It’s a measure of how much the American retail landscape has changed in the past decade that Amazon is poised to overtake Walmart as the largest U.S. retailed by 2022.
As of today, Packaged Facts estimates that Amazon makes up ~43% of all U.S. e-commerce sales, which is dramatically higher than its ~28% share just four years ago. Continuing its growth trajectory, by 2022 Amazon is expected to make up nearly half of all U.S. e-commerce sales.
That degree of concentration will make it bigger than Walmart — even considering the latter’s huge brick-and-mortar presence which Amazon lacks.
Of course, Walmart continues to possess additional advantages that Amazon cannot match, despite the latter’s acquisition of supermarket chain Whole Foods in 2017. Not only does Walmart have a huge physical footprint in retail, it also offers a wide range of in-store services which entice foot traffic — things like an onsite pharmacy, financial services, and photo processing.
Also working in Walmart’s favor is its dominance in so-called “click-and-collect” shopping orders. According to recent surveys, ~43% of respondents identified Walmart as the pickup location for their last click-and-collect order — three times the share percentage of runner-up Target.
Still, the emergence of Amazon atop the retail industry heap says volumes about the seismic shifts brought about by online retail. The channel hasn’t been around all that long in the grand scheme of things, but its impact has been nothing short of seismic.
How have your shopping habits changed during this time? Do they reflect what has happened in the larger market? Please share your thoughts with other readers here.
During the Great Recession of 2008-10, it was no surprise to see an increase in private label product sales – not just in food products but also in apparel, cosmetics and other consumer categories.
That was then …
It was much like a similar recessionary time in the United States history — back in the 1970s — when some supermarkets began selling “generic” packaged and canned goods. Those offerings celebrated their generic status by emphasizing their lack of branding – ostensibly to demonstrate that by cutting back on marketing and advertising costs, product pricing to the consumer could be kept lower.
The generic movement didn’t last. When the economic go-go times returned in the mid-1980s, consumers were more than happy to forego the cheaper offerings and go back to their favorite brands.
But the situation is different today. The Great Recession may now be a decade in the rearview mirror, but the private label brands they spawned are going strong. In fact, they’re thriving as never before – and in some ways are eating the legacy brands’ lunch.
… This is now.
Several factors are fundamentally different from before. For one, products that compete on price are no longer being marketed as “generics” but rather as brands in their own right. Brand names like Kirkland, Archer Farms and Essential Everyday look and feel like Kraft, Kellogg’s and other longstanding brands – and for the most part their quality is indistinguishable as well.
Equally important is that fact that there’s no longer any particular stigma associated with shopping “cheap” private label brands. It turns out that consumers in every income category appreciate a bargain; no one wants to feel like they’re being ripped off when there are good quality “best-value” alternatives available.
Consider these eyebrow-raising statistics: Costco’s Kirkland house brand notched sales of $39 billion in 2018, which is substantially higher than Kraft-Heinz’s total brand sales of $26 billion.
Indeed, the consumer foods industry is witnessing this happening all over the place. Amazon may not be developing its own private brands like Costco or Target have done, but it is working diligently with food and beverage manufacturers to develop private label offerings to sell exclusively on Amazon’s own website.
Looking at the macro environment, the United States is running at historically low unemployment rates today, but that hasn’t stunted the phenomenal growth of discount grocery chains like Aldi and Lidl. Aldi has come from practically nowhere several years ago to threaten becoming America’s 3rd place grocery retailer, behind only Walmart and Kroger. Aldi has done so by pursuing an über-aggressive private label strategy that’s targeting younger, middle-income shoppers in particular.
Note that Aldi is training their sights on more than just budget-conscious consumers, which have traditionally been the narrower audience for private label brands. It turns out that the “stigma” some might have attributed to the “cheap” image of private label foods isn’t there any longer.
For younger consumers especially, such “status” concerns are of no pertinence at all. Whereas the typical grocery cart today contains ~25% private label products, among millennials the proportion is more like one-third.
And while the growth of private label products is most pronounced in the food, paper goods and household supplies sectors — and has had the most disruptive consequences there — other sectors like apparel and cosmetics are seeing similar developments.
