CHICAGO — E-commerce is taking a bigger share of retail sales — about 13% last year — but Amazon continues to take a larger cut of that share for itself, accounting for almost 42% of U.S. online sales last year, according to data discussed by Internet Retailer Editor-at-large Don Davis Wednesday at IRCE.
Still, four “bricks-and-clicks” retailers reported stronger online sales increases than Amazon last year, with Walmart at 61.5% growth (though much of it via acquisition), Lowe’s at 34.3%, Best Buy at 27.2% and Target with 24%, according to Davis’ data.
Meanwhile, among Internet Retailer’s Top 500 online retailers, sales for retailers listed No. 201 through No. 500 collectively increased about 25% last year, suggesting sales growth is well within reach for smaller e-commerce sites even as Amazon continues to dominate, Davis said.
Make no mistake about who is the top dog in the e-commerce world. It’s still Amazon, and by a wide margin. The irony of this situation is that Amazon doesn’t need to win at retail in order to be successful in its own right. Globally, as Davis pointed out, its e-commerce efforts are still losing money, but it can afford to keep losing money by spending outrageously on express delivery schemes and customer acquisition, and fight brutal price wars in the market.
But, what other e-commerce ventures, whether digitally-native upstarts or projects birthed by brick-and-mortar giants, have going for them is that the e-commerce sector still hasn’t fully matured, according to Davis. That’s evidenced by Internet Retailer’s data showing companies in the bottom half of its Top 500 are growing faster than others.
So, what can a small e-commerce firm do to beat the e-commerce giant at its own game? Well, perhaps they shouldn’t even try. Amazon, Davis noted, already has many of the most affluent consumers locked up as members of its Prime program. A significant chunk of Prime member households make more than $100,000 a year, according to Internet Retailer’s data.
"We see a lot of mid-tier companies that are succeeding by not competing with Amazon," Davis said. He called out Glossier, the rising beauty brand that leans on celebrity influencers, pop-up stores and other schemes, as well as wedding registry start-up Zola, and several others. The data also showed that a set of 21 digitally native brands like Bonobos, Warby Parker, Casper and others experienced more than 55% revenue growth as a group last year, well above the 18% growth of the rest of the Top 500.
"To succeed, more online retailers will have to make money earlier in their lifecycles by focusing a profitable niche, and finding services that Amazon doesn’t offer," Davis said.
Another speaker at IRCE, best-selling author and entrepreneur Seth Godin, said it just as well in an earlier keynote speech Wednesday: "Seek the smallest viable market, and build from there," he said. "Find small threads of interest and try to amplify them and repeat them. Amplify and repeat."