Since Amazon’s founding in 1994, the tech giant and ecommerce leader has grown to $232 Billion in annual revenue. As a result of this success, retailers across the world have been finding themselves locked in a competition, and Amazon is winning. Amazon sells over 353 million products and is responsible for 49.1% of all online retail sales. At this volume, it is inevitable that brands are–or will soon be–in competition with Amazon.
So what does Amazon do that gives it an edge over retail locations? Amazon can purchase products at a low price and avoid all of the costs of local brick and mortar marketing, thus they have a cost and scale advantage. Consumers feel comfortable ordering from Amazon because of its reputation for product quality and personal security. Amazon reviews help determine what to purchase and whether a product will meet a customer’s expectations. Lastly, one of Amazon’s strongest assets is its simplicity. Rather than traveling to different niche websites to find an array of items, a buyer can simply go to Amazon and buy everything they need in the comfort of their home.
After analyzing the biggest draws to Amazon, it sounds like a great company that provides an efficient, simple, and reliable platform for customers; however, there are many flaws in that argument. First, the star ratings that are so highly valued by consumers across the world are actually not a reliable indication of the quality of the product. In fact, a recent study found that 61% of Amazon reviews are “fake.” Second, Amazon is increasingly posting advertisements and manipulating results to promote their highest profit products and companies that pay high advertising fees. Third, there is a perception that returns on Amazon are 100% free. This used to be true, but their return rate is so high that increasingly this loss gets placed on consumers through return and restocking fees. Lastly, there is a plethora of knockoff product on Amazon so a customer has little confidence that they are going to receive the true, original product.
Now knowing what you know, you may be asking yourself, “What can I do as a retailer to compete?” For most products you must price at the same price as Amazon; that’s just the reality. If you purchase from brands, be certain that they are holding Amazon to map pricing. If they are not, forewarn them that Amazon will control their brand one day if they do not protect their brick and mortar. Hope isn’t completely lost, however. Gen Zers value touch and feel in their purchases, especially in regards to larger purchases. In your store, be sure to keep as much on display as you can, and have inventory for impulse or immediate purchases. One advantage you have over Amazon is the ability to localize your message. This will create a relationship with your buyers and their local store. Your online ads should highlight your location, address, and local lingo to fuel this relationship with potential buyers. People are 3x more likely to interact with an ad if it’s relevant to them. Lastly, be transparent with customers. Let your customers know that you have the same pricing as Amazon, but your products come with the benefits of buying local and a person to call for advice and help. Millennials and Gen Zers, which are by far the largest buyer group, want to support stores and products that have stories, heart, and relationships. Highlighting local stories about your store and your people on social media will help connect you to these groups. Without local stores to generate demand for products, Amazon is basically worthless. Brands cannot afford to have all of their non-Amazon marketing and distribution channels go away, so plan marketing that leverages your advantages.
The goal of a retailer should not be to compete with Amazon, but rather to compete in today’s market that is dominated by Amazon. Amazon’s US e-commerce market share is nearly 50% and is going to continue to increase, but if you as a retailer learn to compete effectively in this market, you can build a brand that can be successful.
Mackenzie Newnam
Mackenzie Newnam is a Marketing Intern at Netsertive. She is a rising Freshman at the University of Southern California’s Marshall School of Business and plans to pursue a focus in marketing. When she isn’t listening to the latest business podcast, you can find her at a spin class, playing tennis, editing videos, and practicing her photography skills.