[Let’s not forget private label pharmaceuticals, too, where price differences are often dramatically lower than just the 15-20% differential we see in the food sector.]
The bottom line is this: Recession or no, cheap has become chic. It’s a trend that’s here to stay. The legacy brands won’t be able to wait this one out and expect better days to come along again.
If you speak with small businesses that sell products online, many will tell you that they chafe under the strong-arm tactics of Amazon and its seller policies.
On the other hand, what’s their alternative?
The reality is that it takes about the same amount of time and effort to run a Walmart or eBay store as it does to run a store at Amazon.
The difference? The sales revenue of a Walmart or eBay store is typically less than 10% of what businesses would generate on Amazon for that same amount of work. That interesting informational nugget comes from James Thompson, a partner at the Buy Box Experts e-tailing consultancy.
(And for small retailers attempting to run their own e-commerce sites, the revenue stream is even lower.)
But even with Amazon’s ascendancy in the world of online commerce, its retail platform remains a frustration to small sellers due to its level of responsiveness to questions and concerns (low) and its sudden, sometimes inexplicable policy changes.
Consumer advocates would counter-argue that Amazon’s seller policies are focused in the right place: looking out for the end-user customer. But others contend that Amazon’s actions aren’t even-handed, nor applied equally.
Take Amazon’s policies on dealing with product shipments and defects. When a seller’s defect order rate goes as high as 1%, Amazon deactivates the vendor’s account automatically. To be reinstated, a seller has to go through an arduous vetting process, during which time Amazon holds all monies due to the seller until every order is shipped and received – even orders that are in dispute.
To make matters even more onerous, the customer service phone number of the seller disappears, making it next-to-impossible for the vendor to clear up any misunderstandings with an end-customer other than by going through the Amazon portal.
Here’s another example: Without prior notification, last month Amazon instituted a new “Pay by Invoice” policy that allows corporate customers a pay period of 30 days.
While this is a great move from the customer’s point of view, most small businesses are used to being paid in two weeks. The new invoice payment policy squeezes the resources of smaller sellers, which often operate under tighter cashflow conditions than larger retailers.
It is true that bigger brands make up an increasing share of volume in the world of Amazon sellers. Those brands bring in the most money, but small businesses round out the portfolio and remain an important component of realizing Amazon’s aims of becoming the big behemoth with an “always and everywhere” presence in the world of retail.
Considering everything, it would seem that Amazon and its sellers should recognize each other’s worth and how much they mean to each other. Amidst everything, there has to be a win-win position that can be reached to the benefit of everyone.
“Paid product endorsements are meaningless. I want to learn about the product from experts who are advocating for it – not just some random person who happens to have a job that makes them well-known.”
— Consumer panel participant, ExpertVoice, May 2018.
The next time you see a celebrity spokesperson speaking about a product or a service … don’t think much of it.
Chances are, the celebrity isn’t doing a whole lot to increase a company’s sales or enhance its brand image.
We have affirmation of this trend in a report issued in June 2018 by marketing firm ExpertVoice, which recently investigated a Census-weighted audience of ~500 U.S. consumers on the issue of who consumers trust for recommendations on what to buy.
The findings confirm that while celebrity endorsements do raise awareness, typically it fails to move the needle in terms of sales. In fact, just ~4% of the participants in the ExpertVoice research study reported that they trust celebrity endorsements. (And even that percentage is juiced by professional athletes who are more influential than other celebrities.)
As for the reason for the lack of trust, more than half of the respondents noted that their greatest concern is the monetary compensation given to the people from the brands they’re endorsing. Consumers are wise to the practice – and they reject the notion that the endorser has anything other than self-dealing in mind.
By way of comparison, here are how celebrities stack up against others when it comes to influencing consumer purchases:
Trust recommendations from friends/family members: ~83% of respondents
… from a professional expert (e.g., instructor or coach): ~54%
… from a co-worker: ~52%
… from a retail salesperson: ~42%
… from a professional athlete: ~6%
… from any other kind of celebrity: ~2%
A big takeaway from the ExpertVoice research is that more people are influenced by individuals who are making recommendations based on actual experiences with the products in question. Moreover, if it’s people they know they know personally, they’re even likelier to be swayed by their opinions.
