Through time, critical claims and reservations about business practices of the online retailer Amazon are flowing in news stories, social media, and other channels. However, consumers who are accustomed to shopping online, particularly savvy Amazon customers, seem to be little impressed, and continue to shop with Amazon unabated. When it comes to personal behaviour, consumers do not necessarily let ethical and moral issues interrupt their preferred habits. Even if consumers are not indifferent to transgressions by Amazon, they mostly demand respecting their values as well as fairness by the company while they continue shopping on its websites and apps. Consumers simply appear to have learned to live with Amazon.

The e-commerce giant Amazon (including the US-based Amazon.com website, country-extension websites, and apps) has become a major force, dominating online shopping over a range of categories today (e.g., computers & accessories, electronics and media, fashion, health & personal care, beauty, home & kitchen, music, games, and of course books). Amazon already has a foothold also in food (grocery), although its market share in this domain online is still small. Furthermore, Amazon also has physical presence in that category (e.g., Amazon Go automated smart shops, and Whole Foods supermarkets), and in its more ‘traditional’ categories of books, music and games (i.e., Amazon Books stores in the US). Amazon persistently works to link between its online and offline shopping options, for making the boundaries transparent and creating an integrated shopping experience. Almost from its first day, Amazon has built its strengths through the development and application of advanced technologies for managing, analysing and leveraging customer data. The e-commerce retailer has created a strategic competitive advantage around customer knowledge, which to a great part gained Amazon its dominant position, right to our days.

Yet, Amazon has also solidified its market position by using less agreeable tactics to remove smaller competitors, sometimes innovative and disruptive ones, from its way, to ensure its prominence in different categories. The great disrupter of retailing in its earlier years, has later displayed, not very surprisingly, less tolerance to new disrupters. Amazon has been maintaining as branded channels some competitors that it acquired, at least for a while (e.g., Zappos for shoes, Book Depository); but with other competitors, the company submerged their products or services into its own network; and yet other ‘annoying’ challengers have been defeated or taken over by forced submission (including through price wars, e.g., Diapers.com by Quidsi )[1, 2]. Just recently (April 2023) Amazon decided to put an end to the UK-based Book Depository, liked by shoppers for its pricing and (free) delivery terms, and for providing access to less common or even rare books and digital editions of out-of-print books. Amazon has already diluted the advantages of Book Depository during the time it owned the online book retailer, until it made it redundant; earlier it had doomed Diapers.com to a similar destiny [2].

Amazon has also been criticised for giving precedence to its private labels over brands from other companies offered on its platform [1]. Amazon particularly pushes hard its own technological devices (e.g., Kindle electronic book reader, Echo smart speaker powered by AI of Alexa). In matters beyond retailing, concerns have been raised about Amazon’s record on the environment and labor issues (e.g., treatment of its employees in fulfillment centre facilities)[1].

E-commerce is a core business area of Amazon, but the company is engaged in several other areas, the most significant of them is in data warehousing (cloud) and infotech services (Amazon Web Services: AWS). In addition, the company is engaged in physical food retailing, as mentioned above, in film production for TV and cinema, in TV streaming, and the operation of its Amazon Prime customer club (adjunct to it is the streaming programme by subscription, Amazon Prime Video)[1, 2]. Three acquisitions by Amazon are noteworthy: (1) The Washington Post (2013) in news publishing (print and online) — gaining Amazon a foothold to influence politics and regulation; (2) MGM Studios (2021) — strengthening Amazon’s position in entertainment and the ability to independently produce video content for its streaming service; (3) iRobot (2023) in home cleaning robots (Roomba) — helps Amazon to broaden its selection of smart home devices, yet furthermore provides the company access to valuable but possibly sensitive information inside customers’ houses (the matter is under scrutiny in the US and the UK regarding data privacy)[2].

Still, there are advantages that make Amazon attractive to shoppers and are hard to argue with: not just the affordable, lower prices asked for products, but also convenience of shopping [3]. In recent years, and especially during the Corona pandemic lockdowns, convenience has become even a stronger factor in attracting shoppers. A typical snag in shopping online, no less so on Amazon, has been the addition of delivery costs for the filled shopping basket in the check-out stage, which could make the gain from lower prices of products diminished (e.g., with too few products in the basket, for long distance or international deliveries). Prime-member customers can be relieved from delivery costs to obtain products they selected in their shopping basket; that is, after putting aside an annual membership fee, which is worthwhile as customers buy more frequently. The Prime programme has a strong impact on shoppers, driving their loyalty (48% of Prime members purchase at least once a week compared with 13% of non-members). They even particularly look for products that are eligible to Prime free delivery [3].

