No conversation that I have had over the past decade about eCommerce strategy has not included a nod to Amazon. Like the brown boxes that are strewn across porches around the world, Amazon is everywhere (except, notably, China). Jeff Bezos is infamous for his relentless focus on the consumer – you – and making sure that your experience is a great as it can be. This is having very real effects on every other company in the eBusiness game.
Amazon is a business model marvel. It has forsaken much in order to grow to its position today. Think about it: Amazon has never launched a significant redesign of their site to try to make it look even a smidgen more modern. There is no loyalty program. Amazon will refund you for anything no questions asked instead of making you jump through hoops. It analyzes all of the products sold on its platform and when it can get those products to you faster, it stocks them in distribution centers. It offers entertainment bundled into Prime to make the subscription services stickier – but you don’t pay anything more.
On a business level it has reinvested nearly all profits, convincing shareholders to prefer achieving the bigger vision over taking a cut of quarterly earnings. It turns cost centers into profit centers. When their server costs started to balloon, they created Amazon Web Services, which today on its own would probably be a trillion dollar company. It prints so much money that it allows Amazon to sacrifice nothing on the customer experience, while at the same time buying a fleet of aircraft to improve their logistics (which will soon become a profit center by itself). Amazon has amassed the power to insert itself into any industry and finance losses to undercut competition until they take a dominant market position.
Where other businesses cringe, consumers swoon.
Defining the Amazon Effect
The Amazon Effect as I define it is the high level of expectations that a consumer has when ordering online. Because so many people order from Amazon, each consumer has been groomed to want something that resembles Amazon in terms of product availability, speed of delivery, price confidence, and erring on the side of the consumer. This approach of scale and customer experience means that no eCommerce upstart can offer the same combination without taking a huge hit to margins. It is possible to offer eCommerce experiences that are just as fast and just as customer-centric, it is just extremely difficult.
There are many hurdles to getting people to order from your dedicated ecommerce site. When you have to create a new account on a brand website and confirm that account by email, people sigh with displeasure. Since delivery costs are now often invisible thanks to a yearly Amazon Prime membership, when you ask someone to fork over twenty extra bucks for next day delivery from your site, people grumble (or worse, don’t complete the check out). When your package arrives damaged and you wait on hold for a few hours until someone tries to shift the blame to the delivery service, you get irate. At this point, you will never order from that site again.
It is almost always easier, more convenient, and cheaper to order from Amazon directly. Even in the world of luxury and selective distribution, most beauty products are available for purchase on Amazon. Unauthorized third party resellers ignore regional regulation and sell products in the EU from places like Bermuda. Trying to get them to stop is a futile game of whack-a-mole. Because of the hybrid marketplace model and its potential riches, someone will go and find a way to get to Amazon’s audience and sell your products it is the Everything Store.
This is all despite the fact that Amazon is not a sympathetic company. They crush unionization efforts and call delivery people “independent contractors” instead of staff in order to evade paying for benefits like healthcare in the US or paid vacation in other countries. They relentlessly undercut the competition using their size to grab marketshare driving countless other companies – particularly little guys – out of business. Amazon doesn’t need your commission, but it gets it anyway.
Even if you purposefully don’t want to order anything from Amazon, you will quickly see how difficult that can be. At the start of 2020 I made some New Year’s technology resolutions. One was to stop ordering as much stuff via Amazon and instead go directly to brands and stores. My first experience was ordering bluetooth headphones from Bose. On the Bose website they were 199 euro. Amazon had them for 169 euro. Bose estimated 7 days for processing and delivery. Amazon promised to get them to me the next day. I bought from Bose since it was early in the year and I was motivated. But would this trend of paying 20% more and waiting longer hold up through the year?
When the first lockdown went into effect this initiative was thrown out the window. Amazon had everything we needed and rapid delivery (despite a brief hiatus when the French government had a few things to say about employee wellbeing and safety). I threw out my determination and defaulted to Amazon. I am not alone.
As a brand, what can you do?
Either you are too niche to have resellers on Amazon or your supply chain is too tricky (i.e. furniture or high-scarcity luxury items) to get gobbled up by Amazonian convenience, otherwise you will soon find yourself in competition. So there are a couple of things you can do that Amazon does not do in order to differentiate your offering.
The big question is: why would someone go out of their way, jump over the additional hurdles, and take a chance on your site when they could order with one click on Amazon? It comes down to services and experience.
Loyalty programs are great when they are clearly defined and clearly beneficial to the consumer. Loyalty programs make sense when purchases are frequent and there is a a strong carrot at each level. The classic example is the buy 5 sandwiches get one free. You see the stamps as you go and you soon get to the point where you earn a sandwich and you are happy to get it since you already ate at least 5 of those particular sandwiches in the past.
Obscure programs based on points shroud the value in secrecy and resemble air miles programs. Congrats you have 200,000 points! At 1 million points you can trade that in for an upgrade to Economy Flex and take a checked bag for free! Surely 1 million points is worth more than a $35??
Loyalty programs can also be as simple as giving people access to priveleged deals that are not available to everyone. What’s important is clearly stating the value so that someone thinks “hey, I should buy directly from this brand instead of Amazon because I get [insert benefit here].” If that message isn’t getting through then you are one bad experience away from someone defaulting to Amazon.
Then there are things like personalization and exclusives. You could offer customized products that no reseller could. This could be as simple as engraving a name on a gift or changing a color. The advantage is that people are able to get something unique and unavailable elsewhere. It also means that people will allow for a longer waiting period to receive their order. It introduces logistics challenges, however, limiting your ability to warehouse goods for faster delivery if they have to be modified and repackaged.
Finally, customer service. Amazon defaults to the side of the customer when their is an issue. They respond immediately, but they do not care about the people who bought a specific product. If you don’t have a problem, Amazon will never reach out to you. This is where you can show that dealing directly with a brand is better than going through a reseller. Contacting people and asking if they were delighted with a product can be a great way to get deeper feedback and establish a relationship with consumers. If there happened to be an issue, a good customer service rep could identify the problem and find a solution, instead of letting that customer invisibly drift to a different brand.
2021, a year of change?
Vaccinations are rolling out across the world but it is becoming stark that the recovery from the covid pandemic will not be swift nor evenly distributed. That positions eCommerce for another blockbuster year of growth. Brands should be trying to take advantage of that as much as possible.
Oh, and Jeff Bezos is stepping up to Executive Chairman and away from Amazon’s CEO role to spend more time launching rockets into space. One of his top lieutenants, Andy Jassy, will take over. Will this mean a shift away from the consumer? Absolutely not. As Amazon moves into ever more industries (pharmacies, health…) expect them to bundle together more and more services into Prime so that the hurdles to other brands get higher and higher.
Tony Hymes 