Breaking News

Amazon: Retailers Must Adapt To Survive

Stock MarketsJan 14, 2014 08:00PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
Amazon: Retailers Must Adapt To Survive

By Nat Rudarakanchana -, Inc. (NASDAQ:AMZN) specialist and ChannelAdvisor CEO Scot Wingo told retailers at New York industry trade show that they needed a plan for working with or against the e-commerce giant, after presenting a startling portrait of Amazon’s ambitions and growth to date.

Wingo estimated that Amazon owns 46 U.S. warehouses already – or in Amazon jargon ‘fulfilment centers’ – with eight under construction. The Seattle, WA-based giant owns 102 warehouses either built or now under construction in total internationally, he added.

That’s a significantly higher total than what other industry analysts and retailers have estimated, according to Wingo, who has studied Amazon since 2000 and who advises retailers on how to sell their wares on Amazon’s third party marketplace. ChannelAdvisor publishes widely watched e-commerce sales data comparing Amazon and eBay Inc (NASDAQ:EBAY) sales, alongside sales derived from Google Shopping (NASDAQ:GOOG) or search engine results.

Amazon doesn’t typically specify how many warehouses they own, though their executives consistently pinpoint this as an area for further investment. Analysts believe that the company has ploughed much of its revenue into expanding its distribution network in recent years.

Amazon has systematically placed its U.S. warehouses within 100 miles of densely populated metropolitan areas, said Wingo, who has overlaid census data to suspected or known Amazon sites.

Small retailers could simply join Amazon and use their successful marketplace, which broke records in 2013, said Wingo. They could try to beat Amazon at their own game on scale and shipping logistics, though Amazon tends to acquire smaller rivals it sees as competitors, he added, citing shoe seller and

Certain international markets, where Amazon has yet to make a strong impression, could be fruitful areas for global retailers, he continued. Brazil, India and Russia are candidates for those markets. Russia’s e-commerce market has been seen as especially promising, though India’s market is dominated by homegrown marketplace Snapdeal. About 60 percent of Amazon’s revenue comes from its domestic U.S. market.

Social media and mobile commerce are two other frontiers where retailers can at least keep pace with Amazon, said Wingo.

But one clear option is to partner with Amazon’s large rivals, like Google or eBay. eBay in particular has offered same-day local delivery via eBay Now, a nut Amazon has yet to crack, alongside in-store pickup partnerships with Best Buy Co., Inc. (NYSE:BBY) and AutoZone, Inc. (NYSE:AZO).

Upstairs at the National Retail Federation’s 2014 Big Show, where Wingo presented, eBay representatives enticed retailers with their products, explaining how they could boost online traffic and sales and cater to shoppers demanding delivery.  

There aren’t regular official metrics on these eBay initiatives yet, which both rolled out in August 2012. eBay is expected to roll out its delivery service, seen as an e-commerce challenge to Amazon, to 25 cities in 2014, however, up from its handful of cities currently.

Google Shopping’s product listing ads, on the other hand, an alternative to text-only Google Ad Words  has experienced explosive growth since its introduction. Even eBay invested heavily in Google Shopping marketing over the holiday season 2013, wrote Wingo in an earlier blogpost.

“Amazon has raised the bar so high – everyone else is trying rapidly to catch up to what they’re doing, and trying even to outflank them,” Wingo said in his speech, citing renewed e-commerce interest from major tech companies like Google, or defensive moves on cloud computing by companies like International Business Machines Corp. (NYSE:IBM).

Many companies, including international giants like the UK’s Tesco PLC (LON:TSCO) or Japan’s Rakuten Inc (TYO:4755) have also opened marketplaces where small businesses and individuals can sell their wares, imitating Amazon’s immensely profitable 2006 tactic.

“We’re all in this war that Amazon is kind of raising the stakes on, and it’s an arms race,” he said. In his talk, Wingo underlined Amazon’s entry into low profit margin industries, like groceries with its AmazonFresh service, with its willingness to swallow narrower profit margins relative to competitors.

Amazon’s growing empire, which includes business-to-business sales of industrial wares (Amazon Supply), advertising products (Amazon Product Ads) and even lending for its vendors (Amazon Lending), may not comfort your average brick-and-mortar retailer much.

Oddly, Rick Caurso, CEO of shopping mall operator Caruso Affiliated, opened the retail conference on Sunday by telling retailers that the traditional American mall is “dead”, and must be seriously re-invented.

“I’ve come to the conclusion that within 10-15 years the typical U.S. mall, unless completely reinvented, will be seen as a historical anachronism,” Caruso said in a keynote speech, according to a news release.

Amazon is expected to report its quarterly and full year results in coming weeks. UBS AG (VTX:UBSN) analysts upped their price target for the share from $400 to $465 on Jan. 13, citing strong Kindle Fire HDX tablet sales, strong Amazon Prime membership and a bright 2014. They expect Amazon’s North American revenue to grow 27 percent for the quarter to $15.5 billion and its international revenue to grow 18 percent from last year.

Amazon: Retailers Must Adapt To Survive

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email