The Amazon Effect: Retailers vs. Amazon

Amy Hertsenberg
October 25, 2017

When a consumer needs to replace their TV, they have two options.

  1. Drive to a physical store and hope they have the one you want, load it into the car and drive it home.
  2. Search online for exactly what they want at the lowest price and have it shipped directly to you.

More often than not, consumers will pick option 2.

Amazon is widely known as “the everything store”. The company has completely changed the game for retailers by forcing retailers to abandon their traditional processes and invest in innovative e-commerce solutions that can hopefully keep up the pace. Amazon introduced Amazon Prime in 2005, with a $99 membership customers receive free two-day shipping on all eligible purchases for an annual flat-rate fee, which has also contributed dramatically to the company’s growth. In 2009, Amazon had about 2 million Prime members. In 2011, the membership grew to over 5 million and has continued exponential growth since. Last year alone, it grew 53%.

The “Amazon effect” is being felt nationwide. While Amazon is hitting $1,000 a share, brick-and-mortar stores like JCPenny, Macy’s, and Sears are closing stores rapidly. Amazon is even changing the way customers can grocery shop with their recent purchase of Whole Foods. Supermarkets will need to reinvent themselves to pull in customers, but how? Take a look at how the retail industry has changed because of Amazon.

  • An assortment of Products: Amazon has made it easy for shoppers to go to one place for just about anything. They have added many product categories over the years, including groceries and even auto parts. One-stop shopping is now a reality and with Prime, you can get whatever you order in two days – for free. Consumers have the option to compare products side-by-side and trust that they are getting a decent price.
  • Unique Pricing Approach: Amazon begins with low prices and is selectively responsive to external pricing actions. Their prices can change several times a day. Their algorithm is designed to provide the consumer with the lowest price and best value for their selection.
  • 1-Click shopping: – 1-click eliminated the need for the shopper to re-enter their payment methods every time they make a purchase. They make the buying process frictionless. It can take a shopper minutes to enter their payment information and in the meantime, they could change their mind, get distracted, or abandon their carts. Making the payment process as easy as possible gets consumers through their purchase faster and significantly lowers the opportunity for cart abandonment.
  • A plethora of Information: – Amazon provides that rich content – pictures, reviews, videos, descriptions, etc – that build trust with their consumers. The consumers are able to compare products and make an informed decision before their purchase. Consumers are now relying on this information and now are expecting brands and retailers to provide it as well.

So, how do you compete with Amazon?

  1. Connect in-store experience with your online experience: Bringing together what goes on in the store with your online presence can set retailers apart. Let consumers scan items in a store and see product information and reviews. Self-serve kiosks have worked well for some retailers and even in-store beacons that interact with a consumer’s mobile device can be effective if done properly.

  2. Transparency: Consumers want to know what they’re buying and who they are buying from. Is the product high quality? Have there been any issues? How do you use the product? Providing the necessary information isn’t enough anymore. Consumers are diving into the functionality and capabilities of each product and comparing it to the next. Be transparent with your products and let the quality do the talking.

  3. Customer Service: Speedy and high-quality customer service are more important now than ever. Special touches like same-day delivery, express check-out, or 24/7 support can really set you apart. It might take a little extra effort on your part, but the return on the investment can be impactful.

  4. Understanding your own strengths: What makes you stand out amongst your competition? What makes you different? It could be store presence, customer loyalty, product assortment. Use your own strengths to compete in the marketplace.  

  5. Using customer data: To become more personal and relevant, you need to understand your customers and what they expect. Do some research and find the customer pain points. Find out what would turn them into loyal visitors.

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