Amazon is out-growing the market. At least 55 cents of every new dollar spent in US e-commerce is on Amazon, and analysts estimate that by 2021 Amazon will account for more than 50 percent of all US e-commerce spending. As it currently stands there are no companies capable of challenging this path, so the question is what opportunities are out there outside of Amazon. Since even though Amazon will make up the majority of sales, this still leaves hundreds of billions of $ for others.

Many online retail businesses found themselves in direct competition with Amazon, sometimes without even realizing that. Any business selling third-party brands, and thus competing on price, is hoping customers won’t find out about Amazon. But since more than half of US households have Prime this is increasingly unlikely.

In the latest earnings call Tricia K. Tolivar, CFO of GNC said:

“Last quarter, we had a 49% decline in GNC.com sales as we better aligned online and in-store pricing and promotions. With that work behind us and the added benefit of our launch on the Amazon Marketplace and our investment in an online marketing campaign, we saw a decrease of just 7.2% in the first quarter of 2017 and are encouraged by this performance.”

During the earnings call there were more mentions of Amazon than the GNC.com website. The 49 percent decline in 2016 Q4 is very high, and during the last quarter sales continued to decline. This is because nothing GNC does online is not available on Amazon. Amazon likely has better selection and pricing too, thanks to the marketplace model. Unfortunately this is not going to be easy for GNC as they found themselves in direct competition with Amazon.

Cowen & Co. analyst Oliver Chen coined the term “Un-Amazon-Able brands”. Un-Amazon-Able are the only brands and e-commerce businesses that will be able to survive Amazon’s growing e-commerce presence. Oliver Chen focus included brick-and-mortar stores, but we think this term covers all of retail well. Just like physical retail is struggling to grow, many e-commerce brands cannot find growth too. Previously mentioned GNC is struggling in both.

There are three major areas an e-commerce business can focus on, and thus hope to find differentiation: price, selection, and experience.

Price presents unique opportunities as it can be used to offer exclusive deals. For example flash sale websites (Gilt, Fab, Zulily, etc.), or very cheap/very expensive products.

Selection is a very wide area. Some businesses focus on owning their niche of products, thus being able to provide curation and recommendations. Something big websites like Amazon are not fit to do. Building their own line of products is an even stronger way to establish a businesses. It doesn’t end there, as businesses are also experimenting with one-off product lines and even allowing to fund not-yet-existing products.

Experience is what a lot of modern startups have been playing with. From subscription businesses like Birchbox, to clothing businesses like Rent the Runway. These companies focus on emotional content, and shopping experiences. Categories which value heritage, luxury, or craftsmanship are driven by experience.

These three are often combined too. But the key message here is that successful businesses are finding ways to do what Amazon cannot do. Etsy is a great example of selection and experience differentiation. Even though both eBay and Amazon have many handmade and vintage sellers, Etsy has the most. They excel at selection, as customers shopping for these sort of products know where to find them. And experience, since the focus on handmade and vintage has created a community of like-minded people. Amazon will never be able to have that; we even think that Amazon should acquire Etsy instead.

This applies to Amazon marketplace sellers too. The rise of private label and manufacturers selling directly is the result of that. Sellers only doing retail arbitrage are doing what Amazon does as well, which as we mentioned many times is going to be challenging in the long run. Many of these sellers are very successful, but their executives should be aware that the market is increasingly favoring sellers with some proprietary aspect, usually selection.

We think e-commerce business which fail to understand where the market is heading are going to waste a lot of resources trying to compete in a market they cannot win. E-commerce particularly in the US used to be about a retail store opening a website. But Amazon got really good at this, and have since built infrastructure to scale. Modern retailers shouldn’t try to fight this, but instead notice opportunities not fit for the Amazon model and grow there.