Prior to the pandemic (2019), a study by Tinuiti (formerly CPC Strategy)[4] found that Amazon shoppers remain price conscious and continue cross-checking prices (72%). Furthermore, price was the primary decision factor (41%), followed by convenience (23%), and the number of ratings or reviews (16%). Nearly 60% of respondents said they trust the reviews on Amazon platform. Reviews are important, but shoppers seem to rely more heavily on the content provided by marketers about their products, and the details and reliability of the information is crucial. Shoppers on Amazon have shown concern about product counterfeits found on the platform (15%) although the majority said just ‘maybe’ because they were not personally affected (56%, [4]). The issue remains the quality and persuasive power of information on the plenty of products offered on Amazon. Marketers are encouraged to invest greater thought and effort in creating and managing first-class product and brand content on Amazon webpages (‘A+’ content as rated by Amazon). Researchers Bleier, Harmeling and Palmatier identified four critical dimensions of content quality: Entertainment, Social Presence, Informativeness, and Sensory Appeal. The weight to be given to each factor or dimension may depend on the product presented; in most cases entertainment would not fall in importance from informativeness, and for certain products social presence or sensory appeal may prove especially relevant (2019, [5]).

Despite continuing controversies about practices of Amazon, consumers exhibit strong preference (89%) for shopping on Amazon over other platforms (in 2019: 54% of respondents strongly agree that they are more likely to shop on Amazon + 35% who somewhat agree, [3]). This preference manifests in specific aspects of consumers’ shopping behaviour. Amazon shoppers search for new products more on Amazon than search engines like Google; they are likely to start their shopping journey on Amazon (66%) or return to Amazon to complete their purchase process (74%), thus they may actually follow through their journey with Amazon [3]. According to the study of Tinuity (CPC Strategy) Amazon shoppers tend to be looking into Amazon to buy new products or brands (23% frequently, 51% sometimes), but more interestingly, consumers indicate (52%) they also feel more confident to try new products found on Amazon [4]. A more recent study (2022) reports that 61% of US online shoppers start their product search on Amazon, before search engines (e.g., Google, MS Bing; 49%), and followed by Walmart.com (32%)[6]. Furthermore, it was also revealed in Tinuity’s study that Amazon shoppers like to browse Amazon leisurely for interesting new finds with no particular product in mind (58% occasionally + 10% frequently); yet, nearly a third (32%) browse only while knowing what they are looking for [4].

Amazon started with books, but it is not a category of primary destination that shoppers come for to Amazon in recent years. Top categories in purchasing more frequently on Amazon as of 2019 [4]: Electronics, Computers & Office (35%); Beauty & Health (14.7%); Clothing, Shoes, Jewellery & Watches (14.4%), Home, Garden & Tools (10.5%). Neither books, nor music and games are mentioned specifically (probably mixed in Other). Amazon has acted vigorously over the years to pressure small and independent publishers to print their books with Amazon or to limit their activities unless they agree to its terms (e.g., on titles and pricing). This practice hurt particularly the availability and marketing of specialist books, rare books and books in less frequently-spoken languages. Amazon even established its own publishing house. Given that in addition, it took over or pushed out of market online retailers who had advantage in selling the less common books, Amazon reduced the options for interested readers and made itself de facto the sole source for buying those books online [2]. On the other hand, shoppers on Amazon can benefit from a friendly and effective smart system that provides helpful recommendations for relevant books related to the books they are already browsing and considering for purchase (based on other readers’ interests). The recommendation methodology is a strength of Amazon and should be useful also in other types of products.

