Amazon vans
There is new data that indicates a substantial number of good customers of Amazon are not happy. A recent survey by supply chain software company Convey shows the ways in which they’re dissatisfied and provides a potential path for competitors to create an opportunity at Amazon’s expense.
The Data
Convey talked to over 2,000 consumers, the vast majority of which were Prime members. Of the total, 80% said that fast, free shipping was their primary motivator for shopping at Amazon, which isn’t surprising. But those consumers said some unexpected things, too:
- 24.5% said they would not use Amazon if they had to pay for shipping.
- 23.7% said they believe Amazon has a very negative or somewhat negative impact on retail.
- 26.6% said they believe Amazon has a very negative or somewhat negative impact on the environment.
It’s unusual to have about a quarter of your customers feel so negatively about your business. It says that about a quarter of the customers find fast and free delivery so compelling that it outweighs some real concerns.
What If...
But what if there were an alternative? What if there were someone else who could provide deliveries as fast as Amazon at no cost to the consumer? What if that alternative wasn’t perceived as being so negative for retail? What if that delivery system had more environmentally friendly packaging or could show that it produced less carbon? What if that system could facilitate speedy delivery from smaller retailers?
But Who?
As a consumer, you may not have heard of a company called Shopify. Shopify provides the services that small- and medium-sized businesses use to operate their websites. Although Shopify serves small retailers, it is not small. The value of Shopify stock in the market now is over $70 billion, and that means it has resources to move in many directions.
The question is, does Shopify want to challenge Amazon in fulfillment? The answer to that is yes. How do we know? Because in October 2019, Shopify spent $450 million to acquire 6 River Systems, a warehouse automation system powered by robots and artificial intelligence. It’s hard to think of any other reason Shopify would make that deal other than to position itself to challenge Amazon in delivery fulfillment. Shopify must believe, and the data from Convey confirms, that if it can build a fulfillment system that can effectively compete with Amazon by providing smaller retailers with competitive delivery, a meaningful number of consumers will switch away from Amazon. In fact, Shopify has been exhorting its customers to take on Amazon more directly, clearly signaling its own intentions.
Shopify may not be the only one. In the recent holiday season, FedEx and UPS had very poor delivery rates, materially lower than in the previous year. It got so bad at FedEx that for a while recently, Amazon forbade its third-party sellers from using FedEx for their deliveries. FedEx knows it has to improve its reliability and invest in its systems. FedEx can do it—it has a very strong balance sheet and can afford to make substantial strategic investments in its business. It’s not impossible that, with Amazon having become a small part of its business now, FedEx decides to build a fulfillment system to compete directly with Amazon. FedEx hasn’t indicated that it will do that but they have the resources and the motivation. FedEx knows that Amazon is a threat and wants to take delivery market share. Given the numerous reports of acrimony between FedEx and Amazon, it wouldn’t be surprising to hear that FedEx is building a system to more effectively complete directly with Amazon.
Now what?
Will Shopify or FedEx succeed in challenging Amazon logistics and facilitating free and fast shipping for millions of retailers? Will it untether millions of consumers from Amazon so they can be picked off by other retailers using Shopify logistics? No one knows right now. Also unknown is what FedEx—or another competitor that can’t be predicted—will do. Here’s what we do know: Many consumers would leave Amazon if someone else offered shipping that was free and just as fast. Now that we know why consumers will leave in large numbers, it is only a matter of time until someone figures out how to do it. FedEx may not be working on it and Shopify may not succeed at challenging Amazon, but as Amazon’s weaknesses become better known, it’s inevitable that someone, and maybe more than one company, will figure out how to challenge the hold that Amazon’s fast delivery has on so many consumers.