In a crowded marketplace full of many purchase choices, consumers are looking for trusted recommendations. That means something a lot more authentic than a celebrity endorser. Considering the amount of money companies and brands have historically had to pony up for celebrity pitches, it seems an opportune time for marketers to be looking at alternative methods to influence their audiences.
Click here for more information regarding the ExpertVoice research findings.
If there was any doubt that we’re in the midst of fundamental changes in consumer buying behaviors, the results from the opening days of the 2017 holiday season have put such questions to rest.
Movable Ink, a firm that enables content personalization within e-mails, has just published some insightful statistics it compiled from Thanksgiving weekend last month. Movable Ink logged nearly 438 million e-mail opens between the Wednesday before Thanksgiving and the following Cyber Monday. What did it find?
To start with, it found that recipients engaged with them.
Of the e-mails sent on Black Friday, nearly 50% achieved read lengths of at least 15 seconds. On Cyber Monday, the results were nearly the same (~46%).
Fifteen seconds may not seem like a long time to engage with an e-mail, but it’s light years compared to what is often experienced in consumer e-retail.
Movable Ink also found that the majority of the e-mails were opened on smartphones — far outstripping desktops and tablets:
Smartphones: ~53% of e-mail opens
Desktop computers: ~25%
Tablet opens: ~16%
An equal 53% of conversion actions happened on smartphones … but desktop conversions proved to be higher than their open stats, and e-mails opened on tablets were much less likely to experience conversions:
Smartphone: ~53% of e-mail conversions
Desktop computers: ~38%
Tablets: ~8%
Consumers were certainly in a buying mood over the holiday weekend, with purchases averaging between $120 and $140 on each of the four days of the long weekend:
Black Friday: An average of $124 spent
Saturday: $120
Sunday: $119
Cyber Monday: $141
However, while smartphones led in terms of e-mail engagement, when it comes to actual dollar sales smartphones come in last – by a country mile:
Desktop computers: ~$162 average holiday weekend total spend
Tablets: ~$107
Smartphones: ~$85
We can acknowledge that smartphones have become the most important method for reaching consumers with product content, coupons and special offers. And yet, significantly more purchasing continues to happen on desktops.
One takeaway is that for all of the convenience smartphones purport to provide, the purchasing experience on mobile devices doesn’t yet match the experience on desktop computers.
It would also help if there was more similarity between the purchasing process sellers are delivering across all platforms. That continues to be a missing ingredient with some sellers, and it’s likely explaining at least some of the dampening effect on mobile sales revenues.
It’s the beginning of October – which means that the holiday shopping season will soon be upon us.
… If it isn’t already, based on the holiday displays we’re already seeing cropping up at some major retail chain stores.
Of course, U.S. retailing firms have been gearing up for the season for months now, in terms of building merchandise inventories and so forth. But what sort of consumer shopping dynamics will they be facing this year?
According to new research published by Euclid, Inc. in its 2017 Evolution of Retail report which covers holiday physical and digital retail trends, Cyber Monday has now overtaken all of the other holiday-season shopping days in terms of consumer excitement.
That finding is based on a survey of ~1,500 U.S. consumers age 18 and older. While majorities of respondents report that they are excited about each of the three biggest revenue days of the holidays, for the first time ever Cyber Monday heads the list in terms of consumer interest and excitement:
Cyber Monday: ~72% of consumers report being excited about this shopping day
Black Friday: ~62%
Day after Christmas: ~55%
Clearly, online shopping continues to build momentum year over year. But the Euclid research also reveals that physical stores continue to have a major role in the “buying journey.” Even among consumers in the 18-34 age group, three out of four respondents report that they visit physical stores on a regular basis to see products “in the flesh” – even if they purchase them online later.
Not surprisingly, “price” remain the biggest driver in consumer shopping behaviors during the holiday season, but convenience is another factor as well. It isn’t simply a store’s location that matters, but also how quickly shoppers can get in and out of the store that affects their views of “convenience.”
