is down by 3.5% from February 2018. This decrease is mainly due to the strong competition from e-commerce and online retailers. Therefore, online retailers' sales rose by 7.7% from the last year.
In the first three months of 2019, 5,994 retail stores closed compared to 5,864 for all of 2018. Some closed retail stores were Charlotte Russe, Payless, and Gymboree.
Amazon Effect: Consumer behavior
Online shopping experience such as at Amazon impacted the expectations of shoppers from traditional retail stores. Thus, today’s shopper expects a similar variety, the same smoothness, and timely response seen in online retailers while visiting a physical retail store.
With its technology-driven shopping experience, Amazon is prompting consumers to search for the same experience in traditional retailers. "This increased e-commerce and the manifestation of the ongoing consumer shift to online shopping resulted in the evolution and consequent disruption of the retail industry."
Lastly, due to the strong competition from e-commerce and online retailers, 5,994 retail stores closed in the first three months of 2019 compared to 5,864 for all of 2018.