CONSUMER

BEHAVIOR
IMPACT OF CHANGING
CONSUMER BEHAVIOR

Anushka Biswas | 20212106 | 5BBA B Nov 2022

Amazon
One of the most valuable brands in the world, it has been
called "one of the most significant economic and cultural
forces in the globe." Along with Alphabet, Apple, Microsoft,
and Meta, it is one of the Big Five American technological
firms.
On July 5, 1994, Jeff Bezos launched Amazon from his garage
in Bellevue, Washington. It started out as an online book
marketplace but has since expanded into many different
product categories, earning the nickname "The Everything
Store." It has numerous subsidiaries, including Kuiper
Systems (satellite Internet), Amazon Lab126, Zoox
(autonomous vehicles), and Amazon Web Services (cloud
computing) (computer hardware R&D). The company also has
subsidiaries for Ring, Twitch, IMDb, and Whole Foods. With
the $13.4 billion purchase of Whole Foods in August 2017, it
significantly expanded its physical retail footprint.

Consumer behavior
The term "customer behaviour" describes a person's
purchasing patterns, including societal trends, recurring
patterns, and environmental influences on those decisions.
Businesses analyse client behaviour to comprehend their
target market and develop more alluring offers for their
goods and services.
The way your customers shop at your stores, not who they
are, is shown by their behaviour. It examines things like
product preferences, how frequently people shop, and how
they react to your marketing, sales, and service offers.
Changing Consumer
Behavior: Mckinsey Report

Shopping online is here to stay:

Online shopping intentions are on the rise, particularly for
necessities and home entertainment. Food, groceries, household
goods, personal care items, and over-the-counter (OTC)
medications are examples of essentials where internet sales are
predicted to expand by more than 35%.

When it comes to internet buying, millennials and those with

high incomes are leading the way:
High-income earners and millennials are setting the pace in
shifting spending online for both necessary and luxuries items,
even though the shift to online shopping has been almost
universal across categories.

Consumers are switching brands at unprecedented rates:

Consumers are switching brands at previously unheard-of rates,
with 36% of consumers experimenting with new product brands
and 25% adopting new private-label brands as a result of this
broad shift in behaviour.

Brands need to ensure strong availability and also convey value:

For marketers, this emphasises the necessity to immediately
identify when customers are switching brands or retailers and
then to manage the logistics to assure product and service
availability. Brands need to ensure strong availability and also
communicate value.

Spending More Time On Leisure Activities:

As people choose to stay at home and deal with greater stress and
mental health awareness, there is a surge in demand for digital
wellness and the amount of time people spend watching television
for the first time in 10 years. Additionally, more time is being spent
engaging in hobbies and reading the news.
Impact of Changing
Consumer Behavior on
Amazon
Trends Keep a Brand Current:
It is crucial to maintain brand consistency, particularly in this day
and age when digital marketing has become such a buzzword. But
it can be challenging to maintain a brand fully current amid all the
changes and developments brought forth by digital marketing.
Adopting the most recent digital trends and incorporating them
into their branding strategy is the greatest method for Amazon to
make sure that it is staying current. In the end, they will enrich
their brand's narrative and support them in maintaining audience
awareness.

Trends Put Brand Values Front and Center:

Every brand strives to establish sufficient context to influence
consumer perceptions and promote brand loyalty. As a result,
every strategic choice it makes reflects the brand principles that
may be linked to the brand manifesto.
Trends give a significant opportunity for brands like Amazon to
strengthen their brand identity and stay relevant in front of their
audience because it is challenging for them to explain their
philosophy on a continual basis.

Trends Strengthen Your Brand Positioning Statement:

In order to stay relevant, brands must make adjustments to fit the
preferences of their customers and potential customers. And the
best way to do this is to stay current with fashion. Businesses must
make sure that their brand is represented and promoted at the
forefront of these trends as their digital footprint expands.
Amazon must therefore make sure that their efforts to establish
their brand are in line with contemporary values and
considerations. This is done for service delivery and reputation
management in addition to marketing. Trends offer unmistakable
guidance and are an excellent approach for companies like
Amazon to determine their present and future course.
External Factors affecting
Amazon
Governments' attitude toward Amazon:
Politicians and other government officials share the general
public's love or hate of Amazon. Donald Trump, a former US
president, was outspoken in his distaste of the internet giant and
occasionally criticised it and its former CEO Jeff Bezos on Twitter.
Joe Biden, the current president, also lambastes Amazon for its
low tax burden and hostility to the formation of labour unions.

Amazon's Lobbying Activities:

The digital giant participates in lobbying activities in an effort to
lessen the adverse effects that the political element mentioned
above may have on the company's bottom line. Amazon has been
increasing their lobbying expenditure in the US for almost 20
years, as shown in the graph below, with just a minor decrease in
2008.

Changes in Exchange Rates:

More than 31% of Amazon's total revenues in 2021 came from net
sales from overseas company. As a result, the company is heavily
exposed to currency exchange risks. For instance, if the U.S. Dollar
depreciates year over year in comparison to currencies in
Amazon's overseas locations, its consolidated net sales and
operating costs will increase compared to what they would have
been if the exchange rates had remained the same.
Additionally, if the U.S. Dollar appreciates year over year in
comparison to other currencies used by Amazon abroad, its
consolidated net sales and operational costs will be lower than
they would have been if currencies had remained stable.

