Amazon is never idle, but after a global pandemic, the ecommerce leviathan is experiencing one of its most intense growth phases yet.
Snapshot: The State of Amazon
- 38% Growth
in annual net sales - 66% Growth
in annual advertising revenue - 1.3M
sellers joined Amazon in 2020 - 19 Countries
with Amazon marketplaces - $3 Billion
invested in Amazon brand acquirers as of March 2021 - “S-Team” Changes
Jeff Bezos, Jeff Wilke, and Jeff Blackburn exit their roles
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Key Updates from 2020
Amazon Sales Soar
Ecommerce sales reached between 14% and 21% penetration of all retail sales in 2020. US ecommerce sales grew to nearly $800 billion in 2020, accelerating ecommerce growth by over 2 years.
Amazon was a major winner in this ecommerce growth, reporting annual net sales of $386.1 billion in 2020. Amazon’s annual net sales grew 38% year-on-year, a massive figure for a company of Amazon’s size.
As the ecommerce titan grows, having a brand presence on Amazon is becoming less of an option and more of a necessity for brands who want to remain competitive.
Amazon’s Competitors Ride the 2020 Wave
Amazon’s fulfillment issues in late spring and early summer allowed competitors to secure a stronger foothold in the space, which doesn’t seem to be slowing down. Walmart, Target, Shopify, and more posted double-digit and triple-digit growth in 2020. Amazon still dwarfs all of its domestic ecommerce competitors, but 2021 may present the greatest challenge to its dominance seen in the last decade.
In a survey, Kaspien found that 43% of respondents ranked Target.com as the online marketplace that they are most interested in expanding to within the next 1–2 years, followed by Walmart at 41%.
Read our breakdown: Walmart vs Amazon
Amazon’s Share of Ecommerce Shrinks?
Competitors’ success may have eroded Amazon’s market share in US ecommerce. According to Digital Commerce 360, Amazon’s market share diminished from 44% in 2019 to 31% in 2020. However, eMarketer reports contradicting numbers, estimating Amazon’s market share grew from 37% in 2019 to 39% in 2020.
Whatever the reality, Amazon’s subscription service retains a comfortable lead ahead of competitors’ subscription services. A January survey by PYMNTS shows that 64% of respondents have Prime memberships, while only 21% have Walmart+ memberships.
Amazon is irrefutably the dominant marketplace in the US, but the reduction in market share indicates that other online marketplaces are gaining steam. Brands would be wise to plan for an omnichannel approach to ecommerce for the coming years.
Amazon Facing Antitrust Scrutiny
Even before the global pandemic, Amazon was facing increased scrutiny from regulatory bodies. On March 2, 2020, the SHOP SAFE Act was introduced to Congress and referred to the US House Committee on the Judiciary. The act would hold Amazon and other online marketplaces accountable for counterfeits sold on their platforms.
Jeff Bezos also testified before Congress in July of 2020, and Amazon submitted written answers to follow-up questions in September. In October, the committee published a 450-page report with their findings from a 16–month antitrust investigation recommending antitrust actions be taken. 2021 may see some of those actions introduced to Congress.
Jeff Bezos Passes the Reins
In addition to potential legislation, the year will also witness several major changes in Amazon leadership. Founder and CEO Jeff Bezos stated that he will step down from his role to become the Executive Chair in Q3 2021. He will be replaced by Andy Jassy, the CEO of Amazon Web Services (AWS). Jassy has been with Amazon since 1997.
Jeff Wilke, CEO of Amazon Worldwide Consumer, also announced he would retire in Q1 2021. Wilke was replaced by Dave Clark, who has a background in operations. A third Jeff on Amazon’s senior leadership team announced his departure in February 2021. Jeff Blackburn, who served at Amazon for over 20 years, is leaving the company.
As reported by Geekwire, Blackburn’s and Wilke’s departures will enable new CEO Andy Jassy to reshape more of the Amazon leadership team.
Third-Party Seller Services Grow
These changes in senior leadership suggest that Amazon will shift its focus to expanding and improving its platform instead of growing its direct retail relationships with brands. Expanding its platform would increase its value proposition for third-party sellers and advertisers operating on its marketplace, which generated $300 billion of Amazon’s $490 billion GMV in 2020, according to Marketplace Pulse.
If this is the case, all but the largest brands will be expected to sell on Amazon as their own seller or through third-party sellers. This shift has been trending for some time, with third-party seller services growing 57% year-on-year in 2020.
Amazon also acquired a Shopify competitor called Selz in January 2021. Like Shopify, Selz serves as a central hub through which sellers can manage multiple ecommerce sales channels. Amazon’s acquisition of Selz, especially after Shopify’s stellar performance in 2020, demonstrates Amazon’s continued investment in enabling brands to represent themselves on the marketplace.
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Amazon Expands Advertising Services
Amazon’s advertising revenue has been one of its fastest growing segments for the last several years. In just Q4 2020, ad revenue grew 64% year-on-year, reaching $7.95 billion! Amazon also continually expands its advertising capabilities, releasing new features and ad types to Seller Central in recent years.
Brand Acquirers Raise $3 Billion
Over $1 billion were invested in companies focused on buying and growing brands on Amazon in 2020. By March 2021, total funding in this space was over $3 billion. Thrasio, Perch, and Heyday practically became household names in the ecommerce industry. Taliesen Hollywood, founder of Hahnbeck, told Digital Commerce 360 that brand acquirers typically pay 2.5 to 4.5 times a brand’s EBITDA.
Consolidation is a natural part of business lifecycle in emerging industries, and it seems Amazon has finally reached that stage. The impact of brand acquirers is yet to be seen. How many will be able to successfully grow brands? Will their immense funding translate into brands becoming share leaders? How many will flounder?
International Marketplaces
Amazon’s international net sales grew to $104 billion in 2020, up from $75 billion in 2019. Amazon currently has 19 active marketplaces, having launched Amazon Netherlands and Amazon Sweden in 2020 and Amazon Poland in 2021. Latin America also drew much attention, growing ecommerce sales by 37% in 2020. However, the biggest winner in the region has been the online marketplace MercadoLibre, according to Euromonitor.
Amazon advertising also saw strong growth in international marketplaces. In 2020, Kaspien drove strong year-on-year growth in advertising sales in multiple marketplaces, including:
- US: 55% increase YOY
- CA: 201% increase YOY
- UK: 1,434% increase YOY
Winning Categories
Certain product categories saw particularly strong sales growth in 2020 as the global pandemic influenced buying decisions. Online grocery sales soared, with eMarketer reporting 2020 sales reached $89.22 billion, an increase of $30.86 billion.
Online grocery sales are expected to continue to climb, with estimates predicting online grocery sales will reach nearly $130 billion by 2023, accounting for nearly 10% of total grocery sales in the US. Euromonitor forecasts higher growth than eMarketer, predicting that food and drink ecommerce will expand by 8% in 2021.
Kaspien also saw other categories benefit from the wild year. In particular, Pet Supplies, Sports & Outdoors, and Toys & Games each grew substantially. All of these categories involve entertainment and recreation, suggesting shoppers looked for respite from an exhausting year.
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We’ve only scratched the surface. Download our State of Amazon: 2021 Report to learn about other significant changes in 2020, as well as insights into what 2021 will bring.
