How to Compete with Amazon (and Win)
Most ecommerce companies that sell on Amazon have a love-hate relationship with Amazon. Why is that? And more importantly how do you compete with Amazon and WIN?
Well that’s really the wrong question.
That’s like trying to figure out how to live on just water or completely without water… Neither works. It’s really about striking a balance and using every part of your diet to achieve optimal results. It’s the same when dealing with Amazon. So, it’s not really, “how do I compete with Amazon and win?”, it’s “how do I use Amazon correctly and WIN?”
What is there to love about Amazon?
Amazon accounts for about half of all ecommerce sales in the US. Simply put, Amazon can drive serious sales. Whether a company only sells on Amazon, or receives just a small portion of sales through Amazon, Amazon driving sales is a good thing.
That being said, if you’re only selling on Amazon then you’re in trouble. You need to diversify otherwise your fate is out of your control. It’s important to diversify into other channels so that you are not solely dependent on Amazon (or any one single channel), a channel that you ultimately do not have control over.
Amazon is a comparison engine. It is where people go to find the product that they want to buy. In the end, many customers make a decision and complete their purchase on Amazon. However, many others then research other channels once they’ve made a product decision and purchase elsewhere. Amazon is also a discovery channel where many potential customers become aware of your brand. Keep a great reputation and this will work in your favor.
If there’s one thing that consumers know about Amazon it is that they receive their items fast. This is completely intentional and Amazon has invested heavily in the logistics area creating a customer experience that at times seems magical. If you invest on Amazon as a brand and maintain a Prime status this can be a huge benefit.
What is there to hate about Amazon?
1. Channel Competition
Whoa! I thought we said we shouldn’t be competing with Amazon. That is correct, as a brand we shouldn’t see Amazon as a competitor. However, from a channel perspective it’s a different story. Amazon competes with your direct channel (if you have one). This would be your ecommerce store. Now let’s dig into this a bit. Amazon does not compete with you, but your Amazon channel does compete with your direct channel aka your ecommerce website. AND it’s important to make the point that your Amazon channel (while it is ecommerce) is not your direct-to-consumer channel. It’s Amazon’s direct-to-consumer channel, and the customers are their customers. Got it?
Think of Amazon like you would a wholesale channel. They are effectively a 3rd-party retailer. If you are a brand and you’re selling on Amazon and not on your own website, you are not selling direct-to-consumer. A little confusing, I know, but these are important to understand in order to create a successful strategy.
2. Customer Ownership
Many Americans prefer to buy everything that they can on Amazon, especially if they are prime members (which over 90M American households are). It’s a one-stop shop for almost anything one could need.
Even if these customers are buying your product, they are not your customers. They are Amazon’s customers. You do not own their data or control the customer experience. This actually poses a huge problem, because the true value of a customer is in their lifetime value, not a single sale. We talk a lot about how the sale is just the beginning and that true success comes from creating a long-time customer who is a raving fan. You get to have some communication with the customer, but Amazon is very clear that these are their customers. Violate that and you’ll be booted off. It also creates stress because a few bad reviews on Amazon could completely tank your sales through this channel.
3. Customer Experience
Now that we understand the customer ownership part of Amazon, it’s easy to understand the difference in customer experience. The customer is Amazon’s customer, and therefore they get Amazon’s customer experience when unboxing products and interacting with the brand. Yes you control the package your product is in and respond to customer service issues, but only as it fits within their system. Don’t be fooled – this is Amazon’s customer experience, not yours.
This isn’t necessarily a bad thing. The Amazon customer experience is good, but if you want to create a more unique customer experience that is designed around your brand, your values, your story, your content, and your service philosophies that is going to be a challenge. Let’s say you are a brand that has a unique unboxing experience coupled with post-purchase emails educating the customer on your product. You cannot create that same experience within Amazon.
