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Sir Ian Cheshire on how to compete with Amazon

Debenhams chairman and eCommerce veteran, Sir Ian Cheshire, opened The Delivery Conference 2018 by advising retailers on how to cope with the ever-growing threat of Amazon.

“If you want to understand the future of eCommerce you have to pay close attention to what Amazon is doing, and unfortunately what it might do next,” Cheshire said at the Metapack conference in London today.

He pointed to Amazon’s 44% eCommerce market share in the US (according to OneClick Retail - stats from Salmon state market share across UK, US, Belgium and Netherlands stands at 40%). Cheshire said how unusual it is for a single player to own so much in an industry that is still growing. 

“They’re working on a completely different set of models, thinking differently, and driving change in a way that is not linear or predictable.”

Cheshire said retailers are not going to be able to compete by just selling “stuff” online, because Amazon can “hoover up most of the product categories”. Instead retailers should be thinking about how they can be different from Amazon, such as providing services, experience and social opportunities.

“In an already growing disruptive industry, this powerhouse of a competitor is not going to let you get away with anything.”

Agile innovation

Cheshire cited Amazon’s approach to innovation as a different way of thinking, describing how its agile methods allow the roll out of new services very quickly, including its voice-technology Echo devices and business cloud service AWS. Cheshire also identified how Amazon reinvests around 6% of its cashflow back into innovation, compared to a retail average of 1-2%. “That’s a factor of 5:1 which is going back into a better toolkit, testing and infrastructure,” he said.

“Amazon is taking a 20 year bet and is not interested in quarterly figures,” Cheshire explained. “[Bezos] is playing by a completely different set of rules, relentlessly working on where the next chunk of value is coming from in a very agile way.”

While Cheshire doesn’t buy into “the fluff around drones”, he admitted Amazon is good at always looking for the next big innovation.

The threat from China

But Amazon is not the only threat to retailers today. Cheshire said while Amazon’s market share might seem high, Alibaba has 80% of the total eCommerce market in China.

Cheshire warned retailers not to forget about this “staggering” eCommerce player, which he called an “absolute giant”.

“Just because we’re not in China, we tend to underestimate it,” he said.

“There will be a battle of the titans in 10 years from now, where Amazon and Alibaba come head to head in some shape or form.”