Overcoming the Amazon Effect: How Small Businesses Can Adjust to the Changing Retail Landscape
Going by news headlines, it often seems like the world belongs to Amazon and the rest of us are just along for the ride.
Especially since lately there doesn’t seem to be much that Amazon doesn’t have its hand on, including data storage, hardware, and media.
But the company’s backbone remains ecommerce, and it’s no secret that the so-called “Amazon Effect” has had very real implications for the entire retail landscape. If you’ve never heard it before, the term refers to Amazon’s unprecedented success since the company debuted in 1994 and how it has upended retail practices and customer expectations, both online and off.
The Amazon Effect has also been cited as the reason for various business closures. That’s because Amazon is responsible for half of all ecommerce sales in the US.
So whether you love it or hate it, the ecommerce retail giant isn’t going anywhere anytime soon. That means it’s up to small businesses to figure out how to contend with the Amazon Effect.
For some, that might mean using the ecommerce giant to sell products. According to the company’s own Small Business Impact Report, millions of small and medium-sized businesses around the world use Amazon to sell products, and more than one million of those businesses are US-based.
Of course, the platform isn’t conducive for all small businesses, and some have to find other ways to stand out in the competitive online marketplace.
But where there’s a challenge, there’s also opportunity.
Here are a few ways that small businesses can overcome the Amazon Effect and maintain a competitive advantage.
Focus on Convenience
Did you know that as of June 2018 there were an estimated 95 million Amazon Prime subscribers in the US? That’s up from 85 million in 2017.
The reason for the substantial increase is obvious: convenience.
With a Prime membership, shoppers have access to free two-day delivery, and that expectation is quickly spilling over to other retailers. One report found that 91% of online shoppers in the US will leave an ecommerce site if “fast and free shipping” isn’t offered.
In fact, quickly receiving purchases is becoming such a priority for consumers, that only 47% now consider two-day shipping to be fast.
While offering free shipping might seem like the easiest way for more businesses to address this issue, that can present another problem. Shipping is expensive, and can account for 25% of a business’ overall costs.
For small businesses that have a brick-and-mortar presence, one way to enhance convenience without paying a small fortune in shipping is by offering customers to buy online and pick up in-store. The click-and-collect option provides a mashup of the top two priorities for consumers: no-cost shipping and quick turnaround on receiving purchases.
What’s more, the method is quickly gaining popularity among consumers. Since January 2018, use of the buy online/pick up in-store option has risen by an incredible 119% across all retailers. (As a testament to the buy online/pick up in-store method’s popularity, it even has its own nifty new acronym: BOPIS.)
By leveraging their physical store locations, small businesses can gain a competitive advantage, which just happens to take us to our next point.
Brick-and-Mortar Isn’t Dead
We’ve all heard the reports about how online shopping has exploded in recent years.
There’s certainly no denying that ecommerce has seen exponential growth in recent years. At the same time, the vast majority (94%) of all retail sales in the US still take place at a physical store.
One survey found that 32% of shoppers say they have found a brand on Amazon and then purchased it at a brick-and-mortar store.
And even among those who do shop online, many are heading into a physical store beforehand. According to Adobe, 58% of millennials visit a store to see a product that they expect to buy online later. The reason is simple: no one can discredit the benefits of being able to touch and try on items before purchasing versus looking at them on a screen.
That’s why several online-only brands have recently switched gears and started opening brick-and-mortar locations. And many are utilizing new technologies to implement digital touchpoints that blur the lines between the offline and online shopping experience.
Physical stores also offer an advantage when it comes to returns. Shopping online is convenient, but mailing back returns can be frustrating and tedious. So it’s no surprise that 62% of shoppers are more likely to buy something online if they have the option of returning it at a store.
As a bonus, when consumers do go to the store to return an online purchase, more than two-thirds browse or shop in the store afterward.
So how can small businesses make the most of this opportunity? By making sure that marketing materials and other communications highlight the option of in-store returns for online purchases. Don’t assume that consumers automatically know they can return items to your store; instead, invite them to come in, which encourages further interaction with your brand.
Every business owner knows the importance of building loyalty among consumers.
And recent sales data is proving how important building that loyalty can be, with an increasing amount of online purchases being generated through direct-to-consumer means.
In 2017, direct-to-consumer sales increased by 34% and accounted for 13% of all ecommerce sales.
In an interview with CNBC, Shopify COO Harvey Finkelstein explained that selling directly to consumers is the future of retail.
“The idea that direct-to-consumer is just a fad is ridiculous,” he said. “I think the future of commerce and retail will be consumers wanting to buy products from the people who make the actual products.”
Why is the direct-to-consumer model gaining momentum? When brands sell through retail distributors, they have little (or zero) control over how a product is sold. And if a consumer doesn’t have a great retail experience, they’ll associate that with the brand.
But when selling directly to consumers, brands can control and optimize every aspect of the customer experience — that’s a win-win for retailers and shoppers.
And for small businesses, that should provide an incentive for more to adopt an ecommerce presence.
Ecommerce sales are only going to increase. The lack of a digital presence among small businesses indicates there’s a lot of untapped opportunity when it comes to online shopping.
As a small business, are you able to compete directly with Amazon? No, of course not. But that doesn’t mean you can’t become a leading business in your niche market.
With some hard work and investment, your business can avoid becoming a victim of the infamous Amazon Effect and instead be positioned for long-term success.