Amazon’s awareness dwarfs legacy retail competitors

ronburgundyI’ve been working to get my head around the future of the global retail. On one hand, we can always look to the number of stores or the revenue generated along with history and customer loyalty a particular retailer may have. On the other hand, it’s apparent to me that none of that matters. There are many, many brands and retailers that were once dominant yet no longer exist. Many more are ghosts of their formal selves. And fewer still are doing well.

The truth of the matter is that determining the path towards the future, along with who may or may not be successful in blazing along that path, has much more to do with who has mindshare and who is innovating than anything else. Luck has no place in the future. Complacency and mediocrity even less so. What we’re seeing is  a rapid shift from a store-based retail model to a digital retail model. Searching on the web allows us to find and consume practically anything at this point. It’s only a matter of time where there will be little need to go to a store. Why waste time going to a store when we can enjoy friends, family, life, and adventure.

This being the case, it’s apparent to me that one of the single most important things in terms of brand recognition is search interest. Do people go on Google and search for your brand, products, or services? Keyword search is vital, and all that information is trackable. So in understanding which brands or retailers have potential for future success, its necessary to understand search interest. Search interest is exactly as it sounds. What are people searching for? How are searches trending? Are they accelerating? Are they stable? Are the declining? In any of these cases we want to understand why because a big factor is that search is only temporary. As artificial intelligence advances, we won’t have to search because we can just ask.

Search interest is a powerful tool in understanding a brand’s future potential

Search interest is an incredible asset. In this post we’ll see how quickly something can go from no awareness to giant awareness in little time. We’ll also see how search interest can be migrated into other more solid forms of retained loyalty like native apps that become core to the user. And finally we’ll see how search interest among the 800 pound gorillas can be discordant and may show leading indicators of future success or failure.

Google is a pretty amazing technology to do exactly this since the vast majority of searches go through its engines. With Google, we can compare and contrast keyword searches over a period of time. This interest over time shows us a relative comparison how people searched for a keyword over a period of time.

Google’s formula for interest over time is the equivalent of the number of queries for a particular keyword that is searched divided by the number of total Google searches. Google’s own definition is “numbers represent search interest relative to the highest point on the chart for the given region and time. A value of 100 is the peak popularity for the term. A value of 50 means that the term is half as popular. Likewise a score of 0 means the term was less than 1% as popular as the peak.”

Let’s take a look at search interest for Amazon over a period of time. The chart below shows search interest during the 10-year period from February 2007 to February 2017. In this chart you can see that interest in Amazon has been growing steadily since February 2007. The peaks of interest you see are during the holiday selling season during the month of December each year. Clearly Amazon has significant peaks for Christmas selling and it likewise appears that those peaks are becoming somewhat greater.

interest-over-time-001

A key point here is that we can see that Amazon’s peak search period was during the most recent holiday selling period in December 2016. That’s represented by the peak value of 100. To contrast that, we can see that interest the year before was slightly less at about 93. Likewise holiday selling back in 2007 was significantly lower at 44.

Now here’s the tricky part, Google normalizes these results so they are all compared to the highest point in the entire range. So while that doesn’t tell us how much people searched for in a given period, it does tell us in relative value what each period is to the peak. Hence December 2007 was 44% of the peak value in December 2017, and December 2016 was 93% of December 2017. No matter how you look at it, interest in Amazon has grown significantly during the past decade and it appears to be continuing to grow.

I should also point out that we should expect that when a business launches a native app, search would expectedly decline relative to the success of the app. In Amazon’s case, it launched its native app for Android devices in March 2011. Over the years the app has been rolled out across iOS devices as well and it’s been very successful. While exact figures are not available, it’s been reported that more than 70% of Amazon’s shoppers were on mobile devices during the holiday selling season of 2015, and more than half of those shoppers were using the native app. Those searches would not be reported in these Google search results. That makes this chart showing acceleration of search interest for Amazon even more compelling.

To contrast this further, a good example of how a native app can dramatically effect search interest is Facebook. We can see in this next chart that peak search interest for Facebook was December 2012. We can also see that Facebook had relatively no interest in 2007 compared to the peak in 2012. interest-over-time-004Its rise from nothing to its current user base of almost 2 billion is extraordinary.

