Three Retailers Who Threaten Amazon

MAY 27, 2016 | BY DAN BERTHIAUME

Amazon.com is starting to appear like the ‘Teflon e-tailer.”

 

According to eMarketer data, Amazon captured $79.3 billion in U.S. e-commerce sales between April 2015 and April 2016, growing 13% year-over-year. Its next-closest rival, Walmart, took in just $13.5 billion online in that period. However, Amazon may not be invincible.

  

Here are three retailers who could pose a real challenge to Amazon’s e-commerce dominance: 

 

Jet.com

Jet.com only launched in July 2015, but is already estimated to be capable of generating $500 million in revenue annually and raised $700 million in funding as of December.

 

And although Jet’s mainstays are CPG and HBC, it is rapidly spreading its assortment wings. In February, it greatly expanded its home goods presence by purchasing online home products retailer Hayneedle.

 

In April, Jet started testing a fresh grocery delivery service, directly competing against AmazonFresh. While Jet makes customers wait one or two days for their groceries, as opposed to as little as one or two hours for AmazonFresh deliveries, it requires no membership fee.

 

Jet uses a proprietary algorithm to find the lowest possible price on each item from its extensive network of retail partners, and offers free two-to-five day shipping for orders more than $35. If the customer demand and internal costs line up, this could be a high-flying omnichannel offering.

 

Walmart

The world’s leading discount retailer may currently trail Amazon in the e-commerce sphere, but Walmart is not meekly accepting the status quo.

 

As part of its efforts to unseat Amazon, Walmart offered its own version of the Amazon Prime Day online sales event last summer, and now is directly taking on Amazon Prime with a beta test of a similar program called ShippingPass.

 

The two-day delivery service costs about half of the $99 annual Amazon Prime membership fee, with customers trading one day of shipping for a lower cost. Walmart has the advantage of fulfilling from its network of thousands of local stores, which could lead to shorter delivery times, at least for customers close to a store.

 

Walmart has also treaded on Amazon’s turf by providing online grocery delivery and free cloud hosting, and by testing delivery drones. While Walmart may never have quite as broad an online assortment as that of Amazon, it offers about 7 million items online. This gives the retailer a lot of potential to grow at the expense of its main e-commerce rival.

 

Uber

Technically ride-sharing service Uber is not a retailer, but the company’s aggressive moves into the online delivery space makes it a legitimate competitor for Amazon’s business. The UberRush service uses Uber drivers to deliver merchandise from retailers to customers for a $5-$7 fee, often in minutes.

 

Unlike other online retailers and delivery providers, Uber already has profit built into its routes from paying passengers. Further boosting its e-commerce margins, drivers are all independent contractors and the company operates no physical infrastructure and holds no inventory.

 

UberRush is still in limited pilot mode and faces hurdles such as local regulations and dependence on the cooperation of retail partners. Nevertheless, the company that has been obtaining significant marketshare from the taxi industry clearly has its eyes on e-commerce as the next business model it seeks to disrupt.