Opinions expressed by Entrepreneur contributors are their own.
You’re reading Entrepreneur United States, an international franchise of Entrepreneur Media.
In 2020 alone, U.S. online ecommerce grew by an astonishing 32.4%, totaling $791.7 billion in online consumer spending. Part of the resulting effect is that online stores are increasingly grabbing sales from physical locations, as consumers are expected to spend more than $1 trillion through digital retail channels in 2022. Additionally, older consumers who never used to engage in ecommerce are now going online for their needs, particularly as they apply to health concerns. And even after commerce returns to a semi-post-pandemic normal, these people are likely to keep shopping online.
Amazon is poised to own the lion’s share of these ecommerce gains. It simply dominates the online space, with Digital Commerce 360 estimating the company represented more than a third of all ecommerce spending in 2020. The reasons for this are many, but include gained trust of shoppers thanks to an “A-to-Z guarantee”, that its refund and return policies are standard-bearers, and the one- to two-day shipping available for Prime members. In a 2019 Feedvisor survey among U.S. shoppers, 89% said they are more likely to buy from Amazon than other ecommerce websites.
Interestingly, it’s actually third-party sellers that stand to gain the most from Amazon’s continued rise. The company is, in part, a platform for third-party brand owners to sell their products — essentially the world’s largest shopping mall. Amazon gets a cut, but most of the money shoppers spend on the platform goes to third-party sellers, which range from massive name brands to those owned and operated by relative unknowns. According to Statista, third-party sellers are Amazon’s single greatest revenue generator for all its retail sales. It’s incentivized to help such brand owners make money, since that’s a win-win-win: The seller wins with a sale, Amazon wins via referral fees for facilitating the sale and the shopper wins for getting the best product for the best value.
Another future-bankable asset for the Seattle-headquartered giant is that when shoppers trust Amazon, that faith transfers to the often consumer-unknown branded products it sells (and that shoppers can also lean on Amazon reviews to help further validate product choices). In 2020, a survey published by Statista asked U.S. consumers, “How often do you use Amazon to discover new products or brands?” Over half of respondents said they use the site “sometimes” to do just that. An additional 23.6% said they use Amazon “frequently” to discover new products or brands. That means hundreds of millions of shoppers are open to and buy from new brands there, so vast potential is there.