Competing with Amazon in a Depressed Environment
February 1st, 2009 | by PHC |
Amazon’s results this week were in sharp contrast with the overall health of the retail sector. As highlighted during the holiday seasons, Amazon ruthlessly grabbed market share in an overall down retail market and turned a respectable profit on its very solid execution.
Amazon’s success builds on
- a strong brand that keeps customer acquisition costs low;
- aggressive pricing that kept the brand at the forefront of many shopping comparison engines; and
- an experience that nurtures superior customer loyalty throughout the entire shopping cycle, from personalized recommendations to customer reviews.
Amazon’s success puts increased pressure on competitors to step up, at a time when most online retailers are in survival rather than investment mode. Retailers actively should be looking at three crucial areas to grow their top line in this adverse environment.
Build an online shopping experience that fosters discovery
Retailers have to better capture consumers mind before they have actually made their mind on a particular product. Google delivers very precise results when users search for an exact product – bringing competitors one click away from each others, with price becoming the only differentiator. Google is however inefficient at helping users shop a product category, such as a camera or clothes.
Retailers have to rethink how they can leverage their expertise to build a strong funnel from discovery to conversion. Zappos has just released a new way of exploring their catalog that enables customers to intuitively compare and explore shoes and accessories based on colors and shape. Distilled Clothing showcases its collection with an arresting use of videos that keeps the viewer engaged and wanting more.
Expand your reach online and offline
BestBuy has been experimenting for quite some time to expand its reach online and offline. Last year, it started supporting microformats on its website to help build a critical mass of products to tag with Giftag – their social wishlist browser plugin and service. Giftag follows Amazon’s path of helping users share their wish list of products they want to buy, while keeping its finger on the pulse of consumer trends.
With mobile internet becoming pervasive, offline and online shopping are converging. Users are increasingly using their mobile devices to arbitrage between online and offline channels. Multi-channel retailers should however seize on this opportunity to compete with Amazon. Remix – BestBuy’s combined API and affiliate program – does just that. It enables developers to build applications on top of both product catalog, as well as online and offline store inventory.
Use recommendation to build long-lasting customer loyalty
We’ve discussed the opportunities and challenges of online recommendation in numerous earlier posts. The current economic climate only heightens the need for retailers to nurture their customer relationship and improve on customer retention.
As previously highlighted, delivering a personalized online experience remains particularly difficult to achieve, because it requires mastering multiple technologies – user segmentation, content targeting, recommendation, website optimization – as well as aggregating data across online marketing channels and overcoming internal resistance. Those are reasons however why personalization remains a key source of competitive advantage, as it keeps customers engaged and helps strengthen customer loyalty.