Key Insights to Guide Your Amazon Business Strategy
Good decisions require good data. In that spirit, we collaborated with Sellzone to create a comprehensive report that analyzes the biggest Amazon news and trends from 2021, then predicts how they will shape 2022. By gaining a better understanding of the marketplace’s direct, sellers will be better equipped to plan their Amazon business strategy.
Unless otherwise specified, all data is sourced from Kaspien and Sellzone, a toolkit for Amazon sellers designed by Semrush.
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This article contains only a sample of the report. You can download the full report here:
Important Trends in 2021 to Guide Your Amazon Business Strategy
The E-Commerce Surge was Temporary
Amazon’s growth has realigned with pre-pandemic trending, as has U.S. e-commerce as a whole. The US Department of Commerce reported that e-commerce sales accounted for 12.4% of total retail sales in Q3 2021.
COVID-19 triggered massive surges in online sales, but shoppers are now reverting to pre-pandemic buying behaviors. That said, consumer spend is up; it’s just up in both e-commerce and traditional retail.
We see the realignment clearly reflected in Amazon’s traffic, as reported via the Semrush .Trends tool.
Pre-COVID forecasts suggested that 2020 would be larger than 2019, and 2021 would be greater still. COVID reshuffled this steady growth and predictable market patterns, driving an 87% traffic surge to Amazon throughout 2020 that lasted up to January 2021. Since then, however, Amazon has experienced a slight decrease in traffic as the offline world started its slow but steady reopening.
By mid-2020, many analysts, journalists, and business leaders predicted that COVID-19 would accelerate e-commerce’s growth rate permanently. This expectation led many companies to set overly ambitious 2021 goals for themselves.
Direct Traffic is Down, but the Attribution Program is Up
Direct traffic to Amazon surged in early and mid-2020 as more consumers shopped online instead in brick-and-mortars. As shoppers return to pre-pandemic behaviors, we see direct traffic and search traffic wane.
While direct and search traffic are down, we have seen strong and sustained performance in referral traffic. This can be traced back to Amazon’s Attribution Program.
Introduced back in January 2019, Amazon Attribution was designed to encourage sellers to bring more external traffic to the marketplace. And it seems that Amazon’s efforts are paying off.
Comparing Q3 2020 traffic stats with Q3 2021, direct traffic plummeted by 31% while referral traffic grew by 9%.
Desktop Traffic is Up
The COVID-19 outbreak spurred many companies to implement work-from-home policies, resulting in increased desktop usage. In early 2020, the majority of Amazon visitors shopped using mobile devices. Since the COVID breakout, desktop visitors have started dominating the Amazon platform.
Amazon Literacy Increased
While many of Amazon’s gains in 2020 appear to have been temporary, there were some lasting changes. One of them was the average level of Amazon literacy.
By Amazon literacy, we mean the baseline knowledge one has of Amazon, including features, tools, and strategies. The pandemic forced many companies to greatly expand their e-commerce operations in order to survive. They spent more time getting in the weeds with Amazon, and as a result, the average level of Amazon literacy has gone up.
Amazon Services are Larger than Marketplace
Amazon’s revenue composition also passed a notable milestone: In Q3 2021, revenue from Amazon services (advertising, AWS, third-party seller services, and Prime) collectively reached $55.9B, exceeding Amazon retail sales for the first time ever. Amazon is now more of a services provider than a retailer, and this may impact Amazon business strategy moving forward.
Amazon Ad Costs Rose
In 2020, the average cost-per-click (CPC) on Amazon plummeted as some sellers defensively reduced their ad spend, reallocating the budget to other business needs. In 2021, more sellers resumed advertising or increased their ad spend.
This has led to a steady rise in CPC over the year, and a 26% increase in average CPC compared to 2021.
Amazon is Curating Branded Experiences
Amazon added and expanded a host of new features in 2021. Below are just a few of the updates Amazon made in 2021:
These are just a handful of enhancements and additions to Amazon marketing in 2021, but they suggest an interesting trend: Amazon is focusing on creating branded experiences within the marketplace.
Why? Shopify’s massive success in 2020 proved to Amazon that shoppers and brands alike want more personalized shopping experiences. By adding more tools for branded experiences, Amazon feels like a digital mall where each store inside has increasingly more control over its look and feel.
The Global Supply Chain: A New Normal
Of course, we cannot talk about 2021 without mentioning the supply chain. Every link in the global supply chain was impacted by COVID-19.
Understandable fear of the pandemic, quarantines, caring for sick loved ones, deaths, inflation, and petitions for better working conditions and wages led to labor shortages across industries around the world. As a result, output in every link of the chain slowed: fewer materials were available, fewer factories were open, fewer ports accepted ships, etc.
This reduction in labor power was then exacerbated when retailers placed high volume orders from overseas, forcing fewer workers and already strained systems to handle higher workloads. And that’s just scratching the surface.
These challenges will not be resolved overnight. In all likelihood, they will take years to completely work through. The reality is global supply chain issues are the new normal for the foreseeable future. Amazon vendors and sellers must plan 2022 accordingly.
Amazon Doubled Its Warehouse Space
It’s not all grim news though. In Amazon’s Q3 2021 earnings release, CEO Andy Jassy stated, “we’ve nearly doubled the size of our fulfillment network since the pandemic began.” The increased warehouse space will alleviate some of the problems sellers face, but it is still not enough to meet consumer demand.
