Amazon in prime position to lead the mobile network market if it adds Prime as a perk
Amazon could lead the £15 billion UK mobile network market if it entered with Amazon Prime as a free perk.
Amongst seven other network providers offering contracts with perks, including O2, Vodafone and EE, Amazon could capture a quarter of the market, a level of dominance equivalent to its current leadership among home electronics retailers.
A new report from Dectech – called ‘Primed for domination: the threat of Amazon as a challenger brand’ – finds that, controlling for other factors such as price, a quarter (25%) of consumers would choose Amazon as their network provider if the contract included a free Amazon Prime membership.
The second most chosen network provider would be O2, with 17% of customers persuaded by the network and its O2 Priority offer. Tesco Mobile would be the third most popular choice among customers (13%).
Remarkably, even if it entered the market without offering a perk, 12% of customers would opt for Amazon based on brand power alone, more than big household names such as Three (8%) and Vodafone (7%). The research finds that most customers (19%) would choose O2 when deciding on a mobile contract without free perks. With around 92 million active mobile subscriptions, Amazon could add more than £3bn to its annual revenues from entering the mobile network market with a free Prime offer, in addition to any extra revenues it would generate from increased Prime membership.
Amazon’s focus on increasing the number of Prime customers has been well-documented, with statistics showing that they spend an average $600 a year more than non-Prime customers[iii]. And with Amazon recently releasing a patent that builds on mobile networking to deliver Wi-Fi to areas without reliable broadband, it seems the world’s largest internet retailer may already be looking to expand into the mobile market.
“These striking results show that Amazon could well become an even bigger giant should it enter the mobile sector offering Amazon Prime as a free perk. In a fiercely competitive market, it also has potential as a standalone network operator. Today, mobile operators are competing on multiple fronts – from handsets to data and perks. O2 Priority, and Orange Wednesdays before it, have proven the power of a strong perk. Should Amazon enter the mobile market with a free Amazon Prime membership offer, it could be the next iconic brand perk.”
– Henry Stott, director of Decision Technology, Dectech
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. Despite fears that the online retail behemoth could follow last year’s US acquisition of Whole Foods with a similar entrance into the already highly-competitive UK grocery market, the research found that just 13% of customers in this 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 this 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.
“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.”
– Henry Stott, director of Decision Technology, Dectech
how much do these pillocks get paid for coming up with these stupid numbers constantly?
” we asked seven people from a mental hospital if amazon should do bouncy castle hire and all of them said yes, obviously amazon are missing a lucrative niche”.
“controlling for other factors such as price” (wonderful qualifier that) “we found most people would choose amazon mobile if it included a free pallet of gold bars and a live-in-maid”
“if amazon were a fruit 39% of people would prefer an avocado”
what a load of nonsense.