There’s no doubt about it: 2019 was a big year for Amazon. With the company’s move to one-day shipping, updates and improvements to their ad products, and strong headway into the grocery space, there’s a lot to discuss. Let’s dive in.
Give Me Everything, Stat: Shipping and Delivery Gets Crazier
Amazon upended ecommerce and raised the stakes for all other retailers by offering free 2-day shipping for Prime members. Their Q1 earnings report sent competitors scrambling when they announced they were cutting that timeline in half and moving to one-day shipping. Shortly after, Walmart hinted that they were planning to match Amazon’s delivery speed in a tweet, and in September Etsy made changes to their algorithm to favor sellers offering free shipping.
The move has cost them tremendously. On the past two earnings calls, Amazon execs have directly addressed how moving to one-day shipping has been incredibly pricey and set them behind expectations. However, the bet seems to have paid off.
2019 saw two of the biggest sales events of Amazon’s two-plus decades of existence: Prime Day (extended to 48 hours) outperformed previous years, and on Cyber Monday customers bought more items than any other day in Amazon’s history. The company’s “Best of Prime” press release from early December reports Amazon brought in more Prime members in 2019 than ever before.
Amazon has also spent a lot of 2019 improving their warehousing and delivery logistics. In May, the company expanded their Delivery Service Partner Program to fund startup costs for existing Amazon employees who want to start their own package delivery company. In the same month, CEO Jeff Bezos broke ground on a new $1.5 billion air hub in Kentucky, which is scheduled to open in 2021, employ 2000+ people, and house 50+ aircraft.
This hub will drastically reduce Amazon’s reliance on Fed Ex, UPS, and the US Postal Service as they move to one-day shipping, but it may not take that long to see Amazon break away. Earlier this month, Morgan Stanley estimated that Amazon is delivering over half of their US packages with their own logistics company already.
All Grown Up: Amazon’s Ad Products Mature
2019 was the year that Amazon upped the ante on their ad products, using their treasure trove of first-party shopper data to inform audience targeting. The company introduced new vehicles for advertising through their platforms and expanded measurement capabilities to prove out their efficacy.
Beginning in January, Amazon’s Fire devices — which now rival Roku penetration in the U.S. — launched the opportunity for OTT advertising across top-tier streaming apps. Additionally, Amazon launched their own IMDB TV streaming property, featuring ad-supported TV and film content. A few months later, they followed up with a similar option in audio, announcing a free, ad-supported music streaming service for Echo owners. Amazon also acquired ad server Sizmek early in the year, which put them in the right position to nab non-endemic clients for ad buys and compete with the reigning champ of ad revenue, Google.
In October, Nielsen announced that they can measure viewership in the US for Amazon Prime Video. For many brands, this was a long-awaited announcement that gave the platform legitimacy and opened the floodgates to access the deep pockets of television advertising budgets.
The Quest for Grocery Dominance: Amazon’s Booming Brick and Mortar Moves
This year made it very apparent that Amazon is heading steadfastly down the path toward brick and mortar domination. They are approaching their move into physical retail from two angles: Amazon Go and Grocery. The former focuses on quick-service interactions and operates much like a convenience store, sans cashiers. The latter will require a lot of diligence to dethrone the reigning champ of American grocery sales, Walmart. But Amazon is primed (yes, pun intended) to do the work.
Last month, the company announced plans to open a second, more budget-friendly grocery chain in 2020 to complement Whole Foods, which is aimed at customers in a higher spending bracket. The goal is to build up a budget-minded shopper base alongside the higher-income households they have already nabbed through Prime subscriptions. That’s the same audience and income bracket that Walmart aims for, so expect to see the two retailers competing even more directly in the coming years.
The news of the new grocery chain came on the heels of another surprise announcement: just ahead of Prime Day, Amazon announced that their grocery delivery service Fresh is now free for Prime members. Previously, it was $14.99 per month. By comparison, Walmart’s grocery delivery service – built in response to Amazon’s increasing chokehold on ecommerce — costs $12.95 per month, or $98 for an annual subscription.
But grocery isn’t the only place in brick and mortar where Amazon is laying a foundation. In May, they brought their cashierless Amazon Go store to Manhattan. A mere seven months later, there are eight Go stores in NYC alone, and 25 across the US.
America’s New Roommate Alexa: Amazon’s Voice Assistant, Devices, and Smart Home Tech in 2019
Amazon has been trying hard to place an Alexa near as many people as possible over the past few years. Amazon’s fall event introduced eight new Echo products and countless more Alexa-enabled devices, including new appliances, home goods, and wearables. Whether people will be thrilled by a smart speaker embedded in eyeglasses is yet to be seen, but Amazon is testing and learning as always to see what sticks with consumers so they can lean in. The company already boasts 110 million Alexa-enabled devices in American homes.
In Q1 of this year Amazon acquired mesh router network Eero. This, in theory, would tie all their smart home products together under one network and allow for very easy set-up and integration of Alexa devices. It also gives Amazon access to mountains of more data – not only did they acquire Eero’s user data with the deal, but going forward, the routers can provide information about consumers’ most active hours, the approximate size of their homes, and what competitor devices they’re using.