This chart shows what demand on steroids looks like. Since 2013 however, there appears to be a significant decrease in search interest for Facebook. Again let’s keep in mind that this data is related to Google search results so if someone is going directly to a native app, there is no search result. Some of Facebook’s decrease in interest could of course be due to a real decrease of interest, but that’s hard to gauge and imagine since its user base continues to grow, albeit slower as it approaches 2 billion.

What’s very important to understand in this case is that Facebook began focusing efforts on its mobile apps during the 2012 and 2013 period. Much of that traction didn’t happen immediately, and we can see that from 2014 onward a pretty steady decline in search interest occurred. It’s been reported that almost 60% of all Facebook users only login from a mobile device as of July 2016. That statistic is pretty much inline with the decrease in search interest activity since Facebook began focusing on its native app in 2013. On one hand, if I were management at Facebook and saw the above chart I would excuse myself and run for the hills. On the other hand knowing that we replaced those searches with direct login through a native app, I’d be celebrating the people and teams that made that happen.

Once again I think this makes a strong case that Amazon’s meteoric rise in search interest a remarkable feat given that they also have a solid native app presence. While Amazon doesn’t release its membership base, we can do some quick math from its recent 10-K report to learn that it has roughly 65 million Prime members. Amazon Prime members are its key users because they spend the most and more frequently over a given year than do non-prime members. Regardless of the number of total Amazon members, it remains dwarfed compared to Facebook’s 2 billion users. This can only mean that there is tremendous growth potential at Amazon.

Comparing Amazon’s awareness to Macy’s and others

We should expect that Amazon would have a tremendous amount of interest in terms of Google search. Over the years it has become the go-to place to purchase just about everything one needs, and while we enjoy social media like Facebook and Instagram, the dominant place for us all to purchase products we know we want or need is through Amazon. So the question becomes does a store-based business like Macy’s stand a chance competing with Amazon? I’m comparing Macy’s, but this question can be asked about any department store, hardware store, or mass retailer.

Let’s begin by taking a look at search interest for Macy’s during the past 10 years as we did with Amazon and Facebook previously. The first thing we’ll see is that interest in Macy’s is pretty flat. There is little overall growth in interest since 2007, and while we see that Macy’s has similar peak of interest around the Christmas and Holiday selling period in December, for the most part this is a flat line. interest-over-time-002While Amazon shows very impressive acceleration of interest since 2007, Macy’s for the most part hovers the 50% interest index.

This is not good news for Macy’s. In this digital age where more and more consumers are utilizing the web to find things, you would hope to see some improvement in search interest. If you can’t get modern consumers searching for your brand, or have done that and then lead them to an app they utilize as Facebook and Amazon have done, you can be sure that the writing is on the wall regarding your future. The first point therefore, is that a brand like Macy’s is at a tremendous disadvantage to an Amazon because it hasn’t garnered search interest. In due time it’s likely that Amazon, and perhaps Google, will lead consumer’s to it’s AI platform Alexa where what we seek is simply a matter of speaking, not searching. In this regard Amazon, and Google, are easily two steps in front of a legacy retailer like Macy’s. Some form of AI will certainly replace web search soon–why type a search when you can speak a wish?

Now let’s look at search interest overall for Amazon as it compares to a brand like Macy’s. Before we do this however, it’s important that we include a couple of other barometers in order for us to gain a more complete level of understanding. To do this, I have added search interest results on keywords Walmart and iPhone. The reason being is that while Macy’s is small compared to Walmart, Walmart is huge compared Amazon.

Walmart currently generates more than $480 billion annually. Macy’s, on the other hand, generates less than $30 billion. Amazon is in the middle in terms of revenue and generates roughly $136 billion annually. Furthermore, while Walmart generates it’s sales through almost 12,000 stores around the world and it’s website, Macy’s generates it’s sales through 880 stores currently and its website. Macy’s is aggressively reducing its store count and has announced that it will be closing roughly 100 stores this year. Amazon drives practically all its sales through its website and apps, as well as from its web services platform called AWS.

Something else of great importance is that Walmart and Amazon are global businesses while Macy’s is predominately a U.S. based retailer. Not being a global brand is a tremendous disadvantage for any business looking to compete with a digital business like Amazon. I had initially analyzed search interest for these keywords using only U.S. data given that Macy’s is chiefly a U.S. based business. After much thought I felt it vital to understand the significance of these businesses at global reach. With the advent of digital technologies, reaching a global audience is a necessity. Amazon has been using its profits to invest in additional technologies and facilities that it believes will help it be the dominant supplier of goods and services around the world. Rather than investing in physical store locations and inventory, Amazon has invested in technology and distribution capabilities so it can market and deliver globally. Being able to gain brand awareness around the world is of critical value to any brand or business looking to swim in the pools of our modern age.