Price of Labor:
Due to reductions in the expenses of resources, particularly human
resources, Amazon is able to operate with a razor-thin profit
margin of roughly 7,1%. In 2020, 1,3 million Amazon employees had
median pay of USD 29,007, a rise of just USD 159 from the year
before. In contrast, the median pay for employees at Google and
Facebook is respectively USD 133,066 and USD 124,000.
An increase in labour costs will put the e-commerce behemoth's
profit in jeopardy and have a direct impact on its long-term
expansion.
External Factors affecting
Amazon
Adaptations to Taxation:
Former US President Donald Trump mentioned the need to enact a
"internet tax" in June 2017, mentioning Amazon in particular.
Analysts speculated that Mr. Trump may have been considering
legislation allowing state governments to compel online
companies to collect sales taxes from their customers. The largest
online retailer in the world by revenue began obtaining sales tax in
the US as of March 2022.

Personalized Shopper Service Hits Big:

The Success of Personalized Customer Service Amazon recently
introduced their amazing personal shopper service, which is
available only to Prime subscribers. As a result, if you have Amazon
Prime, you can choose the personal shopper option to gain access
to the company's staff of expert stylists and fashionistas.

Autonomous Vehicle Technology:

Amazon just paid a whopping $1 Billion to acquire the self-driving
startup Zoox Inc. in California. It can now take advantage of the
rise in demand for ride-hailing services or employ autonomous
technology to enhance its delivery network.

Introduction of electric rickshaws:

Amazon makes a commitment to protect the environment.
Amazon intends to use 10,000 electric rickshaws for delivery in
India by 2025 in order to realise this objective.

False goods:
Amazon's profits are in danger due to the rise in counterfeiting
and phoney goods. The business recently brought legal action
against a New York-based online merchant for allegedly copying
Valentino shoes, a high-end Italian shoe brand that Amazon sells.

Phony reviews:
There are far too many fake reviews on Amazon, and the problem
has gotten worse recently as a result of the pandemic. The
Financial Times research claims that over 20,000 bogus 5-star
reviews from prominent UK reviewers have been removed by
Amazon.
Internal Factors affecting
Amazon
Differentiation and Innovation:
Amazon often adds new products and services that differentiate it
from competitors, such as the ambitious drone delivery service
and the Withings Aura Smart Sleep System.

Cost Leadership:
Because Amazon sells everything online, there are no costs
associated with operating physical retail locations. Amazon
effectively manages its expenses and reduces the time it takes to
refill its inventory because to economies of scale.

Act and globalise Local strategy:

To compete with domestic e-commerce rivals, Amazon forms
alliances with local supply chain businesses. It recognises local
requirements and introduces its services in accordance with
national customs. For instance, it has started a marketing
campaign called "Aur Dikhao" in India to entice customers to look
up more of its items.

Superior logistics and delivery methods:

Amazon makes use of extremely effective logistics and delivery
methods. Even the fixed pricing for various delivery time periods
are available. As a result, it carries out quick, safe, and dependable
delivery of goods and products to the clients.

Consumer safety is deteriorating:

As Amazon's offers grow, it is harder for the company to inspect
each product and ensure the highest degree of safety. Recently,
Amazon was forced to comply with a request from the U.S.
Environmental Protection Agency (EPA) to remove a variety of
harmful products off its website.

Unfair use of data belonging to third parties:

Engaging in unfair business activities reduces trust and raises
legal concerns. In the European Union, Amazon is being accused of
violating antitrust laws by gathering and exploiting data from
third parties to compete with them. If found in violation, Amazon
may be subject to fines of up to 10% ($28 billion) of its projected
2019 annual revenue.
Recommendation on
Effective Strategies
Increase Cata;ogue of Items available for Prime Shipping:
Only 7% of all items on Amazon are eligible for Prime Shipping.
Given the overall number of objects, this still amounts to an
absurd 36 million or more, but it is a very modest figure. By
expanding the items that qualify, Prime members will believe that
their yearly dues are more appropriately priced. If a Prime member
wants to purchase a certain item but it cannot be shipped for free
within two days, they may decide not to renew their membership
and not to tell others about it. Because they only account for 1% of
sales apiece, categories including toys and games, health and
personal care, the Kindle Store, and patio, lawn, and garden are
good places for Amazon to concentrate its efforts. This approach,
however, comes at a significant cost because all warehouses would
need to be updated with products that should be delivered to
clients in two days. Additionally, it would affect the frequency with
which suppliers must deliver goods to Amazon for storage, which
might result in a decrease in the number of providers.

Expand into Brick and Mortar Business:

Amazon may think about extending its business into store-based
retailing given the possibilities that displays in both that type of
retailing and non-store-based retailing offer. This will enable the
business to diversify into new markets and earn market share in
the retail sector. Walmart and CVS are two fierce competitors in
this market, though. It could be challenging to break into the
market as a result. Currently, the vast product selection is one of
its primary competitive advantages. Amazon would lose this
benefit if this alternative were used since it would be unable to
stock the same number of SKUs. As the corporation would now
need to have a longer channel length with its distributors and
producers, it would also forfeit the cost advantage. As the business
would first need to purchase space to launch its stores and then
spend labour costs to set up and get the store operational, this
would be quite expensive to accomplish. Additionally, more
warehouses would need to be built in order to hold enough goods
for both traditional retail outlets and online sales.
References

https://en.wikipedia.org/wiki/Amazon_(company)

https://www.mckinsey.com/capabilities/growth-
marketing-and-sales/our-insights/the-great-consumer-
shift-ten-charts-that-show-how-us-shopping-behavior-
is-changing

https://www.forbes.com/sites/jiawertz/2021/01/31/chang
es-in-consumer-behavior-brought-on-by-the-
pandemic/?sh=9c5c5fc559ea

https://www.xara.com/branding-hub/why-trends-are-
important-for-brands/

https://research-methodology.net/amazon-pestel-
analysis-2/

https://gradesfixer.com/free-essay-examples/internal-
and-external-analysis-of-amazon-to-indicate-the-
future-perspectives-of-the-company/

https://bstrategyhub.com/swot-analysis-of-amazon-
amazon-swot/