While it’s common to call Amazon the 800-pound gorilla of the e-commerce world, if anything that underemphasizes its scale, reach, and power. But while analysts agree that Amazon is a mighty Goliath, it is also a beatable one.
First, the stats.
According to Slice Intelligence, Amazon accounted for 40% of all e-commerce sales last holiday, and is now in serious contention to not just be the world’s largest e-seller, but the world’s largest retailer, period.
Amazon has also become a search engine of sorts. A 2015 BloomReach survey of 2,000 U.S. consumers showed that 44% go to Amazon first to search for products, compared to 34% who use top search engines like Google, Bing and Yahoo.
In recent years, Amazon has made a characteristically ambitious raid into the world of apparel and accessories, under the rubric of Amazon Fashion.
Analysts from the Cowen Group predict that, by 2017, Amazon—which also owns Zappos and the flash sale MyHabit—will become the largest apparel and accessories retailer in the United States, overtaking current champ Macy’s. It already sells twice as much fashion merchandise as it does books, according to Slice Intelligence analyst Ken Cassar, writing on Internetretailer.com. (Stats on how much jewelry it sells are impossible to come by.)
Among Amazon’s recent moves:
Last October, it launched Handmade at Amazon, a challenge to Etsy, As with Etsy, jewelry is its leading category; it lists 168,000 jewelry items for sale on its site. In March, it launched Style Code Live, a fashion-oriented broadcast streamed every night from its site. The glitzy magazine show stars veterans from Good Morning America and MTV’s Total Request Live dispensing advice on beauty and fashion—talking up the latest fashion offerings on Amazon. So far jewelry is not a big player on the show—or on Amazon Fashion in general—but it is not entirely absent. One item recently featured: a Rebecca Minkoff pyramid bangle bracelet.
Amazon is also taking a page from retailers like J.C. Penney and launching private-label fashion brands featuring mid-price clothes and accessories. This move wasn’t surprising, as Amazon already sells private-label electronics and home goods, and some brands have reportedly been reluctance to sell on the service. But some were taken aback by the scale of its offerings: Reports say it has already introduced seven private-label brands and 1,800 skus.
Given all of the above, and Amazon’s reputation for both low prices and margins (Slate calls Amazon “a charity for consumers funded by investors”) some worry that the site has become an unstoppable force. But analysts say that while Amazon is a formidable foe, it is also a beatable one.
“If I had a nickel every time I was asked how to beat Amazon, I’d be a wealthy man,” says Sam Cinquegrani, founder and CEO of ObjectWave Corp., a digital marketing technology and services company. What most retailers don’t realize, he says, is that they all have a huge advantage over Amazon: They aren’t virtual.
“People still want to go to a physical store,” he says. “The more emotional a purchase, the more people want to be in a physical store. You want to look at jewelry, you want to feel it. So while retailers may not be able to offer a better digital experience, they can offer a better overall experience.”
Phil Granof, chief marketing officer for NewStore, an e-commerce service that aims to meld the offline and online experience, notes that, even with the growth of online retail, 90% of sales still take place in physical stores.
“Amazon is the world’s greatest virtual vending machine,” he explains. “But it’s still missing half of the equation—a physical place for consumers to visit and engage with the brand. People crave live experiences. Stores are where retailers build their brand. The power of the physical store is undeniable.”
Amazon no doubt realizes this, and it is starting to open physical stores—with the first devoted solely to books.
Robin Lewis, CEO of The Robin Report, a retail strategy publication, and co-author of The New Rules of Retail, believes it is just getting started. “I think Amazon will open up showroom-looking boutiques all over the country, based on what they know about the local area,” he predicts. “They won’t be like any stores we are seeing now. They will have coffee, music and the ability to order things virtually.” That is still a ways away, though. For now, when it comes to servicing customers, traditional retailers have both a head start and a leg up.
The trick? Taking advantage of physical retail’s innate strengths while making them as useful as any website.
Bring online features to the offline experience.
