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The Power of Amazon EMarketer
The Power of Amazon EMarketer
The Power
of Amazon
How 19 Business Divisions Fuel Amazon’s Flywheel
the loyalty program that keeps customers using Note: (1) includes product sales and digital media content where revenue gross is recorded;
digital media content is available in both physical and digital format, such as books, music,
multiple divisions? videos, games, and software; product sales include digital products sold on a transactional
basis; (2) includes product sales where customers physically select items in a store; (3)
includes commissions, related fulfillment and shipping fees, and other third-party seller
We forecast that well over half (63.4%) of all US households services; (4) includes annual and monthly fees associated with Amazon Prime membership,
as well as audiobook, ebook, digital video, digital music, other non-AWS subscription
will use Amazon Prime this year. To put that in perspective, services, and digital product subscriptions that provide unlimited viewing or usage rights; (5)
we estimate that in 2016, just 35.6% of US households includes sales not otherwise included above, such as certain advertising services and
Amazon's co-branded credit card agreements
subscribed to the service. Source: Amazon company reports, May 26, 2021
268046 eMarketer | InsiderIntelligence.com
online videos, games, and music, to name a few. In fact, in 4.8% 3.7% 2.7% 2.1% 2.0%
June this year, J.P. Morgan estimated the value of a Prime
subscription (which costs $119 annually) at approximately 2018 2019 2020 2021 2022 2023 2024 2025
Note: households with a paid membership to Amazon Prime, where at least one person of
any age in the household signs in to the account at least once during the calendar year
Amazon launched Prime in 2005 with the offer of Source: eMarketer, May 2021
unlimited two-day shipping for $79 per year on a wide 268598 eMarketer | InsiderIntelligence.com
As Amazon adds more services to its platform and looks to Disruption: 1=Developing business plan, 3=New approach,
6=Forcing out incumbents
offer even faster shipping via its Prime Air drone delivery
service, we expect more households to sign up for Prime in Integration: 1=Standalone, 3=Dependent on two or more
the coming years. divisions, 6=Drives business to all divisions
Leverage: 1=None, 3=Established relationships with key clients,
6=Supports multiple divisions and/or clients to maximize scale
Prediction for 5-year outlook: 1=Out of business, 3=Leader,
6=Massive growth
$791.70
$598.02 $546.90
$482.22
$380.15
$386.40
$309.48
$217.87
Note: includes products or services ordered using the internet, regardless of the method of
payment or fulfillment; excludes travel and event tickets, payments such as bill pay, taxes, or
money transfers, food services and drinking place sales, gambling, and other vice goods
sales; *represents the gross value of products or services sold on Amazon.com (browser or
app), regardless of the method of payment or fulfillment; excludes travel and event tickets,
Amazon Web Services (AWS) sales, advertising services, and credit card agreements
Source: eMarketer, May 2021
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Once Amazon understood how to effectively create the Still, while Amazon created the marketplace retail channel
endless aisle in the “everything store,” it turned its attention and is thought to be the place where many consumers start
to creating its loyalty program, Prime, which was originally their product searches, it now faces concerns over potentially
tied to convenience with free two-day shipping. Prime has anticompetitive behavior, as well as new competition from the
also gone through several iterations since launching in 2005, flurry of rising platforms, like Shopify.
and it now offers same-day, one-day, and two-day shipping,
as well as digital content. Over 70% of people shop on Amazon has been at the forefront of innovation to meet
Amazon for fast, free shipping, according to a 2021 Convey customer needs and follow market trends. However, it’s
survey. The Prime program is at the core of Amazon’s unclear whether consumers will accept that Amazon is
flywheel, as it amplifies stickiness. trying to be more than an easy and convenient place to
shop. Shoppers typically don’t use Amazon for discovery
Over the years, Amazon has either purchased or created and inspiration, and the platform isn’t designed to facilitate
new businesses within its retail ecosystem that align with impulse purchases. As a result, it’s hard to foresee its
market needs and consumers’ changing habits. At the livestream shopping platform (Amazon Live) or its lifestyle
same time, it remains focused on its brand ethos of product images feature (Amazon Posts) having the same
convenience and reliability by offering a huge selection, impacts as Instagram or Pinterest.
competitive prices, and speedy delivery. Amazon has
now turned its attention to the high-end market with Try as it might, Amazon isn’t a cool, fun, curated experience.