Interestingly, when comparing just in-store shopping plans, more respondents in the Euclid survey expect to be shopping on the day after Christmas (63%) than on Black Friday (60%) this year.
Perhaps the decisions by some big retailers to curtail store hours on that traditional first day of the holiday shopping season are being driven by more than simply altruism …
I’m old enough to remember – as an adult! — Maryland’s infamous “blue laws,” which mandated that practically no retail establishments could be open for business on Sundays. It was a way for retail employees to have a day off with their families, even if other consumers wanted to do their shopping on the weekends.
The state saw itself as the protector of those workers against “exploitation” by retail establishments out to maximize their sales and profits.
There were exceptions to the law, of course – such as restaurants and grocery stores which were allowed to be open. But for the most part, strip malls and other retail zones were eerily quiet on Sundays.
Eventually, public pressure for the convenience of weekend shopping became too intense, and the state legislature finally abolished the antiquated restrictions in the 1980s.
It seems the same kind of dynamics are at play these days in the world of e-commerce — not by intent but by end-result. A just-released analysis by e-mail services provider Yesmail reveals that e-mails sent on Saturdays generate more than 60% better conversion rates than the average. On Sunday, it’s 40% higher-than-average sales.
Those findings come from an analysis of more than 7 billion e-mails deployed over Yesmail’s platform during the second quarter of 2016.
Clearly, shopping habits are similar whether it’s electronic or physical. But interestingly, it is e-mails sent on Thursdays that generate the highest engagement levels (open rates and clickthrough rates). It seems that consumers respond well to an initial e-mail sent on a Thursday, with a follow-up communication over the weekend to cement the sale.
Just as the physical retail stores were losing out on a good deal of business on Sundays, e-commerce firms may well be leaving money on the table today – simply because their employees’ work schedules — weekdays — don’t conform neatly to when so much of the shopping action is taking place with consumers.
Sending e-mail messages during the weekend, when work e-mails slow down, offers marketers the opportunity to stand out from a crowded inbox. But that isn’t happening as much as one might expect. Chad White, a research director at Litmus Software, notes this:
“Most B-to-C promotional e-mails are sent Monday through Friday because that’s when corporate offices are open. It’s certainly not because consumers aren’t in their inboxes over the weekend — because they are … which makes sense because consumers are less busy over the weekend and tend to do an outsized proportion of their shopping then.”
Just as the pattern has been for the past three or four decades, really.
That’s what makes the activities of some retailers in the online arena so curious. There are all sorts of ways for business enterprises to plan and schedule e-deployments at a prescribed date or time. The weekend calendar and when marketers are or are not working really shouldn’t any sort of impediment. Funny how something as simple as that fails to make it into the mix sometimes …
The Whole Foods chain of upscale “healthy grocery” outlets just released its 2016 3rd Quarter results … and things continue to look a little less fresh and a little more droopy for company.
Sales for stores open one year or longer have now declined for the fourth consecutive quarter, and the latest ~2.6% drop is steeper than analysts had been predicting.
Company profits have slid more than 20% since the same time last year.
One bit of good news is that Whole Foods’ total sales have increased by around 2%. It isn’t exactly the double-digit growth experienced up until a couple years ago — but at least it remains a gain.
“Wellness has gone mass, and it’s not coming back – never again to be relegated to niche specialty retailers serving price-insensitive early adopters.”
Underscoring Tanal’s contention is the fact that ~75% of Whole Foods store locations now have one or more Trader Joe’s located within five miles. More than half of them have a Kroger store within five miles, and nearly 85% have a Costco outlet located within ten miles.
In response to the heightened competition, Whole Foods is speeding up implementation of its plans to open a line of smaller outlets called 365 by Whole Foods Market. According to the company, these are “value-driven” locations that feature a streamlined operating model while benefiting from centralized buying and auto-replenishment of inventory.
Reportedly, pilot locations in California and Oregon have been positively received, and a third location will be opening soon in the Seattle suburbs.
