On Sunday morning, I was relaxing with my cup of joe when the doorbell rang. I was surprised to see the USPS at my door delivering the three mixing bowls I had ordered from Amazon on Friday afternoon with “one click.” Wow! Unbelievable! While I was pleased that I could use new cookware for Sunday dinner, this almost instant gratification made me wonder how one competes with Amazon. So, I went back over my hundred plus online purchases this past year and found that only about a third had been placed with Amazon Prime. The rest had been placed with a variety of other web merchants. Why didn’t I place all my orders on Amazon? What had these merchants competing with Amazon done to beat them at their game?
Here are my conclusions on things you need to do:
1. Beat Amazon’s Price and BRAG ABOUT IT! Often I price shop before purchasing, and Amazon frequently does not have the best price by a significant margin. The more expensive the items, the more likely I was to give up the Amazon crutch. You need to have prices on commodity items that are at or below those on Amazon. There are many services that you can use to monitor Amazon’s prices and those of your competitors for commodity items including Keepa, Camel-Camel-Camel, Slick Deals, Price Zombie, and Invisible Hand. You can integrate pricing into a marketing automation platform or use price adjustment software such as Feedvisor. Develop a strategic pricing program that offers the low prices you can live with on items most frequently shopped but gains margin on proprietary product, add-ons, impulse items, or site recommended items.
As with any benefit, let buyers know in every way you can. In SEO, SEM, retargeted ads, and website brag about your fantastic prices; tout a price matching policy, and communicate that you are unbeatable. State directly that you beat Amazon!
2. The Sales Tax Advantage. Amazon charges sales tax on most purchases. Yikes – this really adds up and is frequently more than what other merchants charge for shipping. Rarely do merchants tout this advantage in their ads. Most sellers can state “no sales tax collected” in states where they do not have Nexus. When I make large purchases, I always shop with a merchant that is out-of-state; if I see tax added, I quickly abandon the shopping cart! Many sellers can and should put this up front in their paid and natural search description tags so Google will display this advantage and you will get the click rather than Amazon.
3. Free Shipping. If you are selling commodity items that are sold on Amazon, you may need to bite the bullet and offer free shipping. If so, build it into your prices. You must assume that your customers have already joined Amazon Prime and even though they are indirectly paying for shipping, in their perception shipping with Amazon is free.
4. Rapid Delivery. While Amazon advertises “two-day delivery” for prime, many of the items that I have purchased from Amazon this year are not available for Prime shipping, so Amazon does not have this advantage. First, you should do everything you can to move orders through your distribution system as fast as possible; control what you can control. Second, determine what the shipping time will be for every area of the country and advertise this on your website and in geographically targeted ads. In many cases, you can compete with two-day delivery or the longer delivery time for non-prime items. FedEx ground now delivers to many areas in two days. UPS and even USPS have also upped their game in the last few years. As long as the shipping time looks reasonable, the customer may be willing to accept the trade-off for other advantages you offer.
By now you may be thinking that if you take all the above advice, you may as well go out of business since you have no margin left. Not so – you have many potential ways that Amazon does not possess to confront the beast.
5. It’s the merchandise, stupid!
a. Proprietary Product. This has always been the best answer to withstanding price competition. Develop a product line that is unique and branded so that it cannot be commoditized. Make sure that it has features and benefits that are superior to similar product at comparable prices. AND, make sure that it has the margin needed for you to stay in business.
b. Bait and Switch. When I purchased a pool filter last week, I price shopped for a specific filter that was highly rated. In the process of doing my research, I went to a site that not only offered me a competitive price on the filter, but showed me their branded filter that was superior! I bought it.
6. Brand, Brand, and Brand. While you may not be a Tiffany, you can become a brand that is preferred over your competition. For example, Frontgate has done a great job in making itself price resistant with proprietary product, presentation, content, customer services, and superb marketing. Brand has so many elements and alternative approaches that it is well beyond this blog to explore them. Andrea Syverson, a partner at CohereOne and brand expert will present two sessions on brand at CohereOne’s upcoming Summit in May. Be there!
7. Superior Human Service. You have a phone department staffed with product experts that Amazon cannot match. Put your toll-free number as a clickable link in the description field of your web pages and SEM ads so it shows up on Google. Many savvy shoppers want actual human knowledge and help; once on the phone with you about half the callers will place an order. About 50% of site visits are now done by smartphone. Many Shoppers will click to call and then order if you let them know you can.
8. Direct Marketing Superiority. You have arrows in your quiver that are not used by Amazon. Yes, you are an expert with catalogs and direct mail which have about 50x the response of email. You know all the “tricks-of-the-trade” for using print to instill loyalty, reactivate customers, and prospect. Again, there are many ways to use print to tout your brand, merchandise and tactical advantages over Amazon. Done well, print contacts can make you the consumer’s choice over some unknown random reseller presented by Amazon. We will explore many new ways of using site visit data to increase your print based marketing advantage over Amazon at our upcoming Summit.
According to Forrester, 55% of consumers use Amazon for research before they make a purchase. You must assume that many of your prospective buyers will search Amazon before visiting your website and plan your strategy for beating the gorilla. A major theme of the CohereOne Catalog & Integrated Marketing Summit on May 17 to 19 will be how to maximize your sales and profit on Amazon if you sell products there and how to prosper if you chose to stay away. I invite you to come and learn how to survive and thrive with Amazon!
If you have any questions, comments or concerns, email me at jlenser@cohereone.com