Amazon had a spectacular year in 2021, reporting a 22% increase in net sales. But buried in the details there was another number that was almost as startling to those who pay attention to the ecommerce universe — Amazon’s online sales fell by 1% in the fourth quarter. The company’s big earnings boost was driven almost entirely by its hugely profitable Web Services cloud computing division.
To be fair, the decline was against a year-ago quarter when the pandemic was having its maximum impact on bricks-and-mortar commerce. We were all shopping online because we had to.
But Amazon’s decline is not an isolated case. The U.S. Census Bureau reported in February that e-commerce sales as a percentage of all retail sales fell from 13.6% in the fourth quarter of 2020 to 12.9% in 2021.
With growing signs that the pandemic was easing near the end of last year, shoppers began to return to stores, a factor that no doubt contributed to the online slowdown. But there is another factor that may be playing an even bigger role, and one that retailers hoping to cash in on ecommerce should pay attention to.
Consumers — especially Millennials and Gen Z-ers — increasingly feel uncomfortable about sustainability issues such as wasteful packaging and the thousands of vans needed to be able to deliver your tube of toothpaste within 24 hours.
A survey conducted in the UK last year for Sitecore, a marketing services provider, found that almost half of the 2,000 shoppers queried (43%) said they would like to buy less from Amazon, and a third said they felt guilty about the purchases they made. A parallel survey in the US found similar results, with Gen Z consumers leaders the pack.
Sitecore’s US survey also revealed the widening awareness among the public of broader ethical and accountability issues, the foundation of the growing ESG movement (corporate behavior with regard to environment, sustainability, and governance). The survey found that nearly 40% of Gen Z shoppers care whether a brand pays its share of taxes and that its labor practices are fair.
A more recent survey by International Post Corporation, a provider of management services to the global postal industry, found that 44% of e-commerce consumers globally say they have changed their online shopping behaviors due to sustainability concerns.
The impact of all this on Amazon, the most recognizable brand in ecommerce, could be substantial as Gen Z and Millennials become the dominant segments of the consumer universe.
It seemed that Amazon was moving to address its dependence on online shopping by opening up a slew of retail stores featuring some of the best-reviewed products on its platform.
But the company may have been too late to compete with the Walmarts and Targets of the world. The company said it intends to keep its Whole Foods and Amazon Fresh grocery stores, but is there a broader more scalable strategy beyond food?
Ecommerce is here to stay, but the days when Amazon could put whole retail segments out of business (bookstores, for instance) would seem to be over. The next iteration —click-and-collect — is already an important channel for big box retailers and with sustainability and all that comes with it being a challenge, it appears Amazon and all digitally native platforms need to understand how the next gen view them and their offering from a sustainable model perspective.