Other initiatives being undertaken by the company fall under an umbrella described by co-founder and co-CEO John Mackey as a “back to basics” program including refocusing on the customer experience as well as improved store layouts and wayfinding, signage and the like.
… And lower prices, too, one would presume – if the company is serious about reclaiming the mantle of “good for you” food market leader from Kroger, Wegmans, Redners and other “mainstream” chains that have been encroaching on Whole Foods’ turf.
Will Whole Foods regain the momentum … or continue to be on the defensive? We’ll see how it plays out in the coming quarters.
With online shopping so popular these days, why are consumers electing to pick up the merchandise they’ve ordered at the store?
While it isn’t a pervasive practice, a study published recently by consumer analytics firm Connexity/Bizrate Insights finds that more than 30% of online shoppers have used in-store pick-up at least once during the past 12 months.
Even more surprising, perhaps, is that ~13% of respondents reported that they had considered abandoning a purchase because in-store pick-up wasn’t offered as an option.
As it turns out, people choose the in-store pick-up option for four major reasons:
To avoid paying shipping charges: ~55% cited
For the convenience: ~43%
Need to receive the order quickly: ~36%
Shopping online to ensure the item is available: ~29%
At first blush, I wouldn’t think that “convenience” means having to drive to a store versus having the product delivered right to the house. But perhaps “convenience” in this sense is related to product availability – avoiding a fruitless trip to the store only to find out after-the-fact that the desired product isn’t in stock.
But the other reasons cited make good sense, too. Everyone understands the desire to save money – if not on the product itself, then by avoiding shipping charges. And if a quick drive to the store gets you the items compared to waiting a few days for the shipment to arrive, that’s understandable as well.
The Connexity findings underscore how important it is for retailers to align their e-commerce setups to allow for in-store pick-up – especially if the economics don’t allow them to offer a free shipping option. There’s simply too much competition from online-only retailers to afford losing sale to them based on any of the four factors listed above.
Here’s an interesting statistic coming out of the holiday season this year: Nearly one in four consumers has returned at least one of the gifts they received.
For gifts purchased online, returns are an even bigger part of the equation – as in one third of all online gift purchases being returned.
It’s part of a trend that’s growing at a pretty swift pace. In 2014, a total of $285 billion worth of merchandise was returned in the U.S., a 6% increase over the previous year and more than double the growth rate of retail sales as a whole.
Industry observers are expecting higher figures again for 2015 once the stats are fully tallied.
Which holiday gift items tend to be returned most often? In a survey of ~500 U.S. consumers conducted between December 28 and 31, 2015 by mobile app shopping circular developer Retale, the following gift categories were cited most frequently by respondents:
Jewelry: ~32%
Electronic products: ~29%
Gift cards: ~27%
Clothes/apparel: ~26%
Home décor/home improvement items: ~23%
Consumers may have gravitated to online shopping big-time this past holiday season, but as for the gift return “experience,” it’s pretty clear that consumers continue to prefer making a return at the store (~64%) rather than online (~12%).
Evidently, the “hassle factor” of shipping merchandise back to the seller – not to mention the cost of return shipping if that isn’t offered free of charge – is more onerous than getting in the car and driving to the store outlet.
As for the mountains of merchandise that retailers are having to deal with, it’s caused the growth of an entirely new business niche: reverse logistics firms.
These companies input information on each returned item and determine the most lucrative way for the retailer to dispose of it – which can include sending it to a wholesaler, selling it to a liquidator for scrap, or sending it to a distribution center to be repaired and resold. Online “refurbished products” stores on Amazon and eBay enable retailers realize up to 70% of an item’s worth by selling those items directly to value-conscious consumers, compared to recouping only 20% or 30% in the past.
It’s part of the action –> reaction aspects of retail that pretty much define this industry.
It’s a measure of how much the American retail landscape has changed in the past decade that Amazon is poised to overtake Walmart as the largest U.S. retailed by 2022.
That degree of concentration will make it bigger than Walmart — even considering the latter’s huge brick-and-mortar presence which Amazon lacks.
Nones Notes 