Research by behavioural science experts Decision Technology (Dectech) finds that Amazon could outsell Sainsbury’s if it entered the grocery market.
Dectech’s new report ‘Primed for domination: the threat of Amazon as a challenger brand’ finds that, controlling for other factors such as price, 13% of customers in the grocery market would choose Amazon — putting it ahead of Sainsbury’s (10%), but behind Morrisons (16%), Tesco (16%) and ASDA (17%).
The research finds two factors holding Amazon to a mid-table position in the grocery market are the importance customers place on trust and the expertise of brands in this market.
But competitors would be well advised to stay wary of Amazon in the grocery market despite these findings. Morrisons – already a brand partner of the online giant – is found to do well on the factors most influential in driving purchases in the grocery market. If Amazon pursued a similar strategy to the one it took with Whole Foods and acquired Morrisons, it could pose a major threat.
In other sectors, Dectech found that Amazon performed less well where customer use tends to be more ‘experiential’, such as the hotel and airline markets. Amongst eight competitors in the hotel sector, 10% of customers would choose Amazon, with only Z Hotels faring less favourably (8%). Similarly, just over one in 10 (11%) would choose Amazon if it entered the airline market. The findings indicate that consumers do not trust that Amazon would provide quality service in these markets, where there are already well-established budget offerings.
As part of its research, Dectech set up randomised control trials to gauge consumer expectations and find the threat posed to existing competitors by Amazon in seven new markets, including the mobile and grocery sectors.
Henry Stott, director of Decision Technology, said:
“Our extensive, two-pronged research into the power of Amazon’s brand and its potential for disruption confirms that for the most part Amazon is as big a threat as people fear. If Amazon were to turbocharge its entrance into the grocery market, we could see significant disruption. An increasingly digitised shopping experience in the future could play into Amazon’s hands and give it an acute advantage in grabbing market share.
“Yet Amazon won’t kill off competition in every sector. The e-commerce giant fares less well in offline markets, where customers often attach an emotional element to their experiences. We found that Amazon’s brand has its limits. “Our report offers a number of recommendations to help firms stay competitive. Brands that can compete with Amazon on price should use instore comparison tools to make sure customers know. Where they can offer unique products unavailable elsewhere to differentiate themselves from the competition, they should do so. And firms should look to curate unique, customer-centric purchasing experiences like those offered by Apple’s Genius Bars to help them escape Amazon’s looming shadow.”