Amazon’s recent announcement that it will acquire Whole Foods for the small price of $13.7 billion represents the latest chapter in the company’s unprecedented evolution from apparent bookstore to retail behemoth. On the surface, the acquisition might look like a move to expand its product portfolio to include fancier grocery items—and maybe even a concession that brick-and-mortar stores are a requisite for growth. But there’s more to the story.
Technology analyst Ben Thompson asserts that this latest move is just another in a series of steps Amazon has taken to consolidate ownership of the building blocks of commerce—what he calls “primitives.” Some “primitives” are business-facing, like servers and distribution assets, and others are consumer-facing, such as clothing, entertainment, and groceries.
What separates Amazon from other companies is the way in which it allows customers to combine these in new and efficient ways. Companies can be launched based solely on the business ecosystem Amazon provides, and its own operations can be remarkably streamlined. In fact, Amazon has created a new market segment where businesses exist for the sole purpose of helping other businesses efficiently utilize the world of Amazon. This continued growth is great for Amazon and its consumers—which, by some estimates, include more than 80 million Amazon Prime members and bad for just about everyone else. E-commerce professionals, in particular, must now look for new ways to compete with Amazon while keeping costs down.
A Force to Be Reckoned With
Amazon’s methodical takeover of the retail world is unprecedented. Last year, it accounted for more than half of all e-commerce growth and became the go-to channel for the majority of consumers searching for products online, surpassing even Google. Its approximately $356 billion market value at the end of 2016 was more than the total value of the next eight biggest brick-and-mortar retailers combined.
Smaller e-commerce operations simply don’t have the resources to compete with Amazon on price, nor the distribution capabilities to offer cheaper or more efficient shipping options to customers. Moreover, as Amazon continues to commoditize virtually everything, brands built on customer service and quality will have to invest even more into marketing these differentiators and take extreme measures to drive loyalty among current customers.
That said, here are five tips for e-commerce companies seeking to remain relevant in the age of Amazon.
1. Leverage physical locations.
Almost half of retailers believe their physical stores give them a competitive advantage over online retailers like Amazon, and they’re right. Brick-and-mortar outlets give customers an opportunity to immerse themselves in your brand and give you the opportunity to win their loyalty by providing superior in-person customer service. Augment the in-store customer experience with omnichannel fulfillment, and use your physical locations to provide online shoppers with a greater range of fulfillment options.
2. Invest in customer experience technology.
Amazon’s greatest asset is the technology it uses behind the scenes to make the consumer experience as smooth and convenient as possible. In the process, it has raised consumer expectations. Smaller e-commerce retailers need to invest in tools that allow for more personalized engagements with customers and potential customers.
3. Incorporate customer recommendations and reviews.
Amazon allows consumers to be confident in their online purchases by including buyer reviews around the products it sells. Consumers are far more likely to trust another customer’s experience with a product than they are to trust the brand selling that product. By extension, they’re more likely to purchase from online retailers that provide transparent product ratings and customer feedback.
4. Use social media to establish a brand personality.
Instagram, Facebook, and Twitter are great tools for developing your brand’s unique voice and personality. They give you a way to connect with influencers who have already developed loyal social media followings. Amazon has thus far failed to take advantage of these tools to create brands that resonate with customers—but arguably, it doesn’t need to. You, on the other hand, do.
5. Gain control of shipping costs.
Often, business leaders assume that reducing shipping costs is an either-or equation: Either they can negotiate carrier contracts or they can pursue operational improvements. In actuality, though, you should be engaged in both cost-saving strategies at once. As far as operational improvements go, take measures such as removing dead space in packaging and adding more fulfillment locations. On the other hand, you should always be seeking to negotiate with carriers on shipping rates, benefits, and discounts. Step one of that process is familiarizing yourself with carrier contracts.
Smaller retailers face an uphill battle when it comes to competing with Amazon. However, if you use the strategies above and focus on differentiating your business in ways that larger companies can’t, you’ll be positioned to survive and grow in the years ahead.
Shipware provides fulfillment auditing and consulting services.