The rise of e-commerce cannot be overstated. E-commerce is now a $390 billion dollar market in just the U.S. according to Statista, and has grown at a rate of 17% annually in the past decade. The research company Forrester projects e-commerce to grow to $530 billion by 2020, while Statista is even more bullish, projecting e-commerce to reach more than $684 billion by 2020. Yet e-commerce in Western Europe is growing even faster, with sales projected to reach $191 billion by the final quarter of 2017. Brick and mortar stores are being phased out and squeezed by e-commerce. So who stands to benefit most from this rise in e-commerce? The obvious answer is Amazon (NASDAQ:AMZN). According to Forrester Research, Amazon accounted for roughly 60%
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Sure, there is almost no barrier to entry in establishing an e-commerce website, but attracting customers and establishing the requisite warehouse infrastructure is a much tougher task. Amazon and Jeff Bezos took a great deal of criticism in past years for its lack of profitability, but a large part of that came from Amazon’s large investment in warehouses and other vital pieces of infrastructure (a quick look at Amazon’s free cash flow shows that to be true). With Amazon Prime now offering free guaranteed two day delivery (and Amazon now experimenting with same-day and even same-hour delivery), why should a consumer choose any other e-commerce market for their needs? Other online marketplaces are being relegated to selling specialty goods—they can’t compete with the efficiency of …show more content…
alone—an enormously drastic increase from just 19 million users subscribed to the service in June 2014. This rise in Prime users is crucial because Prime users are estimated by CIRP to spend $1,200 dollars per year on the site compared to $500 for non Prime users. The numerous perks of Prime—free shipping, video streaming, e-books, and more—will continue to attract more users and also prevent defections from Amazon to other competitors like Walmart. Amazon is also rumoured to be trying to purchase the rights of live sporting events to attract further Prime users, so it may eventually replace Netflix as the dominate service for those who don’t like to have a traditional cable TV. This is yet another area that Amazon could experience growth in—and why current Prime users will have little incentive to leave to another service.
Amazon is so entrenched as the go-to e-commerce market that Eric Schmidt once remarked that “[Google’s] biggest search competitor is Amazon. People don’t think of Amazon as search, but if you are looking for something to buy, you are more often than not looking for it on Amazon.” He acknowledged “that last year almost a third of people looking to buy something started on Amazon — that’s more than twice the number who went straight to Google.” Schmidt recognizes that Amazon
Sure, there is almost no barrier to entry in establishing an e-commerce website, but attracting customers and establishing the requisite warehouse infrastructure is a much tougher task. Amazon and Jeff Bezos took a great deal of criticism in past years for its lack of profitability, but a large part of that came from Amazon’s large investment in warehouses and other vital pieces of infrastructure (a quick look at Amazon’s free cash flow shows that to be true). With Amazon Prime now offering free guaranteed two day delivery (and Amazon now experimenting with same-day and even same-hour delivery), why should a consumer choose any other e-commerce market for their needs? Other online marketplaces are being relegated to selling specialty goods—they can’t compete with the efficiency of …show more content…
alone—an enormously drastic increase from just 19 million users subscribed to the service in June 2014. This rise in Prime users is crucial because Prime users are estimated by CIRP to spend $1,200 dollars per year on the site compared to $500 for non Prime users. The numerous perks of Prime—free shipping, video streaming, e-books, and more—will continue to attract more users and also prevent defections from Amazon to other competitors like Walmart. Amazon is also rumoured to be trying to purchase the rights of live sporting events to attract further Prime users, so it may eventually replace Netflix as the dominate service for those who don’t like to have a traditional cable TV. This is yet another area that Amazon could experience growth in—and why current Prime users will have little incentive to leave to another service.
Amazon is so entrenched as the go-to e-commerce market that Eric Schmidt once remarked that “[Google’s] biggest search competitor is Amazon. People don’t think of Amazon as search, but if you are looking for something to buy, you are more often than not looking for it on Amazon.” He acknowledged “that last year almost a third of people looking to buy something started on Amazon — that’s more than twice the number who went straight to Google.” Schmidt recognizes that Amazon