In its second-largest acquisition, Amazon buys the company for $970 million.
But an IRCE speaker says the behemoth e-retailer faces its own vulnerabilities.
It seems a reasonable bet that many retailers at the Internet Retailer Conference & Exhibition 2013 in Chicago have at least semi-regular nightmares about the e-commerce beast known as Amazon.com Inc.
If so, they should be happy to hear that the No. 1 merchant in the 2013 Internet Retailer Top 500 Guide has at least a few vulnerabilities. That’s what Colin Sebastian, an analyst for private equity firm Robert W. Baird & Co., said this morning during the first part of a pre-conference workshop entitled “Amazon & Me.”
First, the bad news for e-retailers and web technology providers not named Amazon, as spelled out by Sebastian:
• Amazon continues to focus on low prices and fast shipping—Amazon Prime offers free two-day shipping for $79 a year—as it strives to capture ever more loyalty from online shoppers.
• Amazon’s technology investments—its technology and content spending jumped 46.3% year over year in the first quarter to $1.38 billion—helps it boost its retail prowess.
• Amazon’s growing focus in such areas as advertising and Amazon Web Services—it provides “cloud” or Internet-based computing and data storage services—are helping to subsidize its e-retail operations, which Sebastian described as “near break even.”
All this presents an ongoing challenge for many retailers competing with Amazon for e-commerce dollars, much less any merchants that stray too far into Amazon’s territory, said workshop chair Scot Wingo, CEO of ChannelAdvisor Corp., which helps retailers sell on marketplaces operated by Amazon, eBay Inc. and elsewhere. “There have been companies that have competed successfully against Amazon,” he said, using shoe and clothes e-retailer Zappos.com as an example. “Unfortunately, most of them have been acquired by Amazon.”
That said, Amazon has an Achilles’ heel or two, Sebastian said.
That includes local e-commerce capabilities such as presenting in-store inventory information to online shoppers, a tactic that eBay and Google have worked on. “Both of those companies can be very successful there,” he said. “Amazon will be somewhat distracted by building distribution centers [across the country], and will not be able to build relationships with local stores.” (Wingo says Amazon operates 46 warehouses in the United States, and will have 54 by the holiday shopping season.)
Sebastian also says that Facebook and Facebook marketers could have an advantage over Amazon, given all the data the social network collects about users, which Facebook is working to translate into more precise online targeting of consumers.
As well, Sebastian didn’t rule out that Google could undercut Amazon for the price charged to retailers to sell via an online marketplace. Earlier this year, eBay launched a new marketplace pitch, claiming its new pricing makes it more attractive than Amazon’s marketplace. Google—which, relatively speaking, is still “scratching the surface” of e-commerce, Sebastian says—could potentially offer its own marketplace for sellers, and could perhaps charge less than Amazon charges sellers. “My assumption is that Google over time will see some inevitability in becoming more of a marketplace,” he told attendees.