The Amazon Effect: What Can We Learn?

In 1994, Amazon was introduced to the world — and it’s been transforming ecommerce ever since. Statistically, Amazon is one of the biggest players in the game, boasting $178 billion in sales just last year. They also held the title of most popular online store as of 2017. By mid-2018, Amazon was already responsible for roughly 50 percent of the nation’s ecommerce sales and 5 percent of all combined offline and online sales.

Amazon’s towering success has tended to edge out smaller retailers, and has taken an especially severe toll on brick and mortar shops — a phenomenon often referred to as “the Amazon Effect.”

Many competitors have wondered how Amazon continues to sustain this level of dominance in the market year after year, with consistently increasing sales and the largest consumer base among retailers. Amazon’s vast selection, fast shipping, free returns, low prices and Prime subscription service all serve to create high customer expectations for any retailer hoping to compete.

So how do companies compete with such a massive competitor?

Start from Amazon’s key pillar of success: the customer experience. Amazon customers have been trained to expect to be able to shop anywhere, anytime. Amazon taught the world to expect seamless, personalized omnichannel experiences. Brands that are able to offer similar levels of flexibility and cross-platform service have seen boosts in both sales and customer loyalty that helped them not just survive, but thrive.

Here are a few ways Amazon maintains a killer customer experience:

Cut-throat Pricing

Amazon is notorious for constantly updating prices many times a day to stay competitive. In fact, a host of third-party price-tracking services have emerged to help customers follow the price shifts. Many retailers won’t be able to compete with Amazon on price, so it’s important to consider what other aspects of the customer experience can be upgraded.

Instant Gratification

Online shoppers want instant gratification, and Amazon has done a lot to reinforce that urge. Their one-click shopping experience provides a seamless, simple and quick way to order online.

Data Mining & Personalization

Amazon has an impressive digital infrastructure in place that lets them understand their customers’ behaviors and preferences and then sculpt experiences that reflect those preferences. Today’s ecommerce technologies have made us all accustomed to data-driven personalization, to the point that many customers now expect it in the form of product recommendations based on past purchases, creative loyalty programs, saved shipping and payment preferences, and “buy it again” options. Studies have shown that many customers will exhibit higher loyalty to brands offering personalized shopping experiences.

Shipping Flexibility

Desirable shipping options are a major factor determining whether a consumer will make an online purchase from you, or leave your site and go to a competitor. If you can’t move it fast, can you move it for less? The most cost-effective (or, ideally, free!) option is the best way to ensure a customer will purchase from your company.

While Amazon has led some retailers to despair, it IS possible to use some of the trends they’ve created to your advantage. Many customers are still keen to support smaller, local businesses, or businesses with a personal touch or a reputation for ethical operating practices. Ask yourself, “What’s the low-hanging fruit your business can tackle first?” Shipping speed and cost are a key “secret sauce” to ensuring customer loyalty. At LJM, we’ve seen, time and time again among our own clients that an overhaul of an e-retailer’s shipping program can create an enormous edge against competitors — even Amazon!

We’ll assume you think you already have the best possible rate with your Carrier, and you’re already saving money every week by auditing your shipping invoices. So, where can you go from here? It’s time to step it up by optimizing your parcel program as a whole — you may find it will become your next profit center. Contact us for a free analysis to get started.