Amazon has been quite a hot topic recently, marking 20 years since going public, breaking $1000 per share and winning 3 Oscars in the last Academy Awards. The company is an undisputed ecommerce giant and shows no signs of slowing down. While the company’s trajectory is impressive, Amazon’s level of dominance has some interesting implications for other businesses in the ecommerce space. While it does provide an active marketplace with millions of potential customers, it also creates competition like never seen before. Accounting for over 40% of all ecommerce business in the United States, Amazon is both a blessing and a curse for brands looking to sell online.
From the start, Amazon’s goal has been pretty clear: to be the one-stop shop for every customer’s needs. If they had their way, you wouldn’t ever have to search for a product on Google again. Instead, you’d skip straight to Amazon. Whether that goal is realistic or not remains to be seen, but the company’s history might make you want to think twice before betting against them. The company seems to be unstoppable, accomplishing any feat it puts its mind to. Free 2 day shipping for Amazon Prime members. Largest internet company by revenue. Prime memberships reaching 63% of the United States (that’s more than the percentage that voted in the 2016 election). Drone delivery. Amazon GO grocery stores. Amazon restaurant delivery. The list goes on and on.
To reach this crazy goal, Amazon and it’s millions of customers have waged war against one of the strongest and most praised pillars of commerce: brands. A brand being any company that wishes to sell a product under their brand name such as Nike, Coca-Cola and Apple.
Amazon, being a very customer-centirc company, will do whatever it takes to make the customer happy, and customers like saving money. That means that, if deemed necessary, it will use it’s advanced search algorithms, monopolistic powers, and investments in voice purchasing, to return the billions of dollars poured into branding back into the consumers pocket. It will display to consumers the products that are the best quality, at the cheapest cost regardless of if that product has a swoosh on it.
So is there a way to survive Amazon’s takeover of the entire industry? Before we can win the war we must understand our opponent, so let’s dive deep into how Amazon is overpowering brands.
Being a merchant myself, I think I can speak for all of us when I say that one of the largest challenges with selling a product is getting people to find your store and choose you. For many ecommerce retailers, overcoming this obstacle is all about Google search optimization but for brands selling on Amazon, there is a different search engine god they must praise.
Where Google displays results that are the most accurate, Amazon’s search engine works a little bit differently. Using heaps of aggregate data, Amazon’s A9 search algorithm combs through all of the products on their site and displays results based on these three pillars:
Here, Amazon tends to use both predicted and real conversion rates. This means that if your price is slightly higher than your competitors, Amazon will detect that and match you with a lower conversion rate until your sales prove otherwise. This works to effectively lower your SEO in Amazon’s search results.
Relevancy tends to depend on data taken from your title, product description, and past searches that landed on your page.
Amazon knows that customer retention is the name of the game. Getting a customer to return to your site consistently is much more valuable than a large one-off sale. If your product doesn’t have great reviews, Amazon will infer this as poor customer satisfaction, and your product will further get downgraded.
Using these three pillars, Amazon’s number one goal is to show the buyer the search results that have the highest chance of ending with a purchase. This is very important because it is distinctly different from a search that simply displays accurate results. Your product will not show up if it has mediocre reviews, poor conversion, higher prices, fewer clicks, or anything that does not increase Amazon’s revenue faster.
In addition, research has shown that branded searches are rapidly on the decline, with every sector of consumer packaged goods seeing an increase in non-branded searches! This is a big deal because it shows that customers are beginning to care less and less about which brands they buy. With branded searches on the decline, Amazon will dictate and tell the consumer which product they want - not the brand.
While purchasing something by talking to your phone might still seem a little odd, but the truth is this technology is being adopted at a rapid pace. Voice interactions are being pursued by the biggest players in technology (including Google, Amazon, Microsoft, and Apple) and their involvement is about to change the game. The Amazon Echo, a home connected device that allows you to perform commands and purchase things, has found a home in over 5 million US households. Apple’s voice-activated “assistant” Siri sees 2 billion commands per week,and the Google Assistant accounts for 20% of searches on Android devices. Clearly voice is big, and the largest companies are betting on it to be the future, but what does this mean for ecommerce at large?
Amazon clearly wants you to feel comfortable talking to it’s device. More importantly, they want you to be ready to make quick decisions based off of what it tells you. This completely changes the buyer’s experience by removing the opportunity to see the product you’re purchasing or indicating specific brand preferences.
With voice-activated shopping, then, brands have almost no influence. With no opportunity to display branding, features, or tell a story, Amazon is given the power to recommend only the products that best suit their commercial interests. This puts a lot of stress and importance on being the first suggestion that Amazon makes because, as you can imagine, the chance of a customer listening to other product options is almost as low as them clicking to the second page on Google.