Amazon Luxury Stores, which features luxury fashion and It is not retail as entertainment, nor is it a social
beauty brands—though the jury is still out on whether it’ll be experience. Additionally, its brick-and-mortar presence is
able to crack that niche market. nonexistent in most product categories, although if Amazon
enters the department store space as it has recently been
The endless aisle is also part of Amazon’s strategy. reported, that may change. It should be noted that while
Vendors pitted against each other on the same product online retail sales are growing at a faster clip than non-
search pages differentiate themselves by price and by ecommerce sales, physical stores still make up the vast
paying to be at the top of the list via sponsored ads. majority of retail sales in the US. Amazon is also fighting
Unsurprisingly, first-party market brands are less profitable. hard to counter the perception that it’s unfriendly to small
A 2020/2021 Feedvisor survey of US brands discovered businesses and lacks environmental consciousness.
that 80% of those that sold on Amazon exclusively via
first-party wanted to become third-party sellers.
Amazon Pay ■ On its own site, the “etailer” accepts payment cards—
including general-purpose credit and debit cards;
store-branded cards; gift cards—which customers
can add money to using Amazon Reload; government-
distributed electronic benefits transfer (EBT) cards; and
credit card points.
This has given its buy button wide reach: In 2016, Amazon
reported that 33 million people in 170 countries used
Amazon Pay to make a purchase.
5-Year Outlook
Amazon’s current slate of payment options and commitment
to adding more will allow it to provide an easy and inclusive
purchasing experience on and off its site. As digital payment
options become more popular, expanding Amazon Pay
should become easier, especially within Amazon’s own
properties—including connected devices integrated with
Alexa—and that expansion will boost volume.
In the next five years, it’s likely that Amazon will continue
finding new ways to use ecommerce data to inform inventory
at its Pop Up and 4-star locations. Reports have surfaced
that the company explored opportunities in the opposite
direction: opening physical stores to offload home goods
and electronics inventory at discounted prices. Amazon will
also continue to introduce new retail concepts—recent
reports indicate that Amazon has plans to open its own
department stores—and it will test new technology, like it
has with the augmented-reality-powered Amazon Salon,
which opened recently in London.
Since its debut, Amazon has expanded Just Walk Out to 2 Amazon has yet to retrofit an existing store with its Just
more than 20 locations, including larger grocery formats. It Walk Out technology, which competitors aim to do.
created Amazon Dash Carts, smart carts that use similar Amazon will need to begin the process of installing Just
technology to speed up checkouts at Amazon Fresh stores. Walk Out in retailers’ current stores, so it can expand
its reach to new, specialized locations. Even though
Amazon has ambitions for Just Walk Out beyond its own Amazon is at the forefront of the industry—and boasts
stores. It has licensed the technology to travel retailers retail expertise and ample funding—Just Walk Out
OTG and Hudson and will likely try to lead the space as may struggle to scale at the rate of its competitors.
it develops.
Amazon Pharmacy
Disruption, Integration, and Leverage
Amazon’s push into autonomous checkout technology is a
departure from its history of focusing on ecommerce, but it’s
eyeing brick-and-mortar for good reason. The vast majority
of US retail sales are still made offline—ecommerce is
expected to make up only 15.3% of US retail sales this year.
5-Year Outlook
Autonomous checkout firms should be able to convince
retailers to adopt the technology in the coming years:
According to a February 2021 Piplsay survey, 57% of US
consumers ages 18 and older said they would be excited to
see an Amazon Go or similar store in their neighborhood.
