In our newly released “8 Retail and Logistics Predictions for 2019,” we predicted that forward-looking brands will discover the secret to avoiding Amazon. Here are the details.
Amazon is good for so many things. It spearheaded eCommerce retail, is responsible for more than 80% of eCommerce growth, and created an unparalleled logistics infrastructure that makes fast, affordable delivery possible. But, there are inherent drawbacks to selling through Amazon. It isn’t the best fit for every retailer.
Over the last 20 years, Amazon has continued to innovate and redefine customer expectations. Three- to five-day delivery promises used to be acceptable, but Amazon has ruthlessly driven expectations down to two-day, next-day, and same-day delivery.
The good news? Amazon isn’t the only answer for providing fast, affordable delivery to your customers. Below, we outline three ways retailers and brands can circumvent the retail giant.
First, what’s there to lose with Amazon?
Control over your brand: When you sell on Amazon, you gain an audience of 300 million users, but you lose the ability to control your own marketing and brand image. Product listings are determined by Amazon’s algorithms, meaning you can be listed with, and potentially outranked by, your competitors. Additionally, Amazon is its own brand and sends orders (of your products) in its own box. Sellers lose almost all control of the post-purchase brand and delivery experience.
Your profit: Based on our own eCommerce and logistics study (coming out soon), the top concerns for Amazon sellers included high and complicated fees. These sentiments are being echoed in the online seller forums where sellers complain about issues such as shipping fees cutting into margins, higher costs for shipping to multiple Amazon warehouses, and specific rate hikes on certain categories like electronics, according to Business Insider.
Your customers: Beyond just retailers leaving the tech giant, Amazon could very well be seeing some consumer abandonment as well. A report by Yes Lifecycle Marketing found that Gen Z is less likely than any other generation to shop at Amazon. Only 62% had purchased on the platform in the last month, versus 79% of millennials.
Your product: For sellers, the biggest risk of all actually comes from Amazon itself. Amazon has access to all of its sellers' sales data. As a result, it can, and does, leverage that data to determine the top-performing markets and products that it chooses to enter into with its own private-label brands. If you have a successful product, Amazon could reverse engineer it and become your number one competitor. As Amazon continues to create more private labels, the frequency of which this occurs will only increase. According to analysts at SunTrust Robinson, Amazon’s private label sales are expected to reach $25 billion by 2022.
Unfortunately for sellers, the situation only seems to be getting worse. Brands like PopSockets have started leaving the platform over new policies that aim to claim even more control. According to PopSockets CEO David Barnett, Amazon positioned requests to them to lower prices or increase their marketing budget as “non-negotiable demands.” Meanwhile, Amazon’s new consolidated marketplace, One Vendor, “would effectively eliminate brand choice around how they want to sell on Amazon” according to Digiday.
“Amazon has applied intense pressure to consumer brands across different product categories—seizing more control over what, where and how they can sell their goods on the so-called everything store.” recode
In the beauty, fashion, and wellness category, Glossy reports that "nearly half of brands said they do not sell their products on Amazon" and "despite the attention Amazon garners, only 5 percent of brands said they will start selling products on Amazon in 2019."
How retailers and brands can reach their customers on their own
1.) Lean into logistics
Your logistics strategy, namely warehousing and fulfillment, is the backbone to reaching your customers. Not only can you meet the delivery expectations that Amazon has created, you can support all of your sales channels, while maintaining customer expectations, with the right strategy.
Unfortunately, this is tough to do if you’re relying on traditional supply chain solutions that require fixed terms and long-term investments. Instead, new logistics platforms and solutions are available.
Today, like AWS and variable data storage, there are digital logistics platforms that are easier to plug into and expand based on your needs. Additionally, many of these solutions aren’t disparate but can be integrated to create end-to-end supply chain visibility for your company, giving you total control over the customer experience. The barriers to entry have been lowered substantially.
Technology-backed, full-service trucking: For companies looking to simplify their shipping process, Convoy provides on-demand trucking that connects companies who need to transport goods with truckers via an automated marketplace. This allows companies to more easily facilitate shipping and optimize their journeys, saving them time and money.
On-demand warehousing and fulfillment: Another solution is on-demand warehousing and fulfillment. eCommerce brands like mattress retailer, Lull, have implemented FLEXE’s on-demand warehousing to reduce delivery times, while large, enterprise brands like Walmart use it to manage their peak-season demand. It allows retailers and brands to scale their network up and down throughout the year to better meet customers’ fluctuating demands while keeping inventory costs to a minimum.
The other major benefit is that you gain access to a team of logistics experts to help guide supply chain decisions and build out a lasting distribution network that works for you and your customers.
