New Delhi: As a newbie in the market, you stock everything that everyone else does, and yet, you manage to (eventually) outsell them. How is this possible? This newbie is everywhere, and has outsmarted decades-old businesses. Despite knowing nothing about the products he sells, he still manages to corner a large chunk of the market. How is this possible?
Does he offer something extra that others don’t? Is he offering prices that no one can match? Or does he have a trump card that no one can match?
As a matter of fact, the combination of all of these is true. The newbie ‘disruptor’ in this case is Amazon, who pioneered the e-commerce revolution across the world.
This was in the early 2000s, when e-commerce was in its infancy. In 2023, Amazon has gone to corner more than one third of the ecommerce retail market share. As access to the internet grew worldwide, the way people changed, many physical retail stores shut, and many others were forced to sell online as well.
Amazon realises this, and it knows that people buy from it due to its price and convenience advantage, even if that means selling almost everything at a loss. Though e-commerce has eliminated many errands, intense competition from other e-retailers means that people will buy only if they get a cost advantage.
Amazon works on a marketplace model, where they buy products directly from the producers, manage the inventories and deliver to your doorstep. For them, the cost is their primary advantage, and people will only buy from them if they get a discount or a bundled deal.
To maintain a consistent revenue, Amazon has no choice but to keep doing this, as their sole objective is to maintain their sales volumes. One journalist even joked that Amazon is a ‘charitable organization’ that Jeff Bezos runs to please its investors and maintain its brand equity for its other businesses (Read: Amazon Prime, AWS, etc.)
Though it is a fairly win-win situation for both the customers and Amazon, its offline rivals have been the most affected by all of this. Physical retailers have long complained of customers checking out the products, understanding its value and then eventually buying on Amazon. Some retailers even prohibited customers from using their phones in their stores, as many customers just walk out when they see a better deal on Amazon.
They soon realised that this has become an entrenched customer habit. The solution?A hybrid model, where customers can check out the product at the store and get it delivered to their addresses. Many of them even sell their products on Amazon through a proxy seller account, so that their branded products eventually reach the customers.
For the fight to increase market share, Amazon has even embraced this hybrid model, at least in the US for now. It bought grocery retailer Whole Foods Market for $13.7 billion in 2017 to offer its customers the experience of shopping in a store, even though they haven’t been as successful as they expected.
With new customer brands mushrooming everywhere, and old brands using new tactics to maintain their market share, the hyper-competitive nature of the retail market will keep being that way, as quick commerce now becomes a fresh threat to Amazon and other retailers. Zomato’s Blinkit and Swiggy Instamart are already eating into Amazon’s customer base, but the company hasn’t responded to this development yet. How Amazon protects its market share in response to the threat of quick commerce remains to be seen.