And with 89% of Amazon Go shoppers surveyed rating their
experience as excellent or good, it’s likely that consumers
enjoy the speedy checkout experience, perhaps because
they avoided long checkout lines.
■ Prime members can receive a discount card that can The day after Amazon Pharmacy’s debut in November
now be used at 60,000 pharmacies, including CVS 2020, shares of those rivals dropped again by a combined
Health, Costco Wholesale, Target, and Walmart. $10 billion, according to Forbes. As of mid-July 2021, each
company’s share price had recovered, at least somewhat.
■ Free two-day delivery on orders from Amazon
Pharmacy is included for Prime members. Amazon is counting on its Prime members’ loyalty to boost
its (undisclosed) share of pharmacy sales, and those
■ Amazon also promised members would receive members are notably loyal to the channel. We estimate that
discounts up to 80% off generic and 40% off brand- in 2021, there will be 151.9 million US Amazon Prime users,
name medications when paying without insurance. or 58.2% of the population. By 2025, those numbers will
reach 168.3 million users and 62.4% of the population.
■ In May 2021, Amazon introduced a price-
transparency tool so Prime members can compare
the cash price of drugs available through Amazon
Pharmacy with the price they would pay using their
health insurance plan’s copay.
Note: individuals ages 18+ who have an Amazon Prime account and sign in at least once
during the calendar year
Source: eMarketer, May 2021
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prescription drugs will account for a growing share of its online Prediction for 5-year outlook: 1=Out of business, 3=Leader,
6=Massive growth
sales in the US. Shoppers will undoubtedly be enticed to try
this service, with Amazon giving Prime members and other
shoppers the ability to research and order medications online,
compare Amazon’s cash-only price with their insurance copay, Maturity, Iteration, and Market Sizing
and compare the Prime prescription savings benefit price. As Amazon’s online business took off, it realized that
fulfillment—not only shipping but also returns, warehousing,
We also expect that Amazon will make moves internationally, and inventory management—was an integral part of its
having filed “Amazon Pharmacy” trademarks or patents in retail operations.
the following markets: Canada, the UK, Australia, Brazil,
China, Egypt, the EU, India, Israel, Japan, Mexico, Singapore,
Taiwan, Turkey, and the UAE. While that doesn’t indicate
imminent moves, it does signal Amazon’s intention to
scale its online pharmacy beyond US borders.
Amazon operates its logistics service, Fulfillment by While Amazon doesn’t force sellers to use this service, some
Amazon (FBA), like all other business units—using sellers have said they feel strong-armed into using the
technology to try to remove friction for customers, and add-on to secure a better position on product page search
then iterating. For example, its Key by Amazon service results. For context, nearly 85% of Amazon’s biggest
lets Amazon deliver packages inside customers’ garages or sellers use its FBA service.
homes. To reach the elusive last mile, Amazon is also tapping
As a result, Amazon is drawing attention from critics who
into the gig economy with its Flex program, which allows
say it engages in anticompetitive practices; under one
contractors to deliver packages using their own cars.
recently proposed bill, Amazon could be forced to sell off its
It’s hard to estimate FBA’s market size since it includes logistics division.
different parts of the logistics and transportation
Amazon will continue to make investments in its
ecosystem. But in its Q1 2021 earnings call, Amazon
transportation network, which is a mix of owned and
said it increased spending on fulfillment by 43.4% YoY to
outsourced services, to help mitigate on-time delivery risk
$16.53 billion. After a 2013 holiday season saddled with
for Amazon itself.
shipping delays caused by inclement weather and high order
volumes, Amazon began to dedicate even more resources
As a predominantly online retailer, one of Amazon’s
to fulfillment. In 2020, Bank of America Global Research
biggest weaknesses is the physical return of goods.
estimated that Amazon had spent $39 billion since 2014 to
To better compete with omniretailers, Amazon not only
build a connected delivery network. That investment figure is
partnered with retailer Kohl’s—thus adding over 1,100 points
even higher when other costs, such as aircrafts, are included.
of return—but also developed Amazon Hub, strategically
placed self-service lockers for returns and pickups.