Visibility into last-mile delivery: Technologies like Convey help with last-mile communication to customers and keep them in the know. They also help brands anticipate last-mile delivery demands to inform what type of warehousing and fulfillment network is needed to meet customer expectations.
Custom packaging: Companies like Lumi and Arka enable retailers to customize and brand packaging to enhance the unboxing experience and delight customers through a more tailored brand experience.
2.) Build brand equity and trust
The popular mall staples of 10 years ago are dying off. Not because the physical store is dead, but because they haven’t been able to adapt and sustain connections with their customers.
A new wave of digitally native brands like Reformation and Glossier have found ways to garner massive, near-cult followings online that has even led to some opening physical storefronts. They’ve built lifestyle brands that inspire deep, personal connections with their customers.
Consumers shop with their emotions. Today, more decisions are made based on how a retail brand represents itself, rather than on how much a product costs. From your website to your packaging to the influencers that help you get the word out, every touchpoint on the customer journey has to make your customers feel something. Successful retailers are selling more than a product, they’re selling the brand behind it. All while making it easy to engage with them across a variety of sales channels, both online and in-store.
“In the past, brands only had to worry about coming up with a product, but now developing a brand image and sense of community plays a more pivotal part in the success of that brand.” Krista Corrigan, retail analyst at Edited
Retailer spotlight: Glossier
In an extreme example of cultivating brand equity, Glossier built its customer base before it even released a single product. Glossier started as a blog, Into the Gloss, and then turned its customers into collaborators, giving followers a sense of ownership in the brand and how it was created. They’ve since tapped into that pre-built community to share and promote products on social media, and are now expanding into a new peer-to-peer sales program, which will allow customers to become sales reps for the brand through referrals—further empowering its mob of beauty fans to spread the good word.
Retailer spotlight: Reformation
Another direct-to-consumer brand that’s inspired a rabid fan following is Los Angeles-based fashion retailer, Reformation. Reformation was one of the first fast-fashion brands to create sustainable and ethically made clothing. But rather than making its messaging all about its environmental impact, they took a different approach. As Reformation founder, Yael Aflalo, put it, “Sustainability is important, but you need to give the customer a stellar product and a fantastic experience with the brand.”
By curating a highly intentional brand aesthetic, tapping into celebrity fans like supermodel Karlie Kloss to act as influencers, and incorporating its sustainability messaging only where it fits naturally, Reformation gives its customers a brand they can identify with and feel good about.
Glossier and Reformation both began by building an online presence first and then transitioning into the physical space. They were able to start small, listen and learn from their audience, and then use what they learned to build truly customer-centric brands. By vetting their brand value online, they built up enough equity to survive and thrive in traditional retail formats.
3.) Increase sales channels
The easiest way to be independent from Amazon? Be everywhere. Building out more sales channels can be complicated, but it isn’t impossible. With modern logistics solutions like the ones we mentioned above, it’s easier to start small and scale your network as demand increases. Similar to what we saw with Glossier and Reformation, embracing omnichannel comes with creating brand equity online and growing gradually.
Strong brands understand the value of creating more customer touchpoints and many online retailers are doing this better than their legacy retail counterparts. They’ve mastered the direct-to-consumer sales model, embraced social selling, and are even trying out new peer-to-peer selling models where brands allow their customers to sell their products directly.
Recently, online retailers have begun expanding into traditional retail stores as one of their last competitive sales channels. They’re hosting pop-up shops, launching physical retail stores, and partnering with legacy retailers like Nordstrom and Macy’s to increase exposure. All while ensuring that every channel seamlessly connects with the others.
Legacy retailers are beginning to see the value in pop-up shops as well. According to Vicki Cantrell, retail transformation officer at omnichannel platform Aptos, “pop-ups account for more than $50 billion a year in retail revenue.” Macy’s “The Market @ Macy’s” and Nordstrom’s “Pop-In@Nordstrom” give the retailers a way to prove their relevance in the shifting retail landscape and create new, novel experiences for their customers. It also introduces them to new demographics and helps them push sales through these limited time promotions.
This “be everywhere” strategy is proving to be a profitable one. According to commerce marketing firm Criteo, “omnichannel shoppers account for a four-times-larger (27 percent) share of sales.”
Amazon is great for a lot of things and it continues to innovate and define best practices for eCommerce, but it’s not for every brand or every shopper.
If you’re looking for new ways to support growth while maintaining control over your brand, you have options. There are myriad technologies and solutions available to help you create the experience your brand and your customers deserve.
This is the year forward-looking brands figure out the secret to avoiding Amazon.
Read the rest of our 2019 predictions in the "8 Retail and Logistics Predictions for 2019" whitepaper >>