In addition to this (and this is no small aside), Amazon can choose to suggest their own brand of products instead of yours! Amazon owns and sells private label brands in apparel, baby food, wipes, batteries, supplements, and office equipment (just to name a few).
With this arsenal at their disposal, Amazon will undoubtedly advertise their own products before they advertise yours. When L2 Inc, a New York based research firm, asked Echo to buy batteries, the Echo played dumbed and only suggested Amazon Basics Batteries even though there are plenty of other brands selling on the site. This shows a scary realization of what the future of Amazon might look like - one where Amazon is at the forefront and other brands are just an afterthought.
The final nail in the coffin for modern day brands is the intentional lack of customization that Amazon offers its merchants. Outward appearance is everything when you are trying to build a brand. That is why Coke focuses so strenuously on having an extensive network of account managers that ensure proper shelf space, correct promotional tactics and use of branded materials. Coke is red, not blue. These brands have spent decades building relationships and networks to properly manage how customers perceive their brand, and Amazon completely stips away all of their power.
Let’s take a look at an example. Adidas is a company that focuses on brand building so that they can charge a premium to the end consumer. On Amazon, the page for a standard Adidas shoe features no Adidas branding aside from the shoe itself. No Adidas logos, colors, or anything. All Adidas is allowed to do is showcase the name, some photos, and a short description of the product. This is insanely limiting as a brand’s logo and colours can go a long way to earn a customer’s loyalty.
By restricting product page customization, Amazon creates a uniformity across it’s platform that makes for a smooth customer experience. The major downside of this is further seperating brands from the end consumer, making it quite difficult for merchants to build a meaningful relationship with their customers.
What This Means For You
As I mentioned earlier, I’m actually a merchant myself. Like you, I’ve been trying to figure out how I can keep my current customers returning to my store instead of Amazon and I’m happy to say I’ve found a solution! The best part? It’s surprisingly simple.
At the end of the day, I’d like to believe that I can offer a level of personalization and customization that makes my brand stand out from the crowd. Because of this, I’ve done everything I can to amplify the differences that my brand has and the experience I can provide that Amazon cannot. In an effort to amplify the differences between my brand’s amazing experience and Amazon’s, I started looking into the best way to differentiate myself. The best way that have I found to do this, and the one that I have had the most success with, is a branded rewards program.
A rewards program gives me a lot of flexibility and ample opportunities to exceed my customer’s expectations. By allowing me to design a program that is tailored and seamlessly integrated with my brand, customers get to experience a more personal experience they cannot find on Amazon Prime.
My program uses a three pronged approach: points, referrals, and VIP. In my business (selling Rubik’s cubes to collectors), I get quite a few repeat customers. Around 60% of my site visits are from returning visitors, which means that my customers are continuously checking out my site. A points program gave me the perfect solution to retaining these customers by rewarding them for staying loyal to my store. I’ve gotten great feedback from my customers, as my devoted fans can get benefits from purchasing and sharing a brand they know they can trust.
Another aspect specific to my customer base is the presence of many large influencers. The community loves to share their new collection pieces to a growing online network. What better way to harness this social presence than with a referral program? My referral program has worked wonders for me, allowing me to spread my brand through the recommendations of friends, fans and influencers. Customers who are passionate about my company get to spread the word and then get rewarded for it! It’s the perfect way to please my current customers and branch out to a whole new network of potential customers that will now buy from me and not Amazon.
The final aspect of my rewards program that further sets me apart from Amazon is my VIP program. A well-branded VIP program can go miles to help you build strong brand advocates. One of my favorite examples of this was a small YouTube channel called CubingCritics, who upon discovering my site began to order from it quite frequently. They quickly caught my eye as they moved up the tiers in my VIP program, but little did I know that this small channel of 30+ subscribers would manage to make a small town of 10,000 people my best-selling region.
These customers were so excited about being members of the highest level of my VIP program that they were handing out my business cards to teachers, community leaders, and students - anyone that they thought might be interested. This level of brand advocacy is not something you see quite frequently on Amazon as customers do not build the same sort of relationship with the large corporate giant.
Staying Ahead of Amazon
Running a rewards program with this much customization has allowed me to build a special connection with my customers that Amazon has been unable to provide. It incentivizes customers to come back, allows me to find new audiences and builds brand advocates all in a way that makes my customers smile. Amazon is definitely giving us a run for our money, but if brands put their customers at the forefront of their minds and prioritize the consumer experience above all else, there is no way that the ecommerce giant will be able to keep up with our agile customer-centric businesses.