4. Brand Competition
Ok, so there is one area that your brand may butt heads with Amazon, but it really only applies to a small percent of merchants selling on Amazon. The thing to be aware of is that Amazon owns the marketplace, but they also sell their own products on that very marketplace. And they have the right to see how your product sells decide to make their own version of that very product (assuming they follow all patent laws, etc).
Some may say this seems like a pretty unfair advantage. They own the market, the data, and can sell products that compete with your products on that very marketplace. Well it is an unfair advantage, however, that doesn’t make selling on Amazon a bad thing, just something to be aware of. Plus, a little competition never hurt anyone. Without it, what would push you to be better 😉?
How do we use Amazon to Win?
As we know, we can’t beat Amazon and we shouldn’t be trying to. Stop trying to compete. That’s the wrong mindset. Let Amazon be Amazon, the one-stop shop for household conveniences. Instead of fighting, learn how to work with Amazon.
Here’s the good news: there are ways to leverage Amazon to complement your own ecommerce website and other sales channels. Here are 5 strategies that we use.
1. Treat Amazon as its own channel
Think of Amazon the same way you would think of your wholesale channel. It needs a different strategy, different customer service staff, different managing staff, and different marketing staff. It is not the same as your DTC website and should not be treated as such. Everything from the way your products are presented on Amazon to the marketing strategy and customer service needs to be treated differently. If you don’t have the people resources to invest in Amazon this way, look for an outside agency that specializes in Amazon sales. It will be well worth it.
2. Develop a direct relationship with Amazon customers
Find ways (that are not in violation of Amazon’s terms) to capture information about your Amazon customers so that you can develop a direct relationship with them outside of Amazon.
As the brand, obviously it is ideal to control the customer experience. With Amazon, this isn’t possible, but there are ways to capture this customer data so that you can communicate with them directly going forward. Include an offer in your packaging for a discount on future products from your website or ask people to register their products for a warranty. Get creative here to capture the emails of your Amazon customers so that you can build a relationship beyond this Amazon sale and capitalize on the lifetime value of this customer.
3. Focus on customer experience to generate positive reviews
In ecommerce in general, social proof is one of the biggest factors in converting visitors. But on Amazon, reviews are even more important. As we mentioned above, Amazon is a comparison engine. While shoppers are also comparing features and benefits, typically when looking at comparable products, it’s going to come down to comparing reviews.
Bad reviews on Amazon can kill your Amazon sales almost entirely. If you only have 3 stars and your competitor has 5, it’s hard to convince shoppers to buy from you instead. Do everything you can to offer excellent customer service, especially to Amazon customers, to guarantee that you’ll consistently get strong reviews.
4. Make sure your products are offered on Prime
The other main differentiator, apart from reviews, between different products on Amazon is whether or not your products qualify for Prime. It’s estimated that more than half of all American households have a Prime membership. Prime is essentially the biggest benefit to shopping on Amazon. It offers a huge convenience to customers. Prime members are much less likely to purchase your product if it is not on Prime, so make sure that you qualify.
Beyond that, make sure to offer expedited shipping on your own site for free or comparable discounts to make purchasing from your DTC channel at least as attractive, if not more attractive, than shopping on Amazon.
5. Don’t sell your entire product line on Amazon
A strategy that works well for most brands is to offer a limited product line (perhaps your most popular products) on Amazon and then offer more variety and other options only on your own ecommerce website. This allows you to use the benefit of customers discovering your products on Amazon but gives them a reason to buy from you directly as well. The key here is you will have to work to make the customer aware of that extended line of products.
The bottom line
Your ecommerce store and Amazon are entirely different. Your store offers a tailored experience, compared to the marketplace nature of Amazon. Provide a rich brand experience on your site and a sweet deal on your products to compliment your Amazon sales. Instead of fighting against Amazon, play along nicely. Doing Amazon well does not mean that you are cannibalizing all of your own sales. See it as channel diversification, which is a healthy aspect of any business.