business news in context, analysis with attitude

The Wall Street Journal reports that “a growing number of retailers have a problem that Borders Group and Circuit City didn't survive long enough to solve: Their products are available for much less on ... While the likes of Wal-Mart and OfficeMax have struggled to increase revenues recently, Amazon has thrived, with sales rising 40% in 2010 to $34 billion. For the first time, annual sales of media products like books and DVDs accounted for less than half of total revenue.

“That may mean Amazon is winning market share in a broader range of categories, with shoppers taking advantage of lower prices on products from jump rope to Ray Ban Wayfarers. A recent study by Matt Nemer of Wells Fargo compared prices on a diverse basket of products and found Wal-Mart is 19% more expensive than Amazon. That assumes online shoppers don't pay sales taxes and shipping is free. The price gap is about half as wide if customers pay standard shipping.”

According to the story, Amazon’s advantage is increased when you consider three things:

• Internet-savvy young people are likely to become even more dedicated Amazon shoppers as they age and have greater access to disposable income.

• Amazon has been doing the e-shopping thing for more than 15 years, far longer than virtually any of its nominal competitors.

• Because it doesn’t have to worry about walls, Amazon is able to stock more products than its brick-and-mortar brethren.
KC's View:
And I would add a fourth advantage - that Amazon has what I would judge to be an unrivaled database when it comes to what its customers buy, how often they shop, and what they are likely to buy in the future ... and because most of its shoppers have given it permission to do so, Amazon isn’t afraid to market against that database.

The simple fact is this. If you sell almost anything, there’s a pretty good shot that you are competing with Amazon.

It is worth noting that Amazon keeps finding ways to market to its best customers. Like yesterday, when it announced that people who use its Amazon prime delivery option - paying $79 a year for two-day delivery of all purchases from Amazon, no matter how many there are during the year - will now be able to access instant streaming of more than 5,000 movies and TV shows on Amazon’s website....for no extra charge.

Amazon has to be aggressive in this area because it is competing with the likes of Apple’s iTunes service and Netflix. And it is fighting for every purchase, and is unwilling to concede “share of wallet” to anyone. In much the same way, I would suggest, that here at MNB we urge food retailers not to concede “share of stomach” to anyone.