FINANCE TODAY | ISSUE NO.9
AMAZON NOW HAS SOME SERIOUS COMPETITION
The process of an Initial Public Offering (IPO) is an essential time for any company, as it provides them with the potential to raise an increased amount of capital to fund their day-to-day operations, expansions and other business activities. It is critical for private companies to go public at the right time. Although difficult to accomplish, effectively timing an IPO will help to bolster its performance. Regardless of major setbacks this year due to the COVID-19 pandemic, home-sharing company Airbnb is continuing with their plans to go public this year, believing that there is likely no better time than now. The company plans to file paperwork for the IPO later this month. After experiencing a sharp decrease in revenues surrounding fears about the pandemic earlier in the year, they are now beginning to regain their footing. This emerging comeback has given them the confidence needed to proceed with their plans. Airbnb had initially planned to file paperwork earlier in the year, but the COVID-19 pandemic had forced the company to lay off a quarter of its staff back in May (Klebnikov, 2020). It’s impressive that amidst the significant losses Airbnb incurred this year, they are still confident in their ability to proceed as initially planned.
Walmart has been attempting to improve its e-commerce offerings for the past few years in order to compete with the likes of Amazon and other massive e-commerce companies. In early 2020, the supercenter behemoth revealed Walmart+, its own direct competitor to Amazon Prime. The service boasts perks such as same-day delivery of groceries and products from Walmart locations, early access to deals, scan and go services at Walmart stores, discounts at Walmart gas stations and more (Morgan, 2020). The annual membership fee of Walmart+ is US$98, which is 20 dollars cheaper than the price offered by Amazon Prime. Price is by far the largest advantage that Walmart+ will have over
its main competitor. While both services offer same-day grocery delivery and quick delivery on their other products, Walmart falls short due to its lack of a streaming library since streaming is not one of the company’s areas of focus. Of all competitors poised to compete with Amazon, Walmart is likely to be the most successful. Walmart is expected to sell over US$75 billion worth of goods through Walmart.com this year alone and has overtaken eBay to become America’s second-largest online retailer (McBride, 2020). They possess the capital requirements needed to improve technological infrastructure and meet the needs of their growing market. Overall, both services show several glaring similarities, so the true advantage comes from experience. Whichever service is able to provide customers with the most seamless experience will ultimately be the victor in the struggle for e-commerce dominance.
Shopify is an e-commerce service that allows businesses of any size to open an online store and sell their products to the public. Shopify allows its users to sell a wide variety of different products such as physical and digital goods, services, memberships, lessons and more. Shopify is a unique competitor to Amazon, as Shopify’s means of competing with the e-commerce giant stems from their ability to help much smaller businesses create an easy-to-use e-commerce platform and compete with Amazon head-on. Shopify can be seen as a partner to these small businesses looking to grow within the industry. Currently, there are over 30 million small businesses in the United States and these businesses make up a massive 99.9% of all companies in America (McBride, 2020). A majority of these small businesses lacked an online presence altogether. As the COVID-19 pandemic forced small businesses to close their doors earlier in the year, these businesses were forced to shift their operations to an online format to survive the rapidly declining economic conditions. The drastic change caused many of these small businesses to realize the importance of having a strong e-commerce presence, and they have chosen to sell their products through Shopify rather than Amazon. This change in economic conditions has positively influenced Shopify’s stock, which has more than tripled since March lows. More than 1 million businesses around the globe have set up an online store using Shopify (McBride, 2020). If Shopify can continue to increase their user base by implementing new features that will create an improved online store for small businesses, then they have potential to pose a serious threat to Amazon in the near future.
Etsy is an online marketplace where users are able to sell unique handcrafted or vintage items and craft supplies. Items sold on the website can fall into a variety of different categories such as clothing, home décor and furniture, art, jewelry and others. The company was founded in 2005, making it the youngest of the three mentioned. Etsy currently has two unique competitive advantages over Amazon. Etsy has created a niche market for itself, currently being coined as the “Amazon for Artisans” (McBride, 2020). Since the majority of the products that are sold on Etsy are handcrafted by individuals or small businesses, these essentially become exclusive items to the platform which can’t
be replicated by giants such as Amazon. Roughly US$5 billion worth of craft goods were sold through the Etsy marketplace last year, yet consumers in these markets spent a grand total of US$100 billion on handcrafted and unique items last year (McBride, 2020). Etsy still has a lot of potential to live up to and is a relatively young company. Creating a niche allows the company to gain a head start in controlling a market which may soon catch the attention of Amazon executives. While controlling a niche is very unlikely to be the key to dethroning Amazon, it still creates a barrier for the giant from penetrating the artisan market and may slow Amazon’s domination.
CAN AMAZON STAY ON TOP?
With several emerging competitors primed to increase their market share in the e-commerce industry, the question is raised about whether or not Amazon will be able to maintain its spot as the top online retailer in the world. Chances are that the company will stay ahead of its competition but will fail to grasp the market with the same amount of dominance as it once had. Etsy and Shopify create new challenges for Amazon to overcome such as altering their business plan in order to infiltrate the niche that Etsy is creating for itself. Although both organizations possess their own unique advantages over the online giant, both Etsy and Shopify lack the capital requirements necessary to keep up with the rapid distribution processes currently employed by Amazon. Of the companies discussed above, Walmart has the greatest chance of taking the top spot from Amazon as they possess more than enough capital to invest in distribution and logistics as a means of remaining competitive. As stated earlier, Walmart+ and Amazon Prime will be very similar in terms of the perks they provide to customers, but overall consumer preference will be the key determinant in deciding which retail giant will hold the top spot in the e-commerce industry. It may finally be time for investors to diversify the investments they currently hold within this industry, as these competitors have the potential to outperform Amazon in the near future.
McBride, S. (2020, August 24). Amazon Has Finally Met Its Match. Retrieved August 25, 2020, from https://www.forbes.com/sites/stephenmcbride1/2020/08/24/amazon-has-finally-met-its-match/
Morgan, B. (2020, August 13). What Walmart Plus Means For The Future Of Retail. Retrieved August 25, 2020, from https://www.forbes.com/sites/blakemorgan/2020/08/13/what-walmart-plus-means-for-the-future-of-retail/