Amazon Air has 42 Locations
In addition to doubling the size of FBA, Amazon is also making strides in its air fleet. According to a DePaul University study in September 2021, Amazon Air operated out of 42 locations in the U.S., as well as one location currently in Leipzig, Germany. At the time, Amazon had 81 planes in its fleet, compared to 248 for UPS and 467 for FedEx.
All of these advancements are part of Amazon’s march to becoming the largest logistics provider in the U.S.
Amazon Aggregators Raised Over $13 Billion
2020 has sparked a massive influx of investment into companies that buy up Amazon-focused brands. In 2020, these FBA aggregators raised over $1 billion. In 2021, an additional $12 billion flooded the market, with the largest aggregator, Thrasio, claiming $3.4 billion of it.
The amount of money pouring into this market has inflated the price of Amazon businesses. As we head into 2022, the real test will be to see which of these companies are able to operationalize their capital to grow the brands they buy, especially as they face supply chain headwinds. Not all will survive.
Amazon Traffic vs Top Competitors’ Combined Traffic
To benchmark Amazon’s traffic growth against the market, we’ve looked at the traffic stats of its 11 closest competitors.
Overall, Amazon’s traffic patterns appear to be consistent with the market’s, with its highs at the peak of the pandemic and a slight slowdown since January 2021.
There has been much talk about other marketplaces catching up to Amazon. Yet, none are even remotely close to matching Amazon’s average monthly traffic.
However, if we look at the Q3 2020 vs. Q3 2021 traffic numbers, we see that Amazon’s traffic decline exceeds that of the market: Amazon saw 23% fewer visits compared to the market’s 15% decline.
Looking at Amazon’s top 11 competitors, Amazon has a larger market share than the six next rivals combined. Yet considering a YoY traffic trend, it also witnessed the largest fall in visitors.
We can see that despite the slowing market, not all the rivals saw a negative trend in 2021. In fact, seven out of ten competitors managed to grow their market share, with Walgreens, Costco, and Etsy leading the way.
Shopify grew dramatically and is now the equivalent of 40% of Amazon’s GMV. Shopify’s success parallels what we previously discussed about Amazon literacy: Brands turned to e-commerce to keep their businesses afloat during the pandemic. They made direct websites, and quickly discovered their value.
Direct websites increase brand exposure and educate undecided shoppers about differentiating features. They also allow brands to test new messaging, collect buyer information that can be used for personas and retargeting, and of course, capture additional sales. Even outside of a pandemic, these are huge benefits that can be used to support other sales channels.
Target Grew Digital Sales by 29%
Target reported 29% growth year on year in digital sales in Q3 2021, strongly outperforming Walmart’s 8% and Amazon’s 15% increase in net sales.
Target’s success is particularly notable because it did not break into the top 10 U.S. e-commerce companies by market share until 2020. So, why is Target seeing rapid success, especially compared to Walmart, which has a similar framework for brick-and-mortar and e-commerce?
Target’s online marketplace has taken a much different approach than Amazon or even Walmart, setting very strict criteria for which sellers and brands can sell on its online marketplace. By carefully curating their selection, Target ensures that only quality sellers and products are offered on its marketplace. Target also permits only one seller per product. For vendors and sellers, this means they don’t have to worry about rogue sellers or counterfeit products nearly as much as they do on Amazon.
This sense of a curated and sometimes exclusive selection is also attractive to consumers – it brings them into physical stores too. Target has also done a superb job of scaling its buy online, pickup in store (BOPIS) program and created an easy-to-use app for mobile shoppers. Target is also less reliant on groceries for its sales, which has certainly contributed to its sustained growth compared to Walmart.
And of course, Target is newer to the online marketplace scene. Its growth rate will naturally outsize more established competitors whose growth rates are more mature.
Changes to Top E-Commerce Players’ Market Positions
In regard to market stance, the last two years have driven substantial changes in the Semrush’s Growth Quadrant of top e-commerce players. Some of the biggest callouts include:
- Amazon turned from the market leader into an established player, which indicates that its market share is indeed large, but the growth rate is slowing.
- eBay’s significant market share—it’s the second-biggest player in the industry—combined with faster growth helped the brand almost break into the leader position.
- Walmart also holds a leading position, so if you’re looking to move off Amazon, Walmart and eBay currently have the largest audiences.
- Costco, Walgreens, and Etsy moved from being niche players to game-changers. This means that Amazon should watch out for the three brands that are showing higher-than-average traffic growth and learn a thing or two from their growth tactics.
Amazon Around the World
Amazon is clearly present across most of the globe, yet the biggest share of traffic comes from the US.
Yet if we exclude the U.S., we see that the English-speaking countries make up the largest shares of the marketplaces’ traffic. Together, the U.S., India, Canada, and the UK account for almost 90% of all visits to Amazon.com.
It’s non-English-speaking countries, though, that show the highest growth rates for Amazon. Among the top 5 markets that bring in the largest traffic shares to Amazon (excluding the U.S.), during 2021, South Korea showed the fastest growth of 212%, followed by India (+25%) and Germany (+6%).
Predictions to Guide Your 2022 Amazon Business Strategy
We’ve only scratched the surface. Want to learn what these trends indicate for Amazon business strategy in 2022? Download the unabridged report!
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