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Amazon's rivals have learnt how to push back

Since it launched two decades ago, Amazon has become the world’s “Everything Store”, defined retailing and established itself as a member of the Internet Big Four. But those early shell-shocked retail rivals are fighting back.

A recent L2 intelligence report shows that some retailers have started to push back and gain ground, at the same time as Amazon’s growth is slowing. The evidence suggests that consumers largely prefer in-store pick-up than fast shipping. The authors write, “Retailers have realised the value of their brick-and-mortar locations as fulfilment assets.

They say the threat for Amazon could come from retailers like Walmart, Macy’s and Nordstrom, which are now supporting fulfilment of online orders from physical stores — actually a common practice for up to one in three traditional retailers with online stores.

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(Source: L2)

The L2 study also says that Amazon is still having trouble attracting prestige brands. Prestige brands are attractive to Amazon because of their high margins, but the luxury set are wary of doing business with a company synonymous with cutting price. Amazon has launched sub-brands like a “luxury beauty store” that attracted a few prestige brands, but most maintain a no-engagement policy with Amazon.

Amazon builts its success on three consumer-centric pillars:

  • Largest selection most products should be found on the platform thanks to the third-party merchants system;
  • Lowest price competition between third-party merchants (to win a listing) drives down the prices of products;
  • Superior fulfilment last-mile services guarantee cheap and fast delivery.

    Even in the area where Amazon has long prided itself on leadership — price — the story is shifting. The L2 report says Amazon no longer has price leadership across many categories. A study from found that “Amazon’s best-selling products above $10 could be found at a lower price on other online retailers 50 per cent of the time”.

    Other research shows that for products costing more than $US100, Amazon’s products are more expensive 70 per cent of the time. It’s only across verticals and CPG products that Amazon consistently offers the cheapest products.

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