The online behemoth Amazon.com is on a winning streak. North American sales were up more than 22% year over year in the fourth quarter, and for 2014 as a whole North American revenues grew nearly 25%. Amazon already accounts for more than a quarter of all eCommerce sales in the U.S., according to Internet Retailer’s Top 500 report, and the recent numbers suggest Amazon will grab an even larger slice of the pie this year.
Furthermore, despite a recent price increase to $99, Amazon’s Prime program continues to attract shoppers, with roughly 45% of its customers paying the subscription fee to access free shipping with every order and exclusive streaming content. The high percentage of subscribers is significant because they spend an average of $1,500 annually with Amazon, 140% more than other Amazon customers.
But looking beyond these impressive numbers, there’s reason for small- to mid-sized merchants to take heart. For starts, Amazon’s direct sales of products were up 9.6% in Q4 — in the same league as the 9.1% reported by the MarketLive Performance Index — demonstrating that pure direct-to-consumer sales for even the biggest of the online mass merchants were in line with the market overall. Instead, the bulk of Amazon’s Q4 growth came from marketplace fees, Amazon’s Web Services cloud hosting service, and other smaller revenue contributors, which together saw year-over-year growth of 37%.
And Amazon still faces significant challenges when it comes to matching smaller brands’ ability to deliver personal service and niche product and lifestyle expertise. As we addressed in our series on competing with Amazon, the giant’s economies of scale give shoppers discounted products and shipping on a wide selection of items, the overall shopping experience can be like using “a massive vending machine”. Attempts to tailor the experience for specific niches — such as fashion, health and B2B purchasing — are still nascent, which means that for now, at least, there’s room for merchants with compelling brand stories to compete successfully.
Among the strategies to consider:
Leverage the visibility of Amazon’s marketplace, but strategically. Nowadays, it’s commonplace for brands competing with Amazon to simultaneously take advantage of its dominant position by participating in the Amazon Marketplace program. As we’ve discussed previously, in addition to gaining SEO advantage and reaching new customers, merchants can use the marketplace to piggyback on Amazon’s international forays and establish brand footholds abroad without the headaches of launching a standalone site.
To ensure the benefits are maximized for their own brands and not simply feeding that huge Amazon bottom line, merchants should curate marketplace product selections and track performance carefully. And they should explore other marketplace opportunities that offer visibility benefits, such as via Buy.com or Sears.com, and keep an eye on new upstarts like Jet.com, set to launch this spring, which is set to offer marketplace shopping to members.
Use mobile to spotlight service. With mobile serving as the primary connector between offline and online, eCommerce and social, merchants should do their utmost to ensure that mobile shoppers feel supported by customer service. By making proactive, individualized service a centerpiece of brand offerings on mobile devices — which are now the primary way shoppers connect with brands — merchants can distinguish themselves from Amazon, whose size demands a less service-obsessed approach.
MarketLive merchant Peruvian Connection puts customer service links front and center on its mobile site, with helpful information such as a sizing guide presented along with standard service links such as “contact us”. A toll-free customer service link anchored in the footer ensures mobile shoppers can always reach a live person from any page on the site.
Bridge in-store and online to create an immersive brand experience. Merchants with brick-and-mortar locations have a distinct advantage over Amazon: the ability to combine the depth of product information online with the concrete experience of touching and trying items in-store and accessing face to face assistance with shopping decisions. And thanks to the ubiquity of smartphones, the opportunity to create such an immersive experience has never been greater; technology researcher Forrester estimates that 68% of shoppers use their phones in stores.
Merchants should ensure that device-empowered shoppers in store can access the brand resources they need in a swift and seamless manner, and further differentiate their brands by giving store associates access to online information and training in guiding shoppers toward a purchase decision. Currently, shoppers have low expectations of retail floor staff: close to 60% of consumers believe they’re more knowledgeable than store staff about pricing and product availability, even as 54% say they would buy more from stores where associates were knowledgeable.
MarketLive merchant Sport Chalet opened a downtown Los Angeles outlet in 2013 featuring tablet stations throughout the store where shoppers can browse the brand’s entire product offering, consult reviews and in-depth product information, and seek live help from store experts.
How are you positioning your brand for success against the commerce giants?