The hum of 102 rooftop air conditioners and a chorus of beeping electric carts provide the acoustic backdrop in Amazon.com’s 56,000m2 distribution facility on Phoenix’s west side. But the center’s employees can almost always hear Terry Jones.
On a recent summer afternoon, Jones, an “inbound support associate” making US$12 an hour, steered a hand-pushed cart through the packed aisles and shouted his location to everyone in earshot: “Cart coming through. Yup! Watch yourself, please!”
Jones explained that he was just making his time at Amazon “joyful and fun” while complying with the company’s rigorous safety rules.
But his cries might double as a warning to the retail world: Amazon, the Web’s largest retailer, wants you to step aside.
Fifteen years after Jeffrey Bezos founded the company as an online bookstore, Amazon is set to cross a significant threshold. Sometime later this year, if current trends continue, worldwide sales of media products — the books, movies and music that Amazon started with — will be surpassed for the first time by sales of other merchandise on the site. That transition already occurred this year in its North American business.
In other words, in an increasingly digital age, Amazon is quickly becoming the world’s general store. Alongside the books and CDs and DVDs are diapers, Legos and power drills, not to mention replacement car clutches and more arcane items like the Jackalope Buck taxidermy mount available for US$69.97.
“Amazon has gone from ‘that bookstore’ in people’s mind to a general online retailer, and that is a great place to be,” said Scot Wingo, chief executive of ChannelAdvisor, an eBay-backed company that helps stores like Wal-Mart and J.C. Penney sell online.
Wingo envisions e-commerce growing to 15 percent of overall retail in the next decade from around 7 percent.
“If Amazon grows their market share throughout that period, and honestly I don’t see anything stopping it, that is pretty scary,” he said.
Indeed, Amazon has been gobbling e-commerce market share since 2006, taking away customers from eBay in particular. But its advances are shaking up the entire retail world. Giants like Wal-Mart are warily replicating elements of its strategy, while small independent retailers in sporting goods and jewelry now worry their fate will be similar to that of small bookstores and independent video rental shops (remember those?).
Amazon’s expansion strategy has allowed it, almost alone among retailers, to thrive during the recession, even while its own media business has stagnated. Over the last year, shoppers have bought fewer books, CDs and DVDs, in many cases opting for cheaper digital downloads. In the quarter ending in June, for example, Amazon’s worldwide media sales grew only 1 percent, to US$2.4 billion, highlighted by a slowdown in video games.
But during the same quarter, sales of other products, which the company lumps together on its balance sheet in a grouping dubbed “electronics and general merchandise,” grew by 35 percent, to US$2.07 billion.
Its relentless ambition to sell more of everything is constantly on display these days. In July alone, Amazon introduced separate hubs on its site for outdoor sporting goods and cell phones and wireless plans. Then it capped the month by buying an emerging competitor, the online shoe and apparel retailer Zappos.com, in a stock exchange now worth more than US$930 million.
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