Amazon is third-ranked digital advertising company / Smart carts copy e-commerce experience / Grocery e-suscriptions decreased 4.5%

Plus, retailers are restricting return policies

Inside.com Part of   Network December 28, 2022

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Amazon is, after Google and Facebook, the third-largest digital advertising company. Amazon reached $31B in ad revenue in 2021.  More: Amazon aims to continue that growth by taking away marketing budgets companies usually allocate to Google. During the holidays, direct-to-consumer (DTC) brands took 30% of their holiday ad budgets from Facebook to Amazon. Amazon is also doing influencer events to take out their marketing work from Instagram and TikTok. The retailer is also offering marketers the opportunity to use their cloud services. Thanks to Amazon Web Services (AWS), marketers can access data on what types of customers clicked on their ads.

Smart carts are actively trying to copy parts from the digital e-commerce experience into physical stores. These carts also provide data analytics for retailers' business strategies. More: According to PYMNTS, 42% of men and 31% of women buy groceries online. As a result, retailers like Kroger, Wakefern, and Sobeys in Canada are now using smart carts produced by Instacart. The shopping experience with smart carts is much more interactive and engaging. Customers can see their shopping items, shopping lists, and available coupons on the same screen. In the future, they will even be able to shop by recipes and get personal recommendations based on their particular locations inside a store.

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A report by PYMNTS found that in 11 countries, grocery subscriptions decreased by 4.5% in Q3 2022 versus Q2. The move shows an increasing trend of consumers returning to physical stores for grocery shopping. More: The reduction could also be because of inflation and consumers having less disposable income. Walmart has benefitted from this trend, with higher foot traffic in their physical stores. In the U.S. and Mexico, in particular, the retailer has seen more higher-income individuals in its physical stores. In the U.S., growing physical shopping might keep Walmart's 18% market share in the food and beverage segment intact and leave Amazon with a mere 2% share.

E-commerce retailers are increasingly charging for online returns. Zara, H&M, J.Crew, Anthropologie, and Abercrombie & Fitch are now charging $7 for sending back purchased items. More: The charges aim to reduce customers' practices of ordering the same item in different sizes to see which one fits and return the rest. According to the National Retail Federation, 17% of the total merchandise purchased online in 2022 was returned. This accounted for $816M. For every $1B in sales retailers make online, they have to absorb $165M in costs for returns received. As a result, some stores are reducing their return window timeframes so that they can protect their bottom line as they face an upcoming recession.

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India is conducting tests to launch a  fair trade e-commerce network. The initiative is backed by the Indian government and will provide an interoperable network where buyers and sellers can transact regardless of the apps or services they use. More: The initiative aims to provide an alternative to Amazon and Flipkart, which is owned by Walmart. Amazon currently controls its platform's proprietary services, from vendor registration to delivery. In contrast, the new platform will allow sellers to use different payment providers and delivery services. India's Commerce Ministry is testing the platform in 85 cities, including Bangalore, the country's tech hub.

Amazon is using its Subscribe & Save program to take some grocery shoppers from competing retailer Walmart. Amazon has not been able to substantially raise its grocery shopper numbers, even after buying Whole Foods. More: Amazon acquired Whole Foods in 2017 and, since then, has only been able to raise its market share in the food and beverage market from 1.7% in Q1 2019 to 2% in Q2 2022. With the Subscribe & Save scheme, consumers get a reduction in grocery items if they commit to buying them regularly.  Amazon's focus on grocery shopping could be because the sector is more resistant to consumers' cutbacks during a recession as it provides essential goods. In particular, men are more prone to order groceries online. 52.4 million men ordered some of their groceries online via same-day delivery schemes in October 2020. In comparison, only 36.6 million women did the same.

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Martin Ruiz-Cantu is a writer focused on tech and social impact. He has a BA in International Relations from El Colegio de Mexico and a MS in Foreign Service, Global Business and Finance from Georgetown University. He has worked at HSBC, the World Bank and for one of the Big 3/MBB consulting firms. He enjoys historical podcasts and learning languages. Editor Aaron Crutchfield is based in the high desert of California. Over the last two decades, he has spent time writing and editing at various local newspapers and defense contractors in California. When he's not working, he can often be found looking at the latest memes with his kids or working on his 1962 and 1972 Fords.

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