E-commerce expert Alexander Graf explains why Amazon’s astonishing figures shouldn’t make retailers despair—but start getting personal
It came as a surprise to no one that when Amazon recently revealed the extent of how much the pandemic had improved its sales and profits, the news was good. In Q1 2021, Amazon reported quarterly sales of $108.5 billion. This is impressive enough on its own, but to provide some further context, that was an increase of 44% on the previous quarter.
With much of the world’s workforce now working from home—and with a good many likely to continue doing so even when lockdown measures are lifted—the pandemic has been beneficial to Amazon. It has long been the world’s dominant online retailer, and that dominance is showing no sign of letting up. In fact, recent J.P. Morgan analysis predicted that by 2022 Amazon would overtake Walmart to become the largest US retailer.
For other retailers, this might be dispiriting—how can they realistically expect to compete with such an omnipotent force in retail? Yet, the broader picture brings with it reasons for optimism. If one looks a little deeper into Amazon’s results, then it emerges that non-Amazon retailers make 60% of its sales.
Jeff Bezos himself has declared that “third-party sellers are kicking our first-party butt. Badly.” So there is hope for other retailers. But to really make that count, they must truly focus on personalisation.
Changing customer behaviours
There is a significant difference in the way that shoppers begin their journey in the 2020s. Customers used to start their search for products or brands by going direct to a specific retailer. Price was of course important—when is it not?—but loyalty was also a significant factor. This loyalty has mostly dissipated now, with consumers buying directly from an online store. Amazon, along with its competitors, has changed the face of retailing.
They are also changing the face of information gathering for shopping. Google was once the first port of call when a consumer wanted information on a particular product. Now, consumers increasingly start with Amazon, where they are presented with many similar products to the one they are looking for and choose according to price and availability. For a variety of products, online shoppers now bypass a brand’s online store and buy direct from Amazon.
They do not look to a specific brand to fulfil a need and instead determine their purchase based on star ratings and customer reviews. This would suggest that brands have lost their value in the consumer’s mind and have been reduced to being selected according to who has the highest ratings or the best reviews.
How to meet consumer demands in the 2020s
Another factor in Amazon’s success is its high stock availability, enabling it to execute fast order fulfilment and compete hard on price. So, to compete with Amazon, other retailers have their work cut out. The first step to take is to forget about customer journeys and hot and cold sales funnels – these are outdated concepts that no longer work.
The value-add proposition for other retailers comes from gaining customer access and being the ones to resolve specific customer issues. Owning customer access in this way is perhaps the biggest opportunity for retailers to take back their voice in the marketplace and create solid differentiation versus Amazon.
To achieve this, it requires a focus on how you sell, not what you sell. It’s about providing exceptional customer service to stand apart from the competition. It’s about carving out a space of your own, becoming a destination for specific or niche retail requirements. It’s about meeting the needs of customers who want greener, better-sourced products. These are customers that Amazon cannot easily address, but a group that other retailers undoubtedly can.
Owning access to these customers is only achieved by delivering a first-class customer experience and making more effective use of personalisation. This involves bringing to market new initiatives and features that help the customer, communicating with them better, offering bespoke prices or individual coupons that are unique to the customer.
There is a stark need for a modern, more agile tech infrastructure to provide this level of personalisation. Monolithic legacy systems make assumptions about a business model before bringing any e-commerce campaign to life. They were never designed and built for rapid innovation or adaption in the face of changing circumstances, and that’s an imperative now more than it has ever been.
The world we live in is about rapid adaptation, so relying on inflexible systems when developing an e-commerce model will only restrict agility and flexibility. Those cumbersome and outmoded systems are better suited to planning, and you need to quickly adjust to ever-changing circumstances and the current prevailing retail winds.
Because there is no doubt, demand is changing, such as with the rise of more conscious consumers, where more ethically sourced goods are the order of the day—more organic, sustainable and green. On top of that people want real differentiation in the products they purchase. Amazon can’t offer any of these things, but other retailers can.
Changing the customer experience and offering deep levels of personalisation is how retailers can succeed against Amazon. There is a window of opportunity for them to claw back market share, but that window will not be open forever. Retailers must act now or suffer even more at the hands of Amazon.