The research findings on shoppers’ behaviour publicly available that are cited above correspond to a period just prior to the coronavirus pandemic (2019). Nevertheless, the restrictions enforced during the pandemic crisis mainly deepened tendencies to shop online, and expanded the circles of consumers who participate in online shopping. In hard times as the pandemic crisis, the stronger, more dominant players in the market, like Amazon, usually get to gain more than smaller competitors. The following indicators suggest that the position of Amazon remained strong, and perhaps better, in the past 3-4 years:

• The annual revenue of Amazon started climbing more steeply from ~$100bn in 2016 to ~$300bn in 2019, and then continued rising during the tough years of the pandemic to ~$500bn in 2022 [2]. Note: e-commerce and AWS are main contributors to Amazon’s revenue, both services have likely become more in need during the pandemic by consumers and firms, respectively.
• According to the Retail 100 Annual Brand Value Ranking by Brand Finance in 2022, Amazon retains its title of the most valued brand at $350.3bn, after an increase of 38% in value year-on-year [7].
• In the ’50 All-Stars’ ranking list of admired companies among business people by Fortune magazine, Amazon continues holding the second top position (Apple 1st, Microsoft 3rd) in 2022 [8].
• The (adjusted*) market price of Amazon’s share on Nasdaq (AMZN) climbed from $20 to $100 between 2015 and 2018; after fluctuating between $80 and $100 until February 2020 (start of the pandemic), the share value steeply rose to a level of $160-$180, where it remained until late 2021; during 2022 the share commenced, however, a ‘bumpy’ slide down, back to $80-$100, but in the first half of 2023 it recuperated to $120. (* adjusted according to share split of 1:20 in June 2022).

In its commentary, Brand Finance summarises eloquently the position of Amazon:

Value has always been a big driver of consumer behaviour, but Amazon also delivers a slick shopping experience (‘excellent websites/apps’), and this powerful combination is irresistible for many consumers, even those who question Amazon’s values and broader corporate reputation.

Brand Finance (Brandirectory), Retail 100 Brand Value Ranking 2022, Annie Brown (general manager)

Amazon is a powerhouse in e-commerce, accompanied by a range of additional technological services and devices; the additional activities are related to or support its e-commerce activities, but may also stand on their own. Its benefits to customers, and values they therefore create for them, are based on various functionalities, assistance and guidance (e.g., recommendations) they offer to users of its platform and services (e.g., online shopping, video streaming), which in recent years are enhanced by more advanced AI technology. However, Amazon’s record is inflicted by less favourable practices which critiques frequently bring to public attention and complain about. Yet, the reputation of Amazon in its areas of business appears to be solid enough to tolerate the criticism, taking the time to fix its conduct. Shoppers who have been more unhappy, and less forgiving, may have already quit using Amazon’s services, feeling more free to critcise it, whereas most customers who continue relying on Amazon’s services in shopping and beyond, perhaps take a deep breath, but then go on, business as usual.

Ron Ventura, Ph.D. (Marketing)

References:

[1] “Break Down the Components of Amazon’s Retail Business“, TechTarget (Sarah Neenan), 5 May 2020.

[2] “That is How Amazon Conquered … Everything”, Dafna Maor and Ruti Levy, MarkerWeek –TheMarker on Weekends (origin in Hebrew), 5 May 2023, pp. 24-25.

[3] “89% of Consumers Are More Likely to Buy Products From Amazon Than Other e-Commerce Sites: Study”, Forbes.com, Kiri Masters (contributor), 20 March 2019 (The cited study was conducted by research firm Feedvisor: The 2019 Amazon Consumer Behavior Report).

[4] “The 2019 Amazon Consumer Shopping Study: How Shoppers Browse and Buy on Amazon“, Tinuity (formerly CPC Strategy at time of publication*), February 2019 (Note 1: The survey was conducted by Survata, among 2001 respondents who purchased on Amazon in the past six months; Note 2: In August 2019 CPC Strategy, a digital retail and marketing agency, re-organised and was renamed Tinuity).

[5] “Shopper Engagement: What It Takes to Win on Amazon“, University of Washington (Sales & Marketing Strategy Institute), 2019 — introducing the original academic article: Creating Effective Online Customer Experiences; Alexander Bleier, Colleen M. Harmeling, & Robert W. Palmatier (2019), Journal of Marketing, 83 (March), pp. 92-119.

[6] “Over 60% of US Online Shoppers Start their Product Search on Amazon“, Insider Intelligence with eMarketer, 9 August 2022 (citing Consumer Trends Report by Jungle Scout, June 2022).’

[7] “Brand Finance Retail 100 2022: American and European Retail Brands Bounce Back Better as Values Increase Post-COVID”, Brand Finance: Brandirectory (Annie Brown, general manager), April 2022

[8] “The 50 All-Stars: The World’s Most Admired Companies”, Fortune, February-March 2022, pp. 50-52 (in addition to the ranking across industries, companies are also assessed by peers within each of 9 industries).