‘Fate of Retail’ Part 3 | The Amazon Effect
Many are calling it the ‘Amazon Effect’. Everyone is feeling it. What can brands and retailers do about it?
Amazon started out of Jeff Bezo’s garage back in 1994. The online book store has grown and evolved into the world’s largest online retailer with a reported $107 billion in sales last year. According to CNN Money over 300 million customers shop on Amazon and that number continues to grow year after year.
Founder Bezos has clearly stated his vision for Amazon becoming the “everything store” and we are starting to see that. A consumer can browse millions of products at this one marketplace. Purchasing habits are quickly changing and Amazon is quickly becoming the preferred way to shop for millions of consumers. So why is it so popular?
Think about it… you don’t need to drive somewhere and find a parking spot. There are tons of customer reviews to help make purchasing decisions easier. Returning any products is quick, simple, and easy. The consumer can shop at their own convenience. Amazon makes it quick and easy to shop from a phone, tablet, or computer. Many don’t find the in-person shopping experience to be enjoyable. Need evidence? Continually declining attend at shopping malls nationwide while Amazon continues to grow.
The online retailer has completely changed consumer’s expectations around online shopping. The biggest reason? Amazon Prime. Members are able to receive same day shipping on orders and have the package at their front door step in two days. Consumer Intelligence Research Partners estimated that there were 54 million Amazone Prime members in the United States at the end of 2015. That is 1 in 5 adults! Amazon Prime membership grew 47% domestically during 2015, and 51% globally. For many online shoppers, shipping options are the most important factor in making a purchase. Consumers want and expect their products now.
Amazon can’t be ignored. Both brands and retailers must have a strategy for Amazon if they hope to survive in today’s retail landscape. It is your choice whether you sell products on Amazon or not. No matter what you decide, there must be an Amazon strategy in place.
TransWorld Business takes a look at the most impacted product categories, who is doing Amazon right, and how businesses can improve their presence.
More Consumers Purchasing Hard Goods On Amazon
People who used to visit their local shop to buy a surfboard, skate deck, or snowboard boots are now buying those products on Amazon. Hard goods used to be what drove traffic to specialty retailers, but now many consumers are finding these products on Amazon. The product selection on the marketplace continues to grow and consumers are showing more willingness to purchase different types of products through Amazon.
As a consumer spends more time interacting and making purchases through a marketplace, they begin to get comfortable and gain trust. Most Amazon shoppers have now had years of experience interacting and getting comfortable with the marketplace. Several years ago someone might have been nervous or uncomfortable making a purchase for a $800 set of skis on Amazon. Not anymore. Younger consumers especially are totally confident and comfortable making these larger purchases online. They can do their research online and know exactly what they want without having to visit a local specialty retailer.
Amazon's Push Into Fashion
It’s no secret that Amazon has a desire to become a top fashion retailer. Although they began selling apparel in 2002, most point to their acquisition of Zappos in 2009 as the start of their major push into fashion. Since that time the retailer has continued to become more of a player within the world of fashion. This last year Amazon even launched six of their own private label brands. As a newer category for Amazon, apparel continues to grow faster than most other product categories for the e-tailer, making it fast on its way to becoming the number-one apparel seller in the U.S. while traditional retailers such as Nordstrom and Macy’s continue to struggle.
Successful Selling on Amazon
Getting started on Amazon can be intimidating but with a sound strategy brands and retailers can thrive in this marketplace. If you think you've missed the boat for selling on Amazon, you're wrong. There is still time to hop onboard and begin successfully selling your products. It takes effort, however, to achieve success selling a product on the Amazon platform. If you think you're going to list your product, write a generic description, and watch the sales roll in, you may be in for a rude awakening.
There are many opportunistic people out there that know how to sell on Amazon. Apparel is one of the categories where you can see smaller operations beating out huge brands on Amazon because they know how to sell on the marketplace. A sound strategy and hyper focus on certain products gives them an edge over their competition. You have never heard of them before but they are making noise on Amazon.
A good example is Kanu Surf. Their Men’s CB Rashguard UPF 50+ Swim Tee and Men’s Barracuda Swim Trunk are both on the Amazon Best Sellers list for clothing items. This list represents the 100 most popular products based on sales and is updated hourly. At the time of writing, the barracuda swim trunk was #19 and the rashguard was #80. There are no other swimwear products featured on the Amazon Best Sellers list. They are outselling huge surf brands such as Quiksilver, O’Neill, and Rip Curl on Amazon. Many in our industry have probably never heard of this brand but they are a major competitor within the surf scene.
