Amazon, Bigger Than You Think, and Their Loyalists Eat Your Lunch

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\"\"Are you sick of hearing about Amazon, the voracious Pac-Man of the modern world, chomping on your lunch in ever increasing ways? Think about it: If Amazon’s revenues are growing at the rate of 20 to 30 percent annually, while total retail sales are growing just over 2 percent, whose share of lunch are they really eating? Look in the mirror.

And worse, here’s more to darken your day:

Before a recent USA Today report, the U.S. Department of Commerce noted that Amazon claimed a 15 percent share of total U.S. e-commerce sales. A pretty big number, right? But not nearly as big as the USA Today report, which estimates that when Amazon’s third-party sales are added to total revenues, Amazon\’s share of total U.S. e-commerce sales could be between 20 to 30 percent.


And then there’s the loyalty thing. According to a recent report from Feedvisor and Walker Sands, Amazon shoppers are becoming so loyal that they tend not to shop and purchase anything on competitors’ sites. While over 95 percent of Amazon’s customers (both Prime and non-Prime) made a purchase last year on Amazon, only 33 percent also made a purchase on eBay, 3 percent on, and 10 percent from subscription-based services. On legacy retail and branded sites such as Walmart, Gap and others, 61 percent of Amazon customers bought from those sites in the past year. Since these retailers still rely on over 80 percent of sales from their brick-and-mortar stores, their online sales do not add enough of a lift to be noticed.

When the loyalty of close to 50 million U.S. Prime members is considered, customers who account for over 60 percent of Amazon’s GMV (gross merchandise value), the great share sucking sound from legacy retailers and brands, as well as pure e-commerce sites, just gets louder.

Accordingly, Amazon continues to expand on the benefits of its Prime program. Prime Now was launched in 2014 and offers same-day delivery in 24 major cities, free within two hours, or it costs $7.99 for one-hour delivery. Twenty-five percent of Prime members have used two-day delivery, 70 percent of Prime Now members use it several times a month, and 24 percent use it once a week.

As we wrote in The Robin Report, Amazon has been raising the bar to maintain its “fastest” shipping lead by investing in its own delivery logistics systems and its own fleet of contracted trucks (Amazon Flex) and planes (Amazon Prime Air) as the company awaits drone delivery approval.

Recently Amazon rolled out its Seller Fulfilled Prime program. This is for third-party merchants to use Prime two-day shipping of their own inventory as opposed to using Fulfillment by Amazon. This increases both the number of items sold under Prime as well as total items sold. And since 50 percent of all units sold on Amazon are from third-party merchants, as the company continues to expand the Seller Fulfilled Prime program, that share-sucking sound starts sounding more like a universal black hole.

Costco and Sam’s Club Prime Headaches

Costco and Sam’s Club have their own special headaches, as Pac-Man chomps on their market shares. According to Cowen & Co., Amazon’s Prime-only memberships (not Costco’s or Sam’s), has risen from 7.1 percent of U.S. households in 2013 to 16.2 percent in 2016. Costco-only memberships have decreased from 14.9 percent in 2013 to 9.8 percent in 2016, and Sam’s Club-only membership plunged from 16.9 percent to 9.7 percent in the same period. I’d say, fasten those seat belts.

Conversely, Costco’s and Sam’s supposedly loyal members are flirting with the Pac-Man; 11.3 percent of Costco subscriber households also have a Prime membership, up from 4.8 percent in 2013, and Sam’s Club’s members subscribing to Prime rose from 4.8 percent to 8.5 percent in the same period.

Those giants are all selling the same kind of goods, household essentials, and stuff that can be ordered in bulk and on a repetitive basis. Nobody can do it as quickly and efficiently as Prime. With Amazon’s one-click Dash Buttons literally a finger-tap away for consumers to make on a repetitive order for several items, why would anybody take the time to buy from Costco, Sam’s or anywhere else?

It’s an Olympic Sprint, Folks

I’ve said this before, and it is worth repeating:

Amazon is not just marching on. It’s like an Olympic sprinter whose speed dwarfs the overall industry. Picture Jeff Bezos at the Olympics, crossing the 50-meter mark in the 100-meter sprint as the other runners are just leaving their starting blocks.

Amazon has scale. Amazon has deep pockets and deep-pocketed investors. Amazon doesn’t have to show a profit. Amazon has the most flexible, agile, efficient and fastest distribution platform on earth. Amazon has the potential to be the largest marketplace in the world, capable of distributing anything to anybody, first, faster and more often, wherever and whenever the consumer desires, 24/7.

So pacing halfway through the 100-meter sprint means nothing to Bezos because he has an unlimited track to run on. There is no finish line in sight for Jeff Bezos and Amazon.



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