Amazon Retakes Retailing Award For Innovation And Share Growth

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Twelve years ago when

entered the CE business — carrying some major brands that denied they had shipped the online retailer — brick-and-mortar competitors saw it and all e-tailers as the end of CE retailing as they knew it.

Well, in the dozen years since, plenty of brickand- mortars got their own websites that do online sales … which probably gave more than a few a false sense of security.

Plenty more brick-and-mortars, and late 1990s e-tailers, are gone. Some expired due to competition or lousy business plans or, in recent years, the sour economy.


has survived and thrived in the CE business, making even CE giants like Best Buy and Walmart turn around and take notice, because it has continued to innovate and get even closer to its customers, knowing their wants and needs — and all without a storefront.

CE retailing has changed, with shopping online being second nature to consumers now. Amazon can be credited as starting the online shopping phenomenon, and enhancing it incrementally with a vast selection of products, ease of use, great prices, reliable shipping … and no sales taxes, but more on that later.

The brainchild of founder Jeff Bezos has taken CE retailing by storm, especially in the past 18 months. The TWICE Top 100 CE Retailers Report showed sales in calendar year 2010 growing an astronomical 72 percent to $7.9 billion, trailing only Best Buy, Walmart and Apple, landing it in fourth place.

More recently, Amazon reported CE sales and other general merchandise grew 67 percent in North America during the second quarter, ended June 30, to $3.5 billion.

In a statement accompanying the financial, CEO Bezos said low prices, expanding selection, fast delivery and innovation are fueling “the fastest growth we’ve seen in over a decade.”

Amazon’s CE sales were only enhanced during the quarter due to innovations like the Kindle e-reader. The company’s $139 3G version, with AT&T-sponsored screensavers, is currently its best-selling model, Amazon said.

If you talk to consumers, you’ll find out why. In a TWICE Special Report on Amazon this summer (July 5, p. 20), we quoted a survey released by the Consumer Electronics Association (CEA) and The Stevenson Company’s TraQline shopper surveys. Amazon’s share of total CE dollars spent rose 27.5 percent over the 12-month period, ended March 31, to 5.1 percent, compared with a 0.7 percent decline in share for Best Buy and essentially flat results for Walmart during the same period.

The survey showed that driving the traffic are price, selection and shopping experience — the top motivations of consumers for purchasing their electronics where they do. Amazon was tops in all three areas.

And the survey indicated that the ability to shop any brick-and-mortar — Best Buy, Walmart, Target — and perform price comparisons with a smartphone app is a dramatic new element in the battle for CE market share, profitability and dominance.

Amazon is continuing to innovate. The online retailer is optimizing its website for tablet PCs, according to reports last month that were ripe with details of a supposed new streamlined design that has a larger search bar, fewer buttons, and positions digital content ahead of physical merchandise on the home page.

All of this makes sense since tablets, along with smartphones, are the two hottest CE products of 2011, and Amazon introduced its own tablet, the Kindle Fire last week.

While many in the CE industry and even its key rivals acknowledge Amazon’s savvy online innovations, many see its refusal to collect and pay state sales taxes nationwide as, at best, the key to its recent growth spurt, and, at worst, a terribly unfair advantage.

In a statement issued to TWICE in late July when it released its most recent quarterly financial, an Amazon spokesperson said, “We collect sales tax or its equivalent in more than half of the areas where we do business, and our business is thriving in those areas.”

Still, Amazon has fought sales tax legislation in numerous states, opting instead to back a national approach.

A long-anticipated plan to streamline state and local tax collection on e-commerce sales was introduced into the House and Senate during this past summer of budget and deficit debacles in Washington. Passage of the Democrat-backed legislation remains uncertain, as do many other issues facing the nation.

The bill would certify the Streamlined Sales and Use Tax Agreement, a comprehensive interstate system to harmonize and simplify sales tax rules and administrative requirements that has been adopted by 24 states, but requires congressional approval under the Supreme Court’s 1992 “Quill” decision.

Amazon supports the bill, along with plenty of retail groups, including the National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA), as well as individual retailers.

More recently, Amazon has agreed to begin collecting sales tax in California in one year. But if national legislation ever does get passed, CE retailing rivals will find out how much of Amazon’s market clout comes from its tax advantage and how much is due to the innovations it has fostered in online retailing.


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