E-commerce expert Alexander Graf outlines how retailers can find a way out of the Amazon jungle
In late April this year, Amazon gave us a glimpse of how the pandemic has accelerated its earnings, reporting impressive quarterly sales of $108.5 billion, an increase of 44%. It is clear that home-based working and buying has been good for the retailer; in fact, were it a sovereign state, it would be in the top 25 worldwide by GDP. In addition, a recent analysis by J.P. Morgan suggests Amazon is on course to overtake Walmart in 2022 to become the biggest U.S. retailer.
At first glance, all this may simply suggest that Amazon will continue its dominance of online retail sales. However, when we delve deeper into its earnings, we find an illuminating e-commerce story: 60% of all sales on the platform are non-Amazon retail accounts.
As Jeff Bezos himself says “Third-party sellers are kicking our first-party butt. Badly.” And, with over a million new sellers now using the “Fulfilled By Amazon (FBA)” service, this is an upward trend that all retailers should be aware of.
Consumers are now shopping differently in the 2020s, no longer staying loyal to a specific retailer and buying direct from their online store. Before the advent of the internet and even in its early days, this was not the case. Amazon, along with its competitors, have changed the face of retailing.
At the same time Google is being bypassed as the first port of call when looking for information on a specific product. Now, consumers increasingly start with Amazon, where they are presented with an array of similar products to the one they’re looking for and choose according to price and availability. From kitchen gadgets, to camera equipment and clothing, online shoppers are eschewing a brand’s online store and buying direct from Amazon.
Customers used to begin their search for products or brands by going direct to a specific retailer. That journey now starts with Amazon, where consumers look to solve a problem they want to address, such as finding some fancy footwear or a new fridge. They don’t look to a specific brand to fulfil that need either and instead determine their purchase based on star ratings and customer reviews. All this suggests that brands have lost their value in the mind of the consumer and have been reduced to being selected according to who has the highest star ratings or the most user reviews.
Finding a way for retailers to compete
Amazon’s success also comes from having high stock availability, being able to execute fast order fulfilment and ultimately compete on price. Like its close competitors, it’s a logistics company first and foremost, not a retailer, so how do traditional brick and mortar retailers compete?
The new world order means forgetting about customer journeys and hot and cold sales funnels. These models no longer work. Traditional retailers have to carve out a new role for themselves in order to escape just being a number on Amazon’s balance sheet. Retailers’ value-add can come from gaining customer access and being the ones that resolve specific customer issues. If they don’t fight for this, they are just a cog in the wheel of a large global supply-chain run by Amazon or Alibaba.
Owning customer access presents an enormous opportunity for retailers to grab back their voice in the marketplace and create solid differentiation. This means focusing on how and not what you sell. It’s about providing exceptional customer service to stand apart and not just be one of an often dizzying number of rival products.
Customers remember the experience they had when they buy from a particular brand, so it’s time for customer service to get deeply personal. This means owning the channels of communication like WhatsApp, Telegram and Messenger, ensuring customers’ queries are resolved quickly, communicating new product features and new product lines or offering coupons based on customers’ specific purchases. It’s all about harnessing technology as well as Amazon has done and recognizing that you, the retailer, understand your products better than anyone else.
Adapting to a new reality
Amazon’s continued upwards trajectory will persist. It is after all a pioneer and global leader in what it does. What it cannot do is offer highly personalized customer service on each of the products it sells and it shows no interest in wanting to do so. This offers a distinct opportunity for retailers to succeed.
The world we live in is about rapid adaptation, so make sure you don’t rely on inflexible systems when developing an e-commerce model. Those monolithic systems are better suited to planning and you need to quickly adjust to ever changing circumstances and the current prevailing retail “winds.”
Demand is changing, such as with the rise of more conscious consumers, where more ethically sourced goods are the order of the day. Think organic, sustainable and green. On top of that people want real differentiation in the products they purchase. Amazon can’t offer any of these things, but you could.
Amazon is successful because it adapts faster to customer demand changes than everybody else. It also has its weak spot, as it cannot adapt easily–and now every corner of its business screams for innovation. The companies that adapt faster in their niche areas than the Amazons of this world will eventually become the leaders of their niche.
Changing the customer experience and offering these deep levels of personalization can easily win the day—it’s the main strength that retailers possess and real B2C retail success can come from this approach.
Instead of fighting for space in an Amazon warehouse, retailers should focus on building loyalty, developing deeper relationships with their customers and ultimately having them return. You can choose to stay in the vice-like grip of Amazon or do what you are able to do best and offer customer service that feels extraordinary. Your customers will thank you for it.