Is Amazon Coming Into Its Prime?

This Insights brief delivers our current update regarding Amazon, a topic that continues to be noted prominently in the business news. Early in July, Amazon was again featured as a marquee sponsor of Men’s Fashion Week in New York City. Then, on July 12, Amazon marked its 21st anniversary in business with its second annual Amazon Prime Day, and its sales again jumped dramatically compared with last year’s Prime Day.

Whether upscale marketers and retailers are focused on Amazon’s current positioning in the luxury and affluent marketplaces or not, they should start thinking strategically about how they are eventually going to compete, as Amazon continues to penetrate both the mass marketplace and upscale markets, offering all consumers — mainstream and upscale — more shopping-related benefits, such as Amazon Prime with all its attractions, Sunday deliveries, liberal return and refund policies, etc. Here are some of the reasons why…

    • The majority of all American adults have reported they shopped at Amazon in the past 12 months. Notably, higher-income Americans are now shopping frequently at Amazon and, as household income increases (up to $250,000+), so does Amazon’s penetration of these upscale household segments.
    • Considering how much Amazon’s large customer base overlaps with the other major retailers, these others really need to think strategically about how they will compete, as Amazon is making a concerted effort to target all consumers — and especially upscale consumers — with virtually all types of products and services.
    • Amazon recently formed a partnership with Wells Fargo & Co. to begin offering interest-rate discounts to select shoppers as part of its “Prime Student” services. Is Amazon slowly moving into the financial services market? Only time will tell. However, to the extent that Amazon’s student-loan program is successful, it’s an interesting way to build relationships with Millennials over time.
    • Almost two thirds of Amazon’s customers have reported they now shop at Amazon at least once a month and, as household income increases, so does the probability of an Amazon customer’s shopping there once a month or more often.
    • About four in ten of Amazon’s customers (compared with about a third in our prior survey) now report they are enrolled in the Amazon Prime service, the program that makes it very convenient for Prime customers to make purchases and offers other valuable customer benefits at no additional cost, such as video streaming, unlimited music streaming, unlimited photo storage, free e-books, etc.
    • When asked to compare Amazon with other stores at which they shop, almost three quarters of Amazon’s customers rate Amazon better than the other stores. Among the twelve customer-reported benefits that Amazon delivers, detailed in the full report, are one-stop shopping, its wide breadth of products and services, competitive pricing, and the convenience of shopping online from their home or office. Notably, these customers didn’t list only one benefit when probed about what makes Amazon better; rather, they tended to list two or more benefits.
    • Looking at the luxury and affluent marketplaces (one of the markets we highlight) — in which Amazon has not yet done exceptionally well, as very few luxury brands have agreed to sell their offerings through Amazon to date — about a quarter of Amazon’s customers report they bought one or more luxuries in the past 12 months from any retailer in the United States. What happens if Amazon eventually launches a luxury website targeting upscale and very-high-income consumers? It already has its own fashion site that currently does not target affluent customers with more upscale and luxury offerings. Also, earlier this year Amazon quietly launched seven of its own men’s and women’s fashion labels. Time will tell what’s next.
    • Finally, on the negative side of the equation, counterfeiting — a concern for all luxury brands — has now become a critical challenge for Amazon to address. Birkenstock, a major brand, recently notified Amazon that it will no longer sell its goods on Amazon as of January 2017 because they claim that counterfeit Birkenstock goods are now being sold through Amazon. Not only is counterfeiting an issue for the brands; we wonder how customers will feel when they realize that Amazon delivered counterfeit goods to them.

The following seven topics about Amazon’s American customer base are highlighted in this Insights brief, which includes many more details than this summary:

      • Amazon shoppers by household income
      • Frequency of shopping at Amazon in prior 12 months
      • Enrollment in Amazon Prime
      • Amazon compared with other stores shopped
      • Selected reasons for Amazon customers rating Amazon better/same/worse compared with other stores shopped
      • Amazon and the luxury market today:
        • Incidence of purchasing luxury products or services in past 12 months
        • Selected luxury products or services purchased in past 12 months

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Amazon: Disruption and Innovation in the Luxury Markets

Amazon: Disruption and Innovation in the Luxury Markets
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