As countries around the world struggle to contain inflation and recession cries grow louder, most companies will be wringing their hands. But maybe less Amazon.
Data provided to Slice Mag Pro by digital intelligence platform SimilarWeb (opens in new tab) shows that the e-commerce titan is getting stronger, despite the bleak economic outlook and the decline in disposable income in circulation.
Last month (July 2022), US web traffic to Amazon.com rose 10% from the back of this year’s Prime Day. A peak in traffic is expected during the sales periods, but the latest increase was greater than in either of the previous two years (6.3% and 7.5%), respectively.
In 2020 and 2021, consumers’ pockets were also filled with pandemic stimulus and extra money that would otherwise have been spent on commuting, and lockdowns left people with little to do but shop online. And yet, Amazon is on track for a similarly strong online sales performance this year, despite pressure on margins and the expected slowdown in consumer spending.
Inflation, what inflation?
In times of high inflation, consumer spending tends to fall off a cliff, due both to the rise in the cost of goods and to central bank anti-inflationary measures affecting the cost of mortgage payments and other loans.
In the UK inflation is currently over 10%, the highest in four decades – and the picture in the US isn’t much better either.
Despite the gravity of the situation, the latest SimilarWeb data shows that Amazon has at least managed to some extent to immunize itself against the negative effects of inflation on business habits.
And on top of that, the company is getting better at convincing visitors to make a purchase. In 2020, Amazon achieved a conversion rate of 8.8%, but year-to-date this figure stands at an impressive 11.6%. In the same time frame, conversion rates on retail sites such as Ebay, BestBuy and AliExpress have stagnated at less than 5%.
Amazon’s ability to thrive in a less favorable economic environment could be due to a number of factors, from its reputation for bargains to delivery efficiency and its push for essential goods with services like Amazon Fresh.
Our best guess, though, is that Amazon has continued to tighten its recommendation algorithm so that visitors are increasingly seeing exactly what they’re looking for — and sooner.
This is not to say that the company won’t suffer if the job market takes a dip or the cost of living rises further. A drop in disposable income in circulation will certainly hurt.
What is certain, however, is that the difficulties Amazon faces in the e-commerce market will pale in comparison to the competition.