From a shear volume standpoint, Walmart is clearly the 800 pound gorilla. Amazon, on the other hand, would likely be at least one of the 800 pound gorilla along with Walmart in terms of web search. Neither of those two facts should surprise us. But what happens when we compare the Amazon and Walmart in terms of digital mindshare and awareness? Are they similar given that they are both 800 pounds gorillas, albeit in different retrospectives? Or are they completely discordant? More importantly, how much more awareness power do these gorillas have compared to another significant retailer like Macy’s? From a volume relationship we’d expect Walmart to index at 100 while Amazon indexes at 28.  Likewise we would expect Macy’s to index at about 6 compared to Walmart. To add further contrast and perspective, how would we expect the search interest for iPhone to index compared to this group? The iPhone was launched in 2007 and has since then sold more than 1 billion units globally–surely the keyword iPhone should have tremendous awareness in terms of search interest during this 10 year period.

The results, I think, are startling. Let’s first level-set so we know what we’re about to look at and compare in this next chart. As in the others we will see a peak interest value over a period of time, in this case from February 2007 to February 2017. Since we are comparing different keyword searches over that time period, one of those keyword searches will post its peak value of 100 at its peak time. Our keyword searches are amazon.com, Macy’s, Walmart, and iPhone, and all of these are for global search results since being a global player has much to do with a retailer’s success in this field of comparison. Once the keyword search with the peak data is established over the entire period, all other keyword searches will index from that keyword search’s peak index. Kapish?

Are you ready? Here it is:

interest-over-time-007

The first thing we see in the chart above is the growth of search interest in Amazon.com. From 2007 until 2017 it has gained traction and grown stronger despite the fact that many of its member are utilizing the native app. At the other end of this extreme, we see that Macy’s has virtually no awareness compared to Amazon. While Amazon has grown exponentially since 2007, Macy’s has remained essentially unchanged and minuscule compared to the others. We also see that awareness of Walmart is significantly less than Amazon. In fact, Amazon’s peak search interest in December 2007 was 2X the peak interest of Walmart in 2007, but by 2017 Amazon’s peak search interest was 3X Walmart’s. Walmart has some work to especially if Amazon figures out how to bring AI to the home and stunt any need to visit a big box store in the future.

What’s highly interesting is that we can use iPhone search interest as a base for these comparisons. If any keyword search was emblematic of digital search for this timeframe, iPhone would be it. The iPhone was brand new in 2007. Despite that fact, it outperformed Macy’s! More remarkable is within a year, the awareness and interest of iPhone was greater than Walmart. That’s pretty astonishing for iPhone. It came out of no where and we can see the power of digital search in the reach it has to propel and brand or product forward in this digital age.

I’d like to also point out however, that we also see a flattening of search interest on iPhone since 2011. That, in and of itself, isn’t necessarily surprising, but recent press has noted that Apple’s stock is at it’s all-time high because investors believe in the iPhone. You can draw your own conclusion with this information. Buyer beware!

Is there hope for legacy retailers without search interest and innovation?

So how does a significant retailer like Macy’s hold it’s head above water when the tides are so strong? Peak search interest of Amazon was 8X greater than Macy’s in 2007. In 2017 it was 18X greater. If ever there were signs of a drowning victim, this would be it. So what does a significant legacy retailer like Macy’s do to remain afloat? This question can be asked of any significant legacy retailer currently dependent on stores, coupled with lackluster search interest, and little to no entrance into future AI technologies.

This is going to be a hard choice for many. Clearly this post has much more to discuss. Ultimately figuring out WHAT to do is a lot more simple than figuring out HOW to do it? It’s pretty clear what is going to take place in the next few years. The ramifications are significant for legacy retailers, as well as the many brands that have a wholesale business model with them. In fact the entire notion of being a brand will likely be considerably different than what it is today. What may have worked reasonably well a decade ago, will likely be the demise of a brand in the near future.

Until my next post, I’d love to hear thoughts and ideas. My hope is to stimulate deep thinking and ignite conversations that are actionable. As always, I’m looking forward to listening and learning from everyone and all sources.

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