Disruption, Integration, and Leverage Despite all these costly initiatives and infrastructure
Amazon has expanded the idea of a warehouse beyond just investments, Amazon has more to do when it comes to
being a place where bulk goods are stored. Its fulfillment closing the physical footprint gap. UBS estimates that
centers feature different facilities for receiving goods, Amazon’s delivery stations are now within 1 hour of 77%
sortable pick and pack centers for small items, and areas of the US population. For context, Walmart and Target
dedicated to large items, to name a few. stores are within 1 hour of 99% and 94% of the US
population, respectively.
Separate from its logistics prowess is the
transportation network Amazon has built. Amazon is the As global climate change and sustainability concerns heat
fourth-largest transportation network in the US, according up, Amazon’s biggest uphill battle will be addressing its
to Bank of America Global Research. It shipped 415 million image as an environmentally unfriendly business. In addition
packages in July 2020 alone, delivering 66% of its own to its newest leadership principles, Amazon is reportedly
packages during the month, an increase of 12 percentage exploring alternative fuels, purchasing electric delivery
points YoY, per ShipMatrix. This demonstrates Amazon’s vehicles, and investigating new technologies to facilitate
commitment to creating an end-to-end fulfillment/ delivery, like drones.
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.
This data advantage helped Amazon become the No. The 5-Year Outlook
3 digital ad seller in the US in 2018, when it surpassed
both Verizon Media and Microsoft in its share of digital Amazon is well positioned to continue growing its ad
ad revenues, per our estimates. Since then, the ecommerce revenues strongly, as well as to keep gaining share of the US
giant has widened its lead on the fourth- and fifth-place digital ad market.
players, while closing the gap with market leaders Google
and Facebook. We estimate that Amazon’s net US ad revenues will more
than double between 2020 and the end of our forecast
In its rise to becoming a member of the digital advertising period in 2023, when they will reach $31.97 billion. Our latest
triopoly, Amazon revolutionized the search ad market, forecast, published in March 2021, represents a significant
which has long been dominated by Google. Google still nets upward revision from our previous estimates in October
the majority of US search ad revenues, but it’s Amazon—not 2020. And based on its Q1 2021 earnings report, the
another general search engine, such as Bing—that has company outperformed our expectations at the beginning
taken significant share of the market at Google’s expense. of this year as well—which means that we are likely to make
(And other retailers like Walmart have since had success another upward revision as part of our next forecast update
with similar products.) in the fall.
$51.39
$43.05
$35.68
49.2%
44.9% $27.59
51.5%
$19.23
43.5%
20.7% 19.4%
$13.27
29.3% 14.9%
$8.89
0.4% $5.87
$2.96 0.6% 0.8% 1.1% 1.4% 1.7% 2.0% 2.2% 2.3% 2.4%
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Amazon Business product sales
% change % of US B2B ecommerce site sales
Note: represents the gross value of products sold on Amazon Business (browser or app),
regardless of the method of payment or fulfillment; excludes travel and event tickets,
Amazon Web Services (AWS) sales, advertising services, and credit card agreements;
includes direct and marketplace sales
Source: eMarketer, July 2021
268051 eMarketer | InsiderIntelligence.com
Disruption, Integration, and Leverage One way sellers can combat this is by paying for Amazon
Advertising search ads—which also benefits Amazon’s
B2B marketplaces are increasingly being adopted by both bottom line.
buyers and sellers:
■ Data regulation: Digital sovereignty and data Maturity/Iteration: 1=Nascent, 3=Growth, 6=Mature
localization requirements demand that infrastructure Disruption: 1=Developing business plan, 3=New approach, 6=Forcing
in places like Jakarta comply with local data regimes, out incumbents
putting pressure on Amazon’s capital expenses and
Ring Home Security The Ring lineup now includes a range of interior and exterior
cameras, doorbells, security systems, and lighting. Since the
acquisition, the brand has successfully maintained its leading
position in the smart home security device market.
