Each week I share the top news that impacts brands and merchants who sell on Amazon. My digest for this week includes new estimates for how many consumers use their phones to comparison-shop while in store, Amazon dominates wallets in the UK as well as the teen market, a landmark sales tax case goes to the Supreme Court, and a seller fee promotion to boost sales of products priced under $7.
Seventy percent of shoppers use their phones for comparison shopping while in-store
A survey from UPS on online shopper habits revealed that almost all (96% to 99%) of online shoppers surveyed in the U.S., Asia, Europe, Canada, Mexico, and Brazil, have made purchases from online marketplaces (Amazon, eBay, etc). Not groundbreaking news, but what was interesting were the findings that 70% of shoppers in all regions are using mobile phones for comparison shopping while in-store.
This is important for brands selling on Amazon and other marketplaces because it confirms the need for consistency across sales channels. A large discrepancy in price point can cause channel conflict for brands and put a strain on relationships with retail partners who find their customers are completing their purchases on Amazon because the price is lower.
But this phenomenon also reinforces the need for brands to provide detailed product information on their marketplace product listings. It could be that a customer is unable to get help from an associate while in the store, or wants to check out product reviews from other customers before completing their purchase. Whether the final transaction is completed in store or on a marketplace like Amazon, it’s in brands’ best interest to have their online product listings fully optimized.
Amazon dominates UK retail scene
Analysis from GlobalData has found that Amazon is the fifth largest retailer in the UK, accounting for 33.5% of all UK spend online in 2017, versus 29.6% in 2016.
GlobalData says that Amazon continues to outstrip online spending growth in the UK, with revenue estimated to have risen by 22.5% compared with total online spend increasing 8.4%.
Amazon has invested heavily in the UK market over the past few years, challenging well established grocers and department stores with the Amazon Prime service. The Fulfillment By Amazon (FBA) program allows merchants from there countries to send inventory to Amazon in the UK to be fulfilled locally. Amazon confirmed at the retail industry's Shoptalk conference in April that there are 175 fulfillment centers worldwide.
Amazon promotes low-cost items with minimum fee promotion
Amazon is offering a $0.30 discount on referral fees paid by Third Party merchants for products priced under $7.00, and a discount of $0.50 on products priced under $3.50.
The promotion is limited to new products that are launched between April 10 and August 15 this year. Grocery & Gourmet and Media products are also excluded.
A few months ago, Amazon launched a microsite for products priced at $10 or less. Some speculated that this was a direct swipe at the dollar store market, which seems to be relatively immune to Amazon. By widening their low-priced selection, Amazon is able to attract and retain more value-oriented customers, including teens (more on that below). And the fee discount makes if more attractive for merchants to offer products at this price point.
Ongoing threat of sales tax reform spooks retailers
Today, the Supreme Court will begin hearings from retailers who are challenging a South Dakota law that requires out-of-state retailers to collect sales tax in the state. The decision will have implications for other states who are looking at updating sales tax laws.
Amazon already collects and pays sales tax on orders for its own inventory, but more than half of all Amazon orders are sold by third party merchants, who are responsible for complying with states’ requirements. The issue of which states to collect and remit sales tax in is further complicated for merchants who use Amazon’s FBA program, which distributes inventory to various states depending on customer demand and warehouse capacity. If laws are passed that require only a physical presence in a state in order to be taxed, merchants may unwittingly end up with sales tax obligations in dozens of states.
The ultimate cost of administering the often complex filings of each state is a cost that many merchants--large and small--are concerned with. According to the publication Accounting Today, Max Behlke, director of budget and tax at the National Conference of State Legislatures, calls this case the "tax case of the millennium."
Amazon’s R&D investment soars
According to FactSet data reported by ReCode, Amazon spent $22.6 billion on research and development in 2017, 41% more than the prior year. This includes spending on AWS, Alexa, and technology used in the cashierless stores that are being rolled out.
This investment is promising for brands selling on Amazon. Voice commerce is widely cited as being the next major technology that consumers will use to search and buy products, along with a whole host of other activities. And AWS is a cash cow that Amazon can use as a buffer with the capital intensive retail business. Amazon is setting itself up for the future.
44% of teens call Amazon their favorite retailer
New research from investment bank Piper Jaffray finds that Amazon is the clear leader in the teen market. 44% of teens say that Amazon is their favorite shopping website, with Nike a distant second at 8%.
A shift to online shopping was a broader trend seen in this year’s survey, with teens spending 2% more than a year ago, and online shopping accounts for 19% of shopping a compared with 17% a year ago. This was at the expense of department store shopping, which was down to 38% of shopping time versus 41% a year ago.
Today's teens represent an important market for Amazon--winning the hearts (and wallets) of this group ensures a strong customer base going forward.
This is all the news I have to share with you this week. Subscribe to our newsletter to make sure you receive my news recap next week!