Kanu Surf isn’t the only brand out there killing it on Amazon. There are countless other examples of relatively unknown businesses that are beating out the major brands within our industry on Amazon. Their business model is solely based around Amazon and their focus is entirely on just a few key products. Unless you have a sound strategy for selling your products, you will get lost in the clutter.
Do What Amazon Cannot Do
Don’t worry about trying to be like Amazon. Their pace of innovation is too quick and you will constantly be playing a game of catch up. Instead, focus on how to be different. Amazon does a lot of amazing things. Like any business though, the retailer does have its weaknesses. So what are some ways to create a unique advantage?
Create Experiences For Consumers
You've got this store. It is near customers. But your product alone just isn't enough to drive customers to your store. You have to do something different. Creating experiences is a huge opportunity for brick & mortar retailers to deliver more value. Amazon will never be hosting avalanche safety courses, movies premieres, or demo day programs. These all are things that Amazon would struggle to replicate.
Everything that makes REI such a successful retailer are all things Amazon would have difficulty replicating. An online shopper visiting REI’s website finds resources such as how-to videos, gear checklists, maintenance tips, and more. In total, the retailer has more than 350 articles and videos online to help their customers learn skills and shop wisely for the outdoor activities they love. Consumers can go to REI stores for safety classes, service workshops, demo clinics, and more. They have quite a bit of education that goes into each and every product—that’s something Amazon would have trouble deploying with its endless offering of everything under the sun.
Experiential commerce isn’t limited to only physical retail stores. Evo is blending the online and in-person shopping experiences in their all-new La Familia program. Evo customers can now shop online and receive free day two-day shipping to a local, partner retailer for an in-store pickup. When asked if the La Familia program is a result of the Amazon effect, Evo’s Ben Wallace responded “I wouldn't say it's a direct result of Amazon, but of course they are a huge influence on retail in general, especially in shaping customer expectations. We're not looking necessarily to compete on shipping, but we will compete on experiences and definitely think this gives us an advantage. If free shipping gets more people to choose to ship will call, that's a worthwhile expense for us if it leads to a better experience overall.” A competitive shipping option is not enough. Evo realizes that and pairs it with the personal interaction found at a local retailer to create a key differentiator and added value.
Another shortfall of Amazon is a lack of influencer marketing. Action sports has some of the best athletes in the world. Their influence on consumers is huge. The athletes that are pushing our sports have always been a huge part of marketing products. Both brands and retailers should look for ways to leverage their connections with athletes and other top influencers.
Maybe you bring a pro into your store for an autograph session. Host a movie premiere. Have an influencer do a social media takeover for the day. Consumers have an affinity for their favorite athletes. These things are what generates sales. Once again, this is one of the areas that Amazon will continue to struggle with. It’s highly unlikely that Amazon will ever have their own skate team or be sponsoring the top local talent.
Discounted Retail Setting
While on Amazon, consumers want to search for a product, see the top options, and purchase within a matter of minutes or even seconds. Instead, create an entirely different shopping experience. Try hosting closeout sales at your retail spaces. These are retail experiences where the consumer thumbs through 100 bad products trying to find that one just right for them. Sorting through the bad stuff to find the good deal is entertaining. The warehouse sale or garage sale type retail experiences is a growing trend we are seeing in our industry.
Nordstrom continues to lose ground in today’s retail landscape while Nordstrom Rack is thriving. Why? First off, the shopping experience is entirely different. Many consumers enjoy the experience of searching for deals. In a discounted retail setting a customer expects to search through hundreds of products before finding the one for them. Consumers walk into the store realizing there is a 50/50 chance they go home empty handed.
Don’t carry and sell products that are readily available to the masses. Be strategic with merchandising and offer a product selection that is difficult to find. Distribution has become wider and broader in recent years, and this “exclusivity factor” continues to be a growing concern for retailers. Differentiation is hard to achieve when everyone is selling the same products. As a retailer, be very cautious about whom you open and the products you sell. A unique offering of products will keep customers returning time and time again.
So how can a retailer create that exclusivity factor in the products they sell?
Join ‘Em or Fight ‘Em
The online marketplace can be viewed as a potential sales channel or a competitive threat. The chances of beating them are slim so it’s probably in a business’s best interest to join them—or at least develop a strategic, sustainable way to compete leveraging your small business’s strengths. Those that continue to operate without an Amazon strategy are putting their fate in the hands of others. Control your own destiny.