Amazon has also integrated the Ring devices with its cloud
computing service, AWS, which stores video and other
information from the devices and could potentially analyze
the data. As Ring begins to enter the commercial market,
it will provide additional opportunities for Amazon to
lock businesses into AWS for a whole range of services.
has numerous untapped opportunities around biometrics Leverage: 1=None, 3=Established relationships with key clients,
6=Supports multiple divisions and/or clients to maximize scale
and other areas within the home that could benefit from
remote monitoring and communication. Prediction for 5-year outlook: 1=Out of business, 3=Leader,
6=Massive growth
smart speakers. The Echo, however, is part of a broader 70.9% 71.3% 69.2% 68.1% 67.6% 67.3% 67.0%
strategy centered on voice assistant Alexa—which has a less
dominant position within the voice assistant marketplace
and faces strong competition from Apple’s Siri, Google
Assistant, and even Microsoft’s Cortana.
however, was an immediate success and launched the smart Amazon Echo users
% of voice-enabled speaker users % of population
speaker market on a steady growth path. Since then, the
Note: individuals who use an Amazon Echo at least once per month
Echo has morphed into a variety of forms, including the Source: eMarketer, June 2021
low-end Echo Dot (released in 2016) and the Echo Show 267494 eMarketer | InsiderIntelligence.com
More CTV users in the US will use Fire TV than either Apple
TV (27.9 million users) or Google Chromecast (31.1 million
users) this year. But there will still be more Roku users
(109.7 million) and smart TV users (132.0 million) than Fire
TV users.
Fire TV’s gains in the US, and its growing presence globally, Maturity/Iteration: 1=Nascent, 3=Growth, 6=Mature
will help Amazon in its long-term strategy of being a portal Disruption: 1=Developing business plan, 3=New approach, 6=Forcing
out incumbents
to the internet, its media properties, and commerce from
anywhere. Without a smartphone OS of its own, Amazon Integration: 1=Standalone, 3=Dependent on two or more divisions,
6=Drives business to all divisions
has relied on building alternate portals with Echo, Fire
Leverage: 1=None, 3=Established relationships with key clients,
TV, and other smart home devices, and ties them all 6=Supports multiple divisions and/or clients to maximize scale
together with Alexa. This strategy will continue to build
Prediction for 5-year outlook: 1=Out of business, 3=Leader,
advantages of scale over the next five years. 6=Massive growth
In audiobooks, it’s hard to argue for a scenario in which Maturity/Iteration: 1=Nascent, 3=Growth, 6=Mature
Amazon loses its market leadership in the next five years. Disruption: 1=Developing business plan, 3=New approach, 6=Forcing
The company is simply too entrenched in that business to out incumbents
face significant competitive threats. Integration: 1=Standalone, 3=Dependent on two or more divisions,
6=Drives business to all divisions
In music, we expect Amazon will become the No. 2 player Leverage: 1=None, 3=Established relationships with key clients,
in the US in 2022 and maintain that position through at 6=Supports multiple divisions and/or clients to maximize scale
least 2025. While Amazon will continue to lag Spotify, it’s Prediction for 5-year outlook: 1=Out of business, 3=Leader,
notable that the retailer is on track to leapfrog Pandora and 6=Massive growth
September
Grocery Forecast
November
B2B Payments
Editorial and
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Rahul Chadha Director, Report Editing
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Erika Huber Senior Copy Editor
Ann Marie Kerwin Vice President, Content
Na Li Senior Data Research Manager
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Reuben Loewy Director, Report Editing
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