eCommerce – The Race To The Bottom
Amazon stock just skyrocketed pushing its market cap well above 500 billion dollars and counting. It won’t be long before we see Amazon approaching the 1 trillion dollar valuation given recent trends.
The problem with this is that Amazon operates its eCommerce business essentially at a loss while subsidizing it with other more profitable areas like Amazon Web Services. This allows it to offer ultra-competitive pricing and free shipping via its Prime services.
This is forcing all other businesses to offer free shipping and low pricing as a status quo offering. However, the scale at which Amazon runs makes this possible, but nearly impossible for most SMB companies or even larger enterprise companies.
Thus, the race to the bottom.
Whoever can offer the lowest price, fastest delivery times, and the most convenience in terms of shopping experience wins. More and more items are becoming a commodity because of this and thus there is less and less reason to use a site other than Amazon, because their price, delivery speed, and ease of use are simply unmatched.
So how do you survive the race to the bottom?
This is tricky. Since most industries will suffer from some degree of this. Even insurance is essentially a race to the bottom with companies like Geico and others making it so easy to buy and use online at a very low price. However, there are ways to bring additional value to your customers so that you can perhaps charge more or build in some level of profit to keep doors open.
- Find your niche. You aren’t going to be an everything store and compete with Amazon or Walmart. That is an almost impossible task. Becoming the best at a certain niche might allow you to charge a bit of premium for your products.
- Integrate your systems. Integrating all your systems together allows you to scale and manual entry of data, saving you time so you can focus on marketing tasks and other business generation tasks.
- Incentivize loyalty. Creating incentives for customers to buy more and come back will help you build a strong tight nit customer group that will come to you over the big guys.
- Branding. Building a unique brand that means something to your customers can help influence more purchases. Amazon and Walmart are the big box brands of eCommerce, and don’t have much character. Offering brand value and creating an emotional experience with your customers can create a brand that will allow for online sales and a piece of the massive eCommerce pie.
- Content creation. Creating unique content about your products and other How To guides etc can be the difference between being an interesting place to buy something or just another basic eCommerce site.
- Offer something unique. This doesn’t always have to mean you create the product. You could create unique product bundles or find other ways of personalizing or improving the eCommerce experience to make your site purchasing be unique to other vendors.
- Promotions. Offering flash sales and special discounts could be another way to compete with the crazy prices of Amazon. This doesn’t mean you have to offer discounts 24/7, but changing up and making your promotions exciting and unique on a constant basis could swing the needle in your direction.
- Social Media. Amazon and the big-box retailers like Walmart don’t really have a fun and exciting brand. They are all about efficiency. Social media is a way to differentiate your brand and make it more inviting. By connecting with consumers via social media you could win customers who might be willing to spend more on your brand because they feel it offers something more than an emotionless purchase via Amazon etc.
- Subscription. Although Amazon already provides subscription, their service is pretty basic and there is an opportunity to grow in this space. Companies like Blue Apron, Dollar Shave Club, and many more have capitalized on this, but there are still other niche places to do this in.
- Personalization. Personalization is arguably the number one way to beat Amazon because you can offer a service on top