The Effects of COVID-19 Will Likely Further Cement Amazon’s Dominance in Retail

Even before the COVID-19 pandemic, Amazon had been dominating e-commerce, controlling 49% of U.S. spending online as of 2018. Its share of U.S. retail (5%) is more modest but still staggering considering the number of legacy companies it competes with.

The pandemic has set in motion the acceleration of e-commerce adoption, which will surely benefit Jeff Bezos’ e-commerce giant. To learn more, Hannah Beaver of GLG’s Consumer Goods and Services team spoke with Stan Friedlander, former Chief Director of Clothing, Jewelry, Watches, and Customer Experience at Amazon. The following Q&A has been edited for length and clarity.

What are the dynamics of the apparel industry as it stands today?

There’s been a huge shift over the past 10 to 12 years in how much business has been done online. Obviously, Amazon is a key component of that, and COVID-19 has essentially brought what would have happened over the next 3 to 10 years in 3 to 6 months. About 25% of the U.S. market segment in apparel was done online, and now, arguably another 10 percentage points could be added to that because of COVID-19.

The big shifts come from shopping trips where people would have to drive 20 minutes each way, and the experience is more of an errand. People will ask themselves, “Can I do this online for the same price, same selection, in less time?” Assuming they’re not getting engagement and enjoyment out of a store environment, then it’s going to shift to online, and COVID-19 just accelerated that. People who’ve now tried Amazon or others will unlikely go back to brick-and-mortar, according to our research.

What are the strengths of Amazon compared to traditional retail?

The pillars of how Amazon succeeds is focusing on having the right price, not necessarily the lowest price; having limitless selection; and providing number-one customer service. One thing that Amazon cannot compete on very well is the off-line experience: When someone wants to go into a store to try something on, they can’t – at least not yet.

What I see out there, especially in the apparel and footwear industry, is a desperation of how to shift customers online. Where customers are going into stores is where the store has created an engagement model, whether via entertainment or good customer service. But many retailers in the apparel and footwear industry have not done that in any way, shape, or form. They end up competing on price and limiting their sales associates – their customer service. That shifts the advantage to the mass market.

Are there any traditional retailers that are better positioned than others?

One is Dick’s Sporting Goods, which implemented 15% to 20% of its selling floor space in certain stores to a batting cage. I’ve seen 20 to 30 kids lined up to try out a bat, and whether they buy that bat or not, they were brought there by someone else, likely their parent, who’s roaming through the store, potentially buying something else. That’s an engagement model, and it was probably thought of out of the box. Sports Authority didn’t think of that, and it went out of business.

The other players that have a significant advantage are those selling items that are difficult to put online. That includes T.J.Maxx, Ross, and other outlet-driven models. The reason is many of their items are below the price where it’s profitable to sell and ship online. Most products sold at T.J.Maxx and Ross don’t have a UPC attached, because brands such as Macy’s don’t want to show that it has products in those places. Therefore, for Amazon to get a hold of a lot of those items, they’d have to manually key in that information, which is not cost-beneficial.

Are there any retailers who have excelled in shifting sales from foot traffic in their stores to online? Any winners or losers in this space over the past few months?

Macy’s has upward of 30% of its business done online now. That business may be doing fine, but is it making up for the other 70% of its business? The answer is no. Unfortunately, I’ve seen over the past several years that most of these retailers look for the immediate cash infusion of reducing their store counts, and when I was still at Amazon, I viewed that as a huge win for us, because the closures are just giving Amazon ZIP codes. Every time Macy’s shuts down a store, it’s giving e-commerce three to five ZIP codes, or more if it’s representing an entire city or state.

Brick-and-mortar chains need to figure out how not to shut down stores but instead reduce their footprint within that store by leasing floor space to others. A better option is figuring out how to get their consumer base to use both an in-store environment and an online environment, meaning having consumers look up a given style at a store and choose whether to go into that door or have that same store ship it to them. That way, they can convert their spaces into a shipping point to send products to consumers as well as transfer them to other stores. But even then, have they created an online business that’s robust in using digital marketing in an inexpensive way?

Last week, Walmart and Shopify announced they are teaming up to compete with e-commerce giants such as Amazon. Is that enough to even the playing field?

These partnerships that Walmart’s trying have been expensive. Did Walmart’s purchase of Jet.com a few years back help or hurt it? Amazon would view it as paying too much and not reaping the rewards. Part of that also stems from whether there’s enough infrastructure within Walmart to understand the dot-com and digital marketing world well enough to absorb a company like Shopify. That’s open for debate. I could easily see where the corporate cultures don’t mesh well, and Walmart’s integration of what Shopify can offer will be difficult. Walmart has to do something. One of the smartest things it could do is understand digital marketing better. Getting Shopify is certainly a means to that end. But while this move certainly could help Walmart drive up its traffic, it’s unlikely going to come at the expense of Amazon.


About Stan Friedlander

Stan Friedlander is currently a self-employed retail consultant. Before this, Stan served as Chief Director of Clothing, Jewelry, Watches, and Customer Experience. During his 10 years at Amazon, Stan also worked as General Manager of Shoes, Accessories, Athletic, Outdoor, Sports, Handbags, Sunglasses, Denim, Dresses, Fashion, Kids, Baby Apparel, and Luggage. Before Amazon, he spent 14 years with Macy’s.


This article is adapted from the June 24, 2020, GLG teleconference “The Shifting Apparel Landscape: Traditional Retailers vs. Mass-Market Players.” If you would like access to this teleconference or would like to speak with Stan Friedlander, or any of our more than 700,000 experts, contact us.

GLG is supporting nonprofits on the front line of COVID-19 relief, pro bono. If you represent or know of an organization that could use our help, let us know here. If you are a GLG council member whose expertise might be valuable to a relief organization, please get in touch here.

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