OrderWise in July 2021 - v21.7
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It is safe to say that over the past decade, Amazon has become the dominant force of 21st century retail. During this period, they have orchestrated the ongoing evolution and disruption of the retail market, both online and in physical stores, in what is better known as “The Amazon Effect”. This continuing dominance has been highlighted in some quite startling statistics released this month, that shows the extent to which Amazon has become the go-to online retailer for today’s consumers.
According to a new study conducted by market research firm Mintel, almost 90% of UK shoppers now use Amazon and 40%, the equivalent of around 15 million people, are also subscribed to Prime. Further to that, 70% of people say Amazon is the first online retailer that they go to when looking to purchase something. These staggering figures really underline the grip that Amazon has over the UK retail sector today and the big question is, what can other retailers do to level the playing field?
For many of the bigger retailers, the preferred solution seems to be ditching the Amazon marketplace in favour of other sales channels. There is reasoning to this, as it is no secret that Amazon utilise their marketplace sales data to analyse product trends and determine which products they themselves should start selling. They often then undercut the market on price, meaning the biggest competition for those selling through Amazon ends up being Amazon themselves.
Top retailers are realising this is the case and it is no surprise to also see figures released this month that Amazon has experienced a year-on-year drop in top retailers using their marketplace. According to the 2019 Retail Performance Report, 36% of the top 250 retailers are now selling on third party platforms such as Amazon and eBay, a drop from 39% in November 2017. Although more of the bigger retail names will be expected to move away from Amazon marketplace trading this year, this is certainly not the answer for all businesses.
With over 70% of UK shoppers choosing Amazon as their first point of call when purchasing a product, the Amazon marketplace can still provide an essential platform for raising product awareness and driving higher sales volumes for many retailers. By using the right listing and product management tools to help them remain competitive on price and win the Buy Box more often, retailers can still make a success of their Amazon trading.
So rather than abandoning the Amazon marketplace, retailers should instead look at what is making Amazon and their Prime service so enticing to consumers – the speed of their fulfilment.
Speed of fulfilment has always been a key concern when it comes to online shopping, with consumers still striving for the perfect balance between convenient purchase and quick receipt of goods. Shoppers want to be able to buy their desired products from anywhere at any time, whilst also receiving products as immediately as they would if they were to buy in-store.
This has made next-day delivery and late cut off times such a key perk of Amazon’s Prime service and it is unsurprising to see that the Mintel report shows well over half (66%) of those subscribed said that they use this feature regularly. You can then combine these findings with recent data from GFS and IMRG who found 40% of consumers said a lack of convenient delivery options was one of the main reasons they abandon their online purchases.
So why is it that Amazon can offer these services and yet other retailers struggle? Well one of the key reasons is Amazon’s use of robotics to lower costs and drive warehouse efficiency.
Most retailers have seen Amazon distribution centres in operation, either in-person or through video clips, with their Kiva robots used to bring products to dedicated picking stations for fast one-touch fulfilment. Now Amazon aren’t investing in this technology because their distribution is of the right scale, they have the required funds in their bank account or for their own personal vanity – they are investing in Robotics because they work.
If you think of most standard warehouse operations, there is a reliance on staff roaming around aisles to pick stock for orders. Whether picking on hand held devices or still on paper, on their journey staff might stop for a catch up with colleagues, walk back on themselves to collect stock they have already passed once, or even end up at the wrong bin location before realising their mistake and moving on.
This results in a highly inefficient way of working, with recent studies finding that on average, 50-70% of warehouse staff time is spent travelling between bin locations rather than doing the job they are employed to do – picking and fulfilling orders. This level of inefficiency is not something that is tolerated in any other area of business operations, so Amazon are right to have challenged this way of working through the utilisation of robotics technology. By increasing their rate of fulfilment as a result, Amazon have altered consumer expectations and set the standard for what shoppers now expect from online retailers – “The Amazon Effect”.
So, if retailers want to compete with Amazon, instead of looking at how they can regain the sales advantage on the front-end, they should instead be firstly looking at their back-end fulfilment processes and where picking speeds can be improved. Although robots won’t be suitable for all types of operation, for those that will see the efficiency and cost-saving benefits upon further investigation, finding an affordable robotic solution should be made an essential part of medium term planning. If retailers fail to keep up with this emerging technology and innovate more than their competition, then they risk getting left behind and further facilitating Amazon’s retail supremacy.
Through investing in better warehouse automation, retailers will give themselves the ability to better compete with Amazon on the key part of their offering that pulls in consumers – their delivery service. By harnessing the power of robotics technology, retailers can optimise their warehouse space, maximise pick rates, increase order throughput and ultimately hasten their fulfilment.
If you would like to know how our revolutionary robotics technology can help your business processes, contact us on 01522 704083 to speak to one of our business consultants today.
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