Amazon has always been under threat from its competitors like Walmart, as the battle for dominance of e-commerce continues to rage, but none of these competitors posed a real danger to Amazon. While this remains a fact, the threat doesn't seem to be real.
The fact that the threat isn't materializing in the way it was being expected, it made Amazon believe that it's just one colossal competitor they're up against but it’s actually a whole collection of smaller e-commerce venues.
The model of direct sales to consumers has already made an impact
According to the most recent research by the PR firm "Diffusion", consumers have shown propensity towards making direct purchase from the manufacturer or brand. By doing so, they're bypassing middlemen like Amazon.
While Amazon makes considerable efforts to keep their consumers satisfied, an average consumer will still try to find a more natural way to get what they need. Nevertheless, these consumers only made a few purchases directly from the manufacturer or brand, which doesn't endanger Amazon in any way.
That aside, the statistics indicate that the frequency of direct-to-consumer (DTC) selling decreased when compared to last year, even though it was expected to increase. But the number of DTC options are continuously rising, thus increasing discretionary spending exponentially. With all this in mind, it isn't hard to see that the DTC option is the real threat here. The best example is what Nike did. The biggest athletic apparel brand severed the ties with Amazon to shift its focus on its retail sales.
When a giant company like Nike makes such a move, other brands will follow for sure. They will try to do the same by handling e-commerce affairs on their own. Still, it's not the major brands that are disruptive. It's the other DTC brands and hundreds of them that never established a real relationship with Amazon. These brands could be weighed as the most significant challenge put before the largest e-commerce platform in the world. While these brands didn't quite make an entrance with a bang into 2019, they're persistent in finding their way. Their goal is clear - to find a way to nudge the consumers to purchase directly from their venues. This persistence has been helping these DTC brands have a much better understanding of how things work.
The best example of this understanding is the realization that relying on Facebook ads isn't quite a cost-efficient strategy as they were led to believe. These brands are trying other sales-driving and cost-effective options on alternative social media platforms such as Snapchat. Snapchat is turning out to be the best option for DTC brands. DTC brands have found out that they have much better chances of succeeding if they form partnerships.
The DTC industry is evidently making progress
It is quite visible that the DTC industry is moving on the path of continuous growth which is very much measurable : look at Shopify, it's the best example. The eCommerce platform was designed to help brands sell online without having to depend on Amazon's ecosystem. The industry made $2.9 billion worth of sales in the period between 2019 Black Friday and Cyber Monday. The platform recorded a 61% increase in sales. While this isn't anything significant when compared to Amazon's figures, it is a significant figure in the eyes of the DTC industry.
Instead of those $2.9 billion going to Amazon, they were up there, free for grabs to any brand that knew how to seize them.
DTC is expected to accelerate throughout 2020
According to the survey made by Diffusion, DTC purchases will grow 20% over a period of 5 years from 2020 to 2025.
But considering the fact that less than 10% of nations' retail comes from DTC shopping, it's hardly a thing that could throw a giant such as Amazon on its knees. Also, times are changing and so are the consumers. They expect more from brands.
New brands are already required to show higher levels of maturity when it comes to customer service, support, and relationship. Consumers demand personalized attention, and they are not likely to fall for the DTC industry unless they start seeing these products in stores before they decide to purchase them. But, this growth estimate for DTC is influenced from the history of customer experience by Amazon. As, it hasn't paid much attention to the needs and wants of their consumers. DTC brands have done precisely the opposite, and they have done so much in the past few months.
Most importantly, DTC brands didn't make the same mistake as Amazon did when it comes to realizing how important it is to build trust with their consumers. DTC brands have discovered that consumers are more likely to buy from brands they know and trust.
New brands bring new ways
It's the connection between DTC brands and consumers that is making them come back. Brands that make an extra effort to provide their customers with excellent relationships and experience are more likely to see an increase in sales.
On the other hand, customer relationships, service, and experience aren't really the stronger side of Amazon. This makes it much harder to see what the exact scope of the threat to its business is.
The extent of the threat, as well as speed and scope, can be measured, even though these factors are still in flux. All of these facts lead to just one conclusion: it's more than evident that other brands, along with consumers, aren't as dependable on Amazon as they used to be.
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