Competing with Amazon: Learning from Five Merchants

Cody Hill
Published on: 18th August 2016
Now that Amazon has become the most valuable retailer in the world, it is hard to believe that it began just 20 years ago as a book retailer working out of a garage. The company’s rate of growth has been exponential, and it continues to change the way business is done in every sector of retail.
Competing with Amazon
Businesses that have been unable to keep up with the changing retail landscape have suffered. Who remembers Blockbuster Video? Or Borders book stores? Circuit City? In the past two decades, rapid changes in online retail by businesses like Amazon have rendered these once near-omnipresent businesses into mere memories.

How can your business compete? What can you do to stay relevant in the retail world today?

Here are five lessons from five small-business owners who are learning to hold their ground in a new era of retail:

Be smart: Employ experts to improve your business

Local stores have an advantage over larger retailers: they can employ experts who can advise and guide customers towards products that will benefit them.

One such expert is David, who owns a pet store named Paws Stop. As one Forbes writer notes, Paws Stop staff knows the underlying cause of ailments such as “skin irritation, allergic reactions, hip problems”, and other issues. They can recommend products that will help remedy these issues. What sets his business apart from giants like Amazon is that he and his staff are highly knowledgeable about pets.

Amazon is not capable of providing expertise. While you may be unable to undercut on prices, many customers will pay a premium for expertise.
Competing with Amazon
Be fast: Amazon raises expectations for faster service

Amazon has a perhaps unparalleled process for delivering packages quickly. Such fast service creates pressure on business owners to deliver quickly in order to stay competitive.

Ron, the owner of Serious Cigars, operates four brick-and-mortar locations in Texas, as well as an online storefront. He expresses frustration about the way Amazon two-day shipping has changed customer expectations when he writes: As an online merchant, it makes my life a living hell sometimes. ...I love it and it drives me crazy. I wish we could do that”.

While not as quick as Amazon, Ron knew he had to improve the process in order to compete. He goes on to say that his business now gets packages shipped the same day they are ordered.

Be self-sufficient: Learn the cost of selling goods through Amazon

Of course, some business owners may choose to utilize Amazon to sell their goods. As covered by The Guardian, an owner of an English business dealing with electronics spoke candidly (and anonymously) about his experience selling goods on Amazon.

In general, the seller did not have many kind words about his experience. While he enjoys the freedom of essentially working from home, he is largely dependent on Amazon. Whenever Amazon decides to increase their cut of sales or increase prices related to shipping, sellers must choose to either raise prices to remain profitable, or take a loss to remain competitive.

Sellers on Amazon can be vicious to each other as well. Several times, everyday, sellers will lower prices on goods by pennies to be the cheapest on the market. Other sellers reciprocate. Ultimately, this type of competition makes it difficult to stay profitable.

Be distinct: Invest in your own brand

You don’t want to be just another nameless vendor. You want customers to recognize your name and your brand. Steve is another merchant who sells good through Amazon. He operates his own website where he shares what he has learned.

He preaches that it is important that you invest in your own branded website, clearly indicating your mission statement and ethics; having a “social responsibility” page can go a long way in fostering goodwill for your brand. An excellent example of a page like this can be found here. In it, the business humanizes itself with a description of what drives them.

Without a recognizable brand, your future can be uncertain. When Steve began working with Amazon, he noted that sales improved dramatically, without reviews - just because he listed his goods on site. However, because of the competitive nature of Amazon, it can be difficult to keep consistent business. He knew he was placing himself in a precarious situation.

There are many testimonials by past sellers in which merchants have been suspended or outright banned for unknown reasons. The danger of getting suspended or banned can happen suddenly, and without warning.

As a seller, a safeguard against depending entirely on websites like Ebay or Amazon is by investing in your own branded site. By being entirely reliant on Amazon, you place your business at the mercy of others. If you develop a base of loyal customers who associate your brand with quality, you will have a steady stream of business to fall back on.

Be adaptable: Change your business strategy to stay relevant

As Amazon widens their scope to include groceries, grocery stores will have a new challenge. How can local grocers differentiate themselves from Amazon - or even other big box stores?

Many grocery stores are choosing to compete by bringing grocery shopping online via a “click and collect” system; customers can order the items they want online, then pick up the items in person, sometimes in as little as 60 minutes.
Competing with Amazon
Relay, a “local online” grocer operating in northeastern states, has been taking this concept in a new direction by offering goods from local farms and producers. In an interview, COO Arnie Katz said, “My guess is that Amazon and Walmart will take a significant portion of the mass-market share of the online grocery industry”. However, Amazon is not able to stock the specific goods that Relay has available.

Offering unique or local goods is an excellent way of keeping competitive. By doing this, Relay differentiates itself from other online grocers and maintains a competitive edge.

Today, Amazon is dominating retail. The current climate for retailers is uncertain. By looking at what other successful businesses are doing, we can learn how to stay competitive. Be smart. Be fast. Be self-sufficient. Be distinct. Be adaptable. And now, some wise words:

“What we need to do is always lean into the future; when the world changes around you and when it changes against you - what used to be a tailwind is now a headwind - you have to lean into that and figure out what to do because complaining isn't a strategy.”
- Jeff Bezos, CEO of Amazon

Thanks for reading! Feel free to leave any questions or comments below. I will be monitoring comments and will address any comments or concerns.
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