Amazon.com is experiencing an identity crisis and faces challenges as it looks to grow its business in three separate areas — the retail, shopping portal, and technology platform industries. Amazon’s success or lack thereof could mean the difference of $8.1 billion by 2008.
During the past eight years, Amazon has developed assets that are the envy of most retailers. It has set itself apart with industry-leading retail site design, a custom-built technology platform, and an attractive base of 35 million active customers who have an annual household income nearly $6,500 higher than non-Amazon shoppers and spend almost 10 percent more online.
But a new report from Forrester Research, Inc. (Nasdaq: FORR) “The Future Of Amazon.com,” lays out Amazon’s challenges. On the consumer side, the site has become cluttered and commoditized: In a recent Forrester evaluation of leading retail sites, Amazon came in fourth behind Lands’ End, L.L. Bean, and Wal-Mart. On the business side, some retailers have expressed frustration about their partnerships with Amazon, citing inflexible negotiations, weak execution, and disappointing sales.
“Amazon has reached a crossroads and must focus on what it does best — selling merchandise. The company is trying to be all things to all people, which is weakening its customer experience and relationships with retail partners,” said Carrie A. Johnson, senior analyst at Forrester. “The company must work on moving its impressive base of repeat customers into new product categories by cleaning up their user experience and on increasing its portal business by boosting its account management.”
The Forrester report outlines three scenarios for Amazon’s future, which, in turn, will determine whether the company reaches $7.4 billion or $15.5 billion in US gross merchandise sales by 2008. Although Amazon faces stiff competition in all areas of its business, the company is best poised to succeed in the retail and portal industries, where it has considerable expertise and fills a unique gap in the retail and portal markets. However, it will compete for market share with eBay, Wal-Mart, AOL, Yahoo!, MSN, and Google. On the other hand, Amazon should downsize expectations for its technology platform business, where it is up against powerful players like IBM and Microsoft and smaller ones like GSI Commerce that can better deliver the multichannel shopping and brand experiences most retailers are interested in building today.
To learn more about Amazon’s future from Carrie Johnson, click on the video icon: http://www.forrester.com/ER/Research/Report/0,1338,16873,00.html
The research mentioned in this press release is available to Forrester WholeView™ clients and can be found through www.forrester.com.