Almost three-quarters of U.S. retailers fear being outpriced by Amazon, according to a new study of 500 retail executives. That compares to just under half being concerned by traditional brick-and-mortar retailers.
The question is: why aren’t the other 29% worried?
(Photo by DENIS CHARLET / AFP)
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The study by pricing optimization vendor ActiveViam comes on the same day that that U.S. Treasury Secretary Steven Mnuchin said that Amazon has “destroyed the retail industry across the United States.” Those are strong words as the attorney general is looking into antitrust violations across the tech industry.
Last year Amazon took close to half the business in e-commerce in the U.S. with sales of over $230 billion (although not all of those are in the retail space) and is likely to keep increasing that share.
It’s important to note, however, that even if all those 230 billions were made in retail sales, it would be under 5% of all U.S. retail spend.
In other words, significant, but not exactly monopolistic — at least in the overall retail ecosystem.
But its dominant digital position is a tough challenge for competitors. Amazon has become the default product search engine for many, and its Amazon Prime program — plus the fact that it has hundreds of millions of credit card numbers on file — make it the lowest-friction retail option to many.
It also has far more mobile customers than any other retailer. (Full disclosure: I have consulted for TUNE in the past.)
“It is no surprise traditional retailers are worried about being outpriced by Amazon,” says Kathy Perrotte, Managing Director and Co-Founder at ActiveViam. “From its wealth of customer data to its vast product offerings, Amazon is able to fluctuate their prices very intelligently and very quickly.”
That speed is a problem, because traditional retailers can’t keep up.
61% of them said they can’t optimize pricing quickly enough to maximize competitiveness and changing supple-and-demand scenarios.
Other challenges include data quality, with 55% saying their own data on their own products was of insufficient quality, and aligning pricing between online and offline retail outlets, with 40% admitted to issues there.
Antitrust action seems likely to come to the tech industry, although this will be slow and strongly challenged by the tech giants. Apple has faced multiple inquiries abroad, and presidential hopeful Elizabeth Warren has publicly targeted Facebook, Google, and Amazon.
Whether Amazon is the first target of the current administration or not remains to be seen.
Amazon CEO Jeff Bezos is certainly not on Trump’s Christmas card list, but Amazon has just hired a lobbyist with close ties to the president.
The full report is available from ActiveViam’s website.