Is Amazon Poised To Capture A Higher Market Share In The U.S. EGM Market?
Amazon (NASDAQ:AMZN) generated nearly 36% of all online sales on “Cyber Monday” November 30, [1] while other players such as Best Buy and Walmart had only 5.5% and 3.8% share, respectively, in total online sales. Amazon’s share declined by 3 percentage points compared to last year, but the sales volume was higher given that total online sales on Cyber Monday went up by 16% from last year to $3.07 billion this year. [2]. According to ComScore, digital sales on Thanksgiving Day and Black Friday went up by 20% this year reaching $4 billion, while total revenues over these two days were around $12 billion, according to ShopperTrak. [3]. Online shopping over the Thanksgiving holiday now stands at nearly 25% of total sales and Amazon got the largest chunk of this pie. Amazon’s increasing popularity could help it capture a higher market share in the U.S. EGM (electronics and general merchandise) market, going forward.
Traditional Retailers Are Losing The Ecommerce Battle
Amazon was the leader in Cyber Monday sales conquering a 36.1% share in total spending compared to only 3.8% by Walmart. [1] This shows consumer preference of Amazon for online purchases over traditional retailers.
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Cowen predicts that Amazon will become the number one apparel retailer in the U.S. by 2017, comfortably passing Macy’s by 2017. [4]. ShopperTrak data revealed that brick and mortar retail sales on Black Friday were estimated $10.21 billion which is around 12% lower compared to last year [5], while stating that fewer available store hours on Thanksgiving day and a later Hanukah could be the contributing factors for this decline. However, these data points indicate increasing consumer preference towards online spending, where Amazon is emerging as the winner. As this trend strengthens over the years, Amazon could gain a higher market share in the U.S. EGM market.
Prime Memberships Attracting Wealthier Members
Amazon Prime membership, which is the key driver to its U.S. EGM sales, is growing at a rapid pace. According to new data from Cowen & co, there are now nearly 41 million Amazon Prime members and their average household income is $69,300 nearly 25% higher than Walmart shopper’s average income. [6]. Amazon is offering several benefits to Prime members including faster delivery times, which is the key driver of higher memberships. This can lead to Amazon capturing a higher market share. We estimate Amazon’s market share in the U.S. EGM market will increase from around 14% in 2015 to nearly 20% by 2022.
The holiday shopping data indicates that buyers are leaning more towards online purchases with Amazon as their preferred website. The rapid increase in the number of Amazon prime memberships is another indicator of Amazon’s increasing popularity. We believe both these factors are indicative of Amazon’s capability of capturing a higher market share in the future.
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Notes:- Amazon Dominated Cyber Monday With 36% Of All Online Sales, Fortune.com, December 2, 2015 [↩] [↩]
- Cyber Monday Sales Top $3 billion, beat forecast, CNBC, December 1, 2015 [↩]
- Holiday Sales “Perfectly Average” So Far :Analyst, CNBC, November 30, 2015 [↩]
- Cowen: Amazon Will Be the No.1 U.S. Clothing Retailer Very Soon, Bloomberg, July 2015 [↩]
- In-Store Retail Sales Decline On Black Friday Weekend, ShopperTrak, December 1, 2015 [↩]
- Amazon Prime Is Gaining Steam, Posing An Even Bigger Threat To Walmart, Target, Fortune, December 3, 2015 [↩]