Is Amazon responsible for the decline of retail? This has been the accusation of retailers against market giants for a long time. The audit and consulting firm PricewaterhouseCoopers (PwC) has investigated this question and provides the facts in its study “Total Retail 2017“. In Germany, some 90 percent of the respondents buy from Amazon. Of the 25,000 respondents worldwide, 28 percent said that Amazon had a profound impact on their purchasing behaviour. Of the 1,000 Germans surveyed, 34 percent claimed that Amazon had even changed their purchasing behaviour. This implicitly means that German customers are less likely to buy in stationary retail or from other online shops.
Interestingly, Amazon does not always offer the best prices, as we jointly uncovered with ibusiness in our own study. So what drives the fascination of customers for Amazon, if not the price? The PwC study suggests that,
“The keys to a positive business development in retail are a deep understanding of the needs of consumers and those customer-oriented innovations resulting therefrom. This is confirmed by successful online retailers, especially Amazon”. – Gerd Bovensiepen, Head of the Trading and Consumer Goods Division of PwC in Germany and EMEA
In order to remain successful in online retail, it makes little sense to be entangled in a discount war with Amazon. The more important question for you as online retailers will be what you can take for yourselves from Amazon’s customer-centric procedures in order to remain competitive? We would like to offer a few suggestions here.
Increased customer focus through premium services
Some 35 percent of the Germans interviewed in the PwC study already use an Amazon prime membership and another 19 percent have expressed their interest in this service. The strongest arguments for this are free delivery (said 77 percent of respondents) and fast shipment (52 percent).
Orders are often associated with emotional events, such as Christmas, birthdays or Valentine’s Day. Buyers want a punctual and free delivery, especially at these times. If a premium service provides this option, then many customers are willing to pay an extra charge. As a further argument for a premium service, the special positioning of the premium customer emerges. Premium means customer-centric – or the customer is treated by the retailer specially. You should use this circumstance as an online retailer. It does pay off, since a study published by DHL Express showed that retailers and manufacturers with premium delivery packages are growing 1.6 times faster than competitors without premium offers.
Customer loyalty and a sharpened profile with own brands
Amazon is no longer exclusively selling products from other manufacturers, but now also sells its own brands. Amazon basics started with computer accessories, but now includes cutting boards and yoga mats. With the Kindle series, the manufacturer has also established in-house eReaders and tablets. In this way, Amazon has made itself independent of external manufacturers.
Setting up and maintaining an own brand can be a good idea for you, the retailer. Own brands escape any price comparison, because only you exclusively offer this product. By this method, you can establish a fruitful profit margin. In addition, an own brand carries the inherent opportunity of profiling. When you develop a product that matches your branding, you then add more depth to your brand. Beforehand, you should clearly define which target audience you want to address with your brand. Afterwards, the design, advertising and price are then determined for your own brand.
Convince customers with expert status
Amazon began in 1994 as an electronic bookstore and then gradually expanded its product offering. The online giant first established itself in a niche before advancing into other product areas.
Before you attempt to expand your online store, you should firstly dominate a niche. You can prove yourself as an expert here by providing detailed product information, detailed presentations and also valuable tips. As soon as the buyer trusts you, they will then order more often from you. The higher the price for a product, the greater the need for the customer to find a competent contact person in sales. Turn this buying experience to your own use and establish yourself as an expert. From this safe position, you can then further expand your product range. Keep an eye out here for alternative online marketplaces to also offer your products.
Summary: Prices continue to influence purchasing behavior
To take up a price war with the online giant Amazon holds little chance of success for you the retailer. You and your online shop will fall into the pricing spiral here and also damage your margins. But you can increase your chances when you implement a premium service, develop your own brand and maintain your branding accordingly, or also by establishing yourself as an expert for specific product groups. In this way, you will best be able to develop an incomparable position and gain recognition with the customer.
In order to create a unique offer, you should keep an eye on the offers of other competitors. Amazon performs 2.5 to 3 million price changes daily and this can hardly be monitored and evaluated manually. Using the blackbee Business Intelligence software you are constantly informed about price changes on the market. From this starting point, you will find the ideal price and the best margin for your product range.
Do you need more tips on how to operate successfully in eCommerce? Send us a message now – we look forward to meeting you!