Originally published on Target Marketing.
Will 2018 be the year of Amazon (again)? The first week of the year is always filled with predictions, and there’s a good chance that most serious business predictions for 2018 will include some version of a call for businesses to respond to, react to, or create a new business model in order to compete in this age of Amazon. Because the truth is, if you think that non-retail businesses are exempt from this challenge, you are wrong.
While Amazon may have started as an online bookseller, it is so much more than that now. It is, among many things, a cloud computing powerhouse, an award-winning original content producer and streaming content platform, a top-selling fashion house, a gamer’s paradise, the leader in AI and voice technology innovation, and the largest world marketplace for third-party sellers.
The company has innovated in pricing and subscription models, delivery systems and on-demand technologies and scared the heck out of those who previously thought their little corner of commerce was exempt from Amazon’s notice. No one is safe.
When Amazon enters a new industry or vertical — which the brand does with disquieting regularity — it changes the game for consumers and for businesses across segments and industries, challenging everyone and everything we thought we knew about consumer needs and how to sell stuff. Its impact is felt all along the business chain from suppliers and providers to adjacent businesses and directly to the consumer.
Amazon’s expansion plans and willingness to take risks, its consumer experience obsession, logistics expertise, consumer access and deep pocket investments have broad implications across categories. In 2017 alone, Amazon expanded through acquisition in non-retail directions including grocery stores (Whole Foods), cyber security (harvest.ai), gaming (GameSparks) and analytics presentation (Graphiq). And all these moves are strategically designed to strengthen its core offerings and consumer ties.
Amazon’s advantages also include a ubiquitous consumer presence in U.S. homes, (64 percent with Amazon Prime membership according to Forbes). This translates into tremendous data and insights into shopping patterns, price elasticity, promotion and offer value and critical consumer search patterns. And because it freely sells competing products, its marketplace supplies the company with nearly complete information on competitor strengths and weaknesses in not only sales data, but also consumer reviews.
This is in conjunction with the fact that it controls the marketplace and can therefore work the home-field advantage to highlight its own brands or those products that deliver the most value. In short, Amazon has a direct way to translate its big data into big dollars. This is increasingly important as Amazon aggressively expands its catalog of private label categories and products. Other key strengths include its forays into voice search, in-home electronics, alternate ordering methodologies and sheer operational excellence.