Slow Motion Starvation
Amazon has for the past twenty years implemented a strategy to starve every other business in America to death in slow motion. Sounds overly dramatic. I think not.
Amazon Starves Businesses to Death – One Product At a Time
Angelica La Vito wrote in her CNBC article, Amazon has quietly launched an exclusive line of over-the-counter health products detailed what Amazon is preparing to do the retail giants by selling to its 150 million Prime Members products that undercut retailers. In LaVito’s article the most telling revelation is that people are increasingly shopping for OTC products online.
Fortune Magazine write Madeline Farber in her article Consumers Are Now Doing Most of Their Shopping Online reported,
“For the first time ever, shoppers are going to the web for most of their purchases. An annual survey by analytics firm comScore and UPS found that consumers are now buying more things online than in stores. The survey, now in its fifth year, polled more than 5,000 consumers who make at least two online purchases in a three-month period. According to results, shoppers now make 51% of their purchases online.”
Matthew Oster, head of consumer health research at global market research firm Euromonitor, knows what’s coming, “It’s a very different world, and having Amazon jump in is not a good sign for existing brands, either branded or private label, because the way Amazon works is its ability to take on unprofitable ventures for a time to see how things go. And the fact they have a near monopoly in e-commerce gives them a lot of scale that can allow them to undercut price. So that aspect should be concerning for whoever their competitors are in that space.”
CVS, Rite Aid, Acme, Kroger, Safeway, Publix, and other large national and regional chains will fight back. But like France against the German blitzkrieg, don’t expect the outcome to be positive. The most immediate casualties will be local pharmacies, grocery stores, butcher shops, and other local businesses don’t stand a chance. As these local business fall, local media collapses.
Amazon’s Starvation of Local Business Strategy
Amazon has gone after $300 billion cosmetics market and the and the $174 billion Over-the-Counter (OTC) market. Amazon sells branded over-the-counter medications such as Advil, Mucinex and Nicorette as well as options from Perrigo’s generic GoodSense brand. Amazon is directly challenging the retail chains by taking traffic.CVS Health, Walgreens Boots Alliance and Rite Aid are losing in-store traffic as people shop for OTC products online. Businesses starve when customers stop walking in like they used to. Amazon stops traffic one product at a time.
How Amazon Starves Other Businesses of Their Customers
- Amazon bots 24/7/365 search Amazon and all other online and retail sites for “hot trending products”
- Amazon finds a product in real-time and then posts its own product, more often than not a “white label” Amazon product like those above BUT at a 25%-t0-40% below competitors’ prices.
- Louis Columbus revealed in a Forbes article that Amazon immediately lowered Whole Foods’ prices by 40% upon acquisition of the grocery giant in order to DRIVE CUSTOMER GROWTH Click for backup article
- Then Amazon buys up or out bids all competitors for keywords related to that product and when shoppers, who 81% search before they purchase type into a search engine the product they are looking for – boom – Amazon’s products show up first. Backup Article on 81%
- 95% of shoppers rarely go past Page One of Search and more often than not they rarely go past the first five items on the first page. Click to view research
According to new research from Upstream Commerce, Amazon tracks third-party sales on its site and uses that data to sell the most popular items in direct competition with marketplace members, Upstream reported that it came across Amazon’s activity while conducting a competitive analysis for clients of women’s clothing brands on the site. In total, Upstream sampled 857 women’s clothing products initially sold by marketplace sellers and checked to see when Amazon initiated selling the same items. Within 12 weeks, Amazon began selling 25% of the top items first sold through marketplace vendors.
There is no single answer to stopping Amazon but in coming posts there will be data on what Amazon is doing and how innovative retailers are successfully fighting back.