retail news in context, analysis with attitude

There were a couple of stories about Amazon.com that were reported over the weekend…

• The New York Times reported that 15 years after Jeff Bezos launched Amazon.com as an online bookstore, “Amazon is set to cross a significant threshold. Sometime later this year, if current trends continue, worldwide sales of media products - the books, movies and music that Amazon started with - will be surpassed for the first time by sales of other merchandise on the site. (That transition already occurred this year in its North American business.)

“In other words, in an increasingly digital age, Amazon is quickly becoming the world’s general store. Alongside the books and CDs and DVDs are diapers, Legos and power drills, not to mention replacement car clutches and more arcane items like the Jackalope Buck taxidermy mount ($69.97).”

And, the Times writes, “Amazon has been gobbling e-commerce market share since 2006, taking away customers from eBay in particular. But its advances are shaking up the entire retail world. Giants like Wal-Mart are warily replicating elements of its strategy, while small independent retailers in sporting goods and jewelry now worry their fate will be similar to that of small bookstores and independent video rental shops (remember those?).

“Amazon’s expansion strategy has allowed it, almost alone among retailers, to thrive during the recession, even while its own media business has stagnated.”

The piece notes that Amazon’s near ubiquity in so many categories has the effect in many cases of depressing prices in many of the venues that compete with it, which has put the onus on both brands and stores to find new ways to do battle. In some cases, brands (such as Nike) refuse to sell their products through Amazon; in others, retailers are having offer products and services that the online retailer cannot compete with.

But perhaps the headline on the Times piece puts the question most succinctly:

“Can Amazon Be Wal-Mart Of The Web?”

• Amazon announced that it is creating a new entity called AmazonBasics, described as a “private-label collection of consumer electronic ‘basics’ created for customers who want exceptional value. The AmazonBasics line currently includes audio video cables and blank DVD media, with additional accessories and other items to be added in the coming months … All AmazonBasics products ship in Amazon.com’s Frustration-Free Packaging, which is easy-to-open and made from recyclable cardboard, alleviating plastic clamshells, wire ties and excessive packaging.”

Paul Ryder, Amazon’s vice president of Consumer Electronics, says that the company “saw an opportunity to create a line of consumer electronics basics that combine quality and low prices for an overall focus on value.”
KC's View:
The Amazon-Walmart question is an interesting one, especially since Walmart recently announced it will start allowing outside retailers to sell on its website, and Sears made the same announcement over the weekend. (Of course, Walmart has a big advantage over Sears because people actually go to its site…) And Amazon certainly is strengthening its battlements, with expansion of its private label as well as its recent acquisition of Zappos.com.

There are a lot of parallels between what Walmart and Amazon are doing…and it strikes me that if there is a major league heavyweight retail battle coming, it will be between these two behemoths.