Amazon had a strong 2023, with their Q4 earnings call showing double digit growth across their many lines of business.
But with such a wide ranging product and service offering, what is Amazon prioritizing in its ecommerce operations?
We take a look at what priorities Amazon is likely to focus on in 2024, and how its competitors are likely to respond.
-
Elevating delivery expectations
Amazon continues to set the pace when it comes to order fulfillment. In 2023, it delivered more than 7 billion units arriving the same or next day, including more than 4 billion in the U.S. and more than 2 billion in Europe.
Delivery speed for Prime users is likely to accelerate even further in 2024, as Amazon rolls out its Same-Day Delivery capacity.
Despite offering Same-Day Delivery in 17 countries across the globe, its availability is more widespread in the United States. This will soon change, however, as Amazon further strengthens its fulfillment networks internationally.
Amazon's fulfillment advancements have reset consumer expectations. This is likely to compel competitors to consider stronger partnerships with logistics leaders such as FedEx or UPS and to invest more aggressively in technology to enhance supply chain efficiency, in an effort to keep pace with Amazon.
-
Prime Air and the future of drone deliveries
To enable the constant improvement in delivery times, Amazon has been investing heavily in cutting edge technology like drones.
Amazon's Prime Air drone delivery service aims to reduce delivery times to as little as 30 minutes for certain items. The service is already active in the USA and Prime Air will expand its services to Italy and the UK in 2024.
Competitors and logistics companies are observing Amazon's progress closely. For instance, Wing, a project under Alphabet, has also been developing drone delivery technology and has received FAA approval for commercial deliveries in select U.S. locations.
Wing has also made headway internationally, with the delivery of medical deliveries in Ireland. They will surely provide a good option for marketplaces and fulfilment providers looking to keep up with FBA.
The grocery sector: Amazon's new arena
In 2023, Amazon expanded Amazon Fresh grocery delivery and began to offer free pickup to customers without a Prime membership in the U.S.
This is a clear sign that they are willing to sacrifice some margin in their attempts to gain market share against other US supermarkets, especially for delivery services.
Leveraging fulfillment strength is an interesting path to growth for Amazon in this sector. Amazon isn’t top of mind for consumers when buying groceries at the moment, but they are a clear leader when it comes to fast deliveries.
It makes sense that Amazon plays to their strengths here, and by forming partnerships with supermarkets to deliver their food, they can build their brand in the category, while generating revenue instead of spending ad dollars.
In response to Amazon's moves, competitors have launched and expanded their own services to strengthen their position in the grocery market. For example, Aldi USA has formed a strategic partnership with Instacart, to enable grocery delivery in 30 minutes.
While the grocery category is fiercely competitive all over the world, it’s clear that Amazon is not backing away from the challenge. In 2024, expect them to ramp up their focus on this sector, with their delivery capabilities as their ‘not so secret’ weapon!
-
Attracting Chinese international sellers
On Amazon’s Q4 earnings call Andy Jassy announced that they have expanded tools and resources for Amazon sellers in China.
These include an ‘Innovation Center’ to help support product innovation and brand growth among Chinese sellers. As well as Supply Chain by Amazon, offering logistics and supply chain services tailored for Chinese sellers, facilitating easier and more efficient international shipping and fulfillment.
Last year Amazon also opened five Regional Global Selling Centers across China to offer localized support, including training and insights into global ecommerce trends, helping sellers expand internationally.
This is a clear sign that Amazon is attempting to attract Chinese ecommerce merchants who want to sell internationally.
This is no surprise, as Chinese marketplace Temu enjoyed explosive growth last year, with their app the most downloaded in The USA in 2023.
When a rival’s marketplace’s presence is growing this fast in America and globally, with a highly engaged user base, it’s easy to imagine the alarm that this would cause among the Amazon executive team.
It’s not only Temu’s parent company Pinduoduo that are fighting this battle, however.
Chinese ecommerce heavyweights Alibaba and JD.com, major players have intensified their efforts to support sellers internationally.
Alibaba's Tmall Global and JD.com's JD Worldwide platforms offer similar cross-border ecommerce services, including logistics support through Cainiao and JD Logistics, respectively. These platforms also provide marketing and global expansion services to help sellers reach international consumers, positioning themselves as comprehensive ecosystems for Chinese businesses looking to sell abroad.
It’s an open question whether Pinduoduo’s Temu can maintain its aggressive growth for long, but Amazon clearly isn’t sitting back and waiting to find out. They are attempting to win some of the highly competitive Chinese merchants over to sell on their platform.
Final words
As the clear leader in almost every market they operate in, you would imagine that Amazon has a level of dominance that cannot be overcome. But in the dynamic world of ecommerce, this is never the case. The ambition of its innovations is indicative of this.
Just a few years ago it would have been hard to believe that Amazon would be rolling out delivery drones to offer same-day delivery. Similarly, at the beginning of 2023 it would have been difficult to comprehend that they’d be losing market share to a Chinese rival few people had even heard of.
It’s impossible to know exactly what 2024 will bring for Amazon, but they will certainly be pushing the boundaries of ecommerce customer experience.
