- We rounded up five Amazon trends to watch through the rest of the year.
- The following content has been excerpted from Insider Intelligence’s report, The Power of Amazon, which assesses 19 different business units.
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Amazon’s retail ecommerce sales have been steadily increasing, with a spike seen in 2020 reaching $309 billion dollars thanks to consumers’ pandemic-induced demands. As the retailer who dominates the ecommerce industry, it’s no surprise that they’re making strides to keep—and expand—that position. How? Learn about these Amazon trends unfolding for 2021.
Amazon Trend #1: Online grocery
Online grocery is among the leading Amazon ecommerce trends. The company has experimented with several grocery formats over the past decade, but its current offerings include:
- Amazon Fresh
- Whole Foods Market
- Amazon Go
Insider Intelligence estimates that Amazon’s US grocery ecommerce sales will grow 12.9% this year to $29.12 billion, amounting to 23.8% of all digital grocery sales. It’s the second-largest digital grocer after Walmart, which will capture 25.3% of digital grocery sales this year (and 28.9% when including its subsidiary Sam’s Club).
We forecast that US grocery retail ecommerce sales will nearly double over the next four years, growing from $122.39 billion in 2021 to $243.67 billion in 2025. In the US, digital sales are still only a small portion (9.6%) of overall grocery sales, and Amazon’s grocery business isn’t nearly as competitive offline, but given Amazon’s placement as an ecommerce powerhouse, it is primed to generate a large chunk of this growth.
Amazon Trend #2: Amazon One
Amazon One is a biometric-based payment terminal that allows customers to authenticate in-person transactions with a palm scan. It launched in September 2020, and then expanded into Seattle and New York locations, including some Whole Foods Market stores, in late winter and early spring 2021.
Launch conditions were fairly favorable, as contactless payments surged when the pandemic made customers more health-conscious and touch-averse. Increased familiarity with payment options like mobile wallets could make customers even more willing to test other new platforms, particularly if they offer even less contact than a phone.
Amazon hopping into the biometric scanning ring now should give it an early-mover advantage, especially since there isn’t much specifically like Amazon One on the market yet. But the move may also signal to rivals that interest is mounting and accelerate industrywide technology development. Down the line, the company plans to license the technology to other interested parties, including retailers, office buildings, and stadiums, which could bring in a new revenue stream. And moving beyond retail could preview a push into identity verification more broadly.
Amazon Trend #3: Amazon Advertising
Amazon will net $26.31 billion worldwide and $20.47 billion in the US this year in advertising revenues, we forecast. Amazon ads have been expanding rapidly for years, and growth accelerated recently because of the pandemic and the associated step change in the share of retail transactions conducted online.
Amazon’s advertising business has several facets:
- Advertisers that sell products on Amazon can buy impressions based on cost per click on Amazon’s retail properties. We estimate that the majority of Amazon’s net US ad revenues come from these types of placements.
- Amazon DSP is a demand-side platform (DSP) that allows advertisers, including nonendemic brands, to buy display impressions across Amazon’s retail properties; its nonretail properties like Twitch and IMDb TV; and the programmatic web.
- Amazon Publisher Services provides header bidding integrations for publishers to access both Amazon demand and demand coming through other supply-side platforms (SSPs).
In its rise to becoming a member of the digital advertising triopoly, Amazon revolutionized the search ad market, which has long been dominated by Google. Google still nets the majority of US search ad revenues, but it’s Amazon—not another general search engine, such as Bing—that has taken significant share of the market at Google’s expense.
Amazon Trend #4: Fulfillment by Amazon
As Amazon’s ecommerce business took off, it realized that fulfillment—not only shipping but also returns, warehousing, and inventory management—was an integral part of its retail operations. Amazon fulfillment centers feature different facilities for receiving goods, sortable pick and pack centers for small items, and areas dedicated to large items, to name a few.
Separate from its logistics prowess is the transportation network Amazon has built. Amazon is the fourth-largest transportation network in the US, according to Bank of America Global Research. It shipped 415 million packages in July 2020 alone, delivering 66% of its own packages during the month, an increase of 12 percentage points YoY, per ShipMatrix. This demonstrates Amazon’s commitment to creating an end-to-end fulfillment/shipping arm—one that third-party sellers generally feel obliged to use to be more successful on the platform, despite its higher costs when compared with other suppliers. Nearly 85% of Amazon’s biggest sellers use its Fulfillment by Amazon (FBA) service.
The more control Amazon has over fulfillment, an often forgotten but friction-inducing part of the consumer journey, the more likely it is to meet consumers’ expectations of convenience and maintain its brand ethos while adding to its bottom line.
Amazon Trend #5: Gaming
Amazon’s Twitch subsidiary is a pioneer and category leader in game-oriented streams and is expanding into a broader social video platform. We estimate that Twitch will have 31.4 million US users in 2021, growing its base to 36.7 million by 2025. Amazon is weaving this business unit into broader entertainment experiences that include influencer marketing culture and social video.
Like other parts of Amazon’s business, Twitch benefited from pandemic-induced lockdowns that boosted home-based entertainment activities such as gaming. This Amazon business unit helped give rise to esports and will increasingly benefit from the growing popularity of game streams and the influencers who create them. The service’s “Just Chatting” feature—a catchall venue where creators can talk about their work in casual streams—became its most-watched category in Q3 2020 and has continued to grow since then, illustrating the engagement that the Twitch community can generate.
Twitch should also be able to tap new revenue opportunities from legalized sports gambling. It’s hard to envision a scenario where, five years from now, Twitch isn’t an even stronger player than it is today.