Due to the various lockdowns 2020 was arguably the first real online Christmas, which has meant a great final quarter for Amazon, closing out a real stand out year for the company. The research team believe that Amazon marketplace's GMV has grown by at least 50% from US$200bn in 2019 to around US$300bn in 2020.
That said, some other retailers have also reported record figures and in many ways the logistical advantage (FBA, Prime Air, Fulfillment centre network) Amazon has built up over the competition over years has (almost unbelievably) been somewhat reduced, as competing retailers have invested heavily into their own digitalisation (Walmart, Kroger etc) and logistics efforts and/or services such as Instacart have proliferated and are easily available on a plug and play basis. One should mention the runaway success of Shopify in enabling independents and major retailers alike to go online in this context too.
While Amazon's logistics network was simply overwhelmed in Q1/2 2020 with the spike in extra demand, a situation which has stabilised now, there is another reason, why the research team thinks the competitive moat of FBA has been somewhat eroded. This is due to the rise of click & collect, which has become such a major trend in the USA.
For Walmart click & collect (or drive up) has taken 50% of all online orders - and possibly all of US online grocery has developed like this, as it is the cheapest option for both retailers and shoppers, due to the last mile deliveries cost falling away. During the pandemic click & collect also enabled shoppers to avoid going into crowded shops.
Amazon lacks the same physical presence as its bricks and mortar competitors (Walmart, Target for example), but has started to address this with the acquisition of the Whole Foods business, the locker roll out, its click & collect partnerships (with Kohls' for example) and of course its Go and Fresh stores.
Another prediction the publisher is making is that Amazon advertising is set for massively successful 2020 and 2021. Estimates are pegged at an annual US$20bn run rate for the business unit. And looking ahead, there might be another nascent market in audio ads (coupled with Alexa) that could grow massively in years to come.
Advertising on the Amazon platform will be driven by the sheer endless number of SKUs on the website and the problem to gain visibility for brands and sellers as a necessary prerequisite for sales conversion. In this sense Amazon follows down the path of the Alibaba model, where the Chinese platform makes most of its money from advertising rather than the listing fees. End user experience on Amazon has suffered for some time now, with the search function being overwhelmed by the sheer mass of Asins and advertising making the problem even worse.
Key Topics Covered:
1. Executive Summary
2. Latest Key Developments
April: Amazon increases capacity for surging online grocery
April: Coronavirus unmasks Amazon's stumbles at Whole Foods
April: Amazon turns of recommendations temporarily
May: Amazon faces scrutiny as operations return to normal
May: Amazon invests in self driving cars
May: Amazon acquires Zoox for over $1.2bn
June: Amazon private label sellers suffering during the pandemic
June: Chinese Sellers on Amazon losing ground
June: Vogue x Amazon Fashion . is not rescuing fashion
June: EU commission starts investigation
June: UK Ultra fast fresh
June: Amazon is rolling out Dash shopping carts
June: Amazon FBA Brexit plans - EFN and Pan-European FBA ends for UK
July: Amazon FBA a weak point?
August: Amazon logistics with 10bn orders
August: Amazon to use JC Penney/Sears as local DCs?
August: Amazon Deliveroo tie up gets the all clear
August: Federal Trade Commission investigation
August: Amazon to introduce Go technology to Whole Foods
August: Amazon unveils first Amazon Fresh grocery store
August: Amazon and Tegut roll out Prime Now groceries in DE
September: Whole Foods to offer pickup from all of its stores
September: Amazon high end streaming
October: Amazon grocery store deals for Prime Day
October: Amazon Prime day 2020 - another new record
October: Amazon's R rate and coronavirus cases
October: Amazon buys into Spartan Nash
October: Amazon begins hiring for four new Amazon Fresh stores
October: EU accuses Amazon of breaching antitrust rules
November: Amazon launches Key In-Garage Grocery Delivery service
November: The Amazon room
November: Amazon launches online pharmacy
December: Is Amazon becoming the biggest global employer?
December: Amazon's advertising business booms in pandemic
January: Amazon investing over $5 billion in small business success
January: Amazon's Covid Christmas
3. Strategy: The Structure of the 3P Marketplace
Amazon MP structure, the "gold rush era" is over
Number of Amazon sellers contributing % of volume
Seller X, Razor, Heroes, Upper90
The platform risk: Amazon's algorithm changes
Thrasio Reaches $1B Valuation, Sets New US Speed Record for Unicorns
Thrasio - compliance check and processes
Thrasio's product categories strategy
Thrasio paying out $100m to sellers
Thrasio enters Germany
Perch raises $123.5M to grow its stable of D2C brands on Amazon
4. Analysis - How Sustainable is the FBA Roll Up Strategy?
What drives the current frenzy
But there are major risks
At least Amazon will stand by, instead of consolidating the MP