Cinquegrani is a big believer in “beacon” technology, which uses smartphone apps to transmit info about products as well as deals to consumers. Often consumers in a store will jump onto Amazon for additional information on a product. As an example of how this works, he talks about a recent unsatisfying trip to Home Depot.
“I was looking for an air compressor,” says Cinquegrani. “I couldn’t really understand the difference between them. If I had the info at the store I would have chosen it right there. Instead, I went home and bought one off of Amazon. If you can give the customer the kind of info they can get online on their phone, you can turn that into a competitive advantage, because they can not only get the info, they can see the product and leave with it.”
Provide an experience.
Now that customers can buy anything from their home, fashion/jewelry retailers must give them a reason to visit their stores. “Stores must become entertainment destinations,” says Lewis. “Provide music, a place to sit down and work at your computer, food, and by the way, we also have things that you can buy.” Lululemon offers not just yoga sportswear but yoga classes; Apple stores host a “genius bar” that fixes products and sometimes offers in-store entertainment.
Give your brand a personality.
For all of Amazon’s strengths, it is fundamentally a faceless company that eschews human connection: It doesn’t even list its customer service phone number on its site (though it can be Googled). Today, however, consumers want a more direct relationship with the brands they patronize.
“Each brand must have a personality or it will fail,” says Lewis. “If an old brand doesn’t have personality it will cease to exist or they will struggle along as mature brands like Gap or Levi. Those used to have a personality but no more.” For brands that do it right, he lists Apple—its personality is “young, cool, and sexy”—and Target: “When a young mother thinks about Target they think about a young, fun place, that always has new designers.”
Customize for your local area.
The ability to stock your shelves for local tastes is a huge advantage for traditional retailers, says Cinquegrani. Would a Florida store sell charms of seashells? Of course. That doesn’t exist online; dot-coms don’t merchandise on a local level.
“Traditional retailers collect information about what merchandise sells in specific stores,” he explains. “If you go to a Costco, you see different merchandise in different geographic locations. Online, however, Amazon and Costco.com are the same as New York or San Francisco. If I am a retailer in Alaska would I be selling parkas in the winter? Or would I be selling swimsuits?”
Make “buy local” part of your pitch.
Cinquegrani says that “buy local” is popular among Millennials, and retailers need to increase their ties to their local community. “As a retailer, you know your demographics and your customer better than Amazon ever can,” he says. “If you could leverage that information and your presence, think how much further ahead you would be.”
“The associate is the most important link in the chain,” says Lewis. “They are the last point of human touch before the consumer makes a decision to buy. They need to do more than just smile and ask ‘What are you looking for?’ Associates should know every one of their loyal customers and what kind of jewelry they love, so when they come in the door they can give them what they want.”
In recent years, one of Amazon’s secret weapons has been Amazon Prime. For $99, the customer gets unlimited two-day shipping, as well as free streaming music, movies and titles from the Kindle lending library. The service has dual benefits for Amazon: It not only pockets the fee, but it’s found that Prime customers spend more on the site and become more loyal customers. While Amazon does not provide stats on the decade-old service, analysts estimate it has over 50 million members, or about half the company’s customer base.
Enter ShopRunner. Founded in 2010 in part to combat Prime, it gives customers unlimited two-day shipping from close to 150 affiliate retailers, including Lord & Taylor, Neiman Marcus, eBags, and Blue Nile, all for $79 (Prime’s original cost, before a recent price hike).
Shoprunner also offers retailers the ability to offer one-click purchasing at those retailers, just as Amazon does. Members also get special deals from participating stores, customized to match their buying habits.
“There are brands that don’t want to work with Amazon,” says Nena Kwon, ShopRunner’s head of merchandising. “Working with us enables them to be part of a consortium of stores that provides the same benefits but lets the stores control the experience from end to end.”
What do retailers get out of it? Access to new customers that typically spend more than their standard buyers, says Kwon.
“The idea is to band together and make a dent against the giant that is out there. Neiman Marcus does not want to sacrifice any of its brand identity by working directly with Amazon. People don’t think luxury when they think of Amazon. Who wants jewelry sitting next to toilet paper? ShopRunner gives them that elevated brand identity and makes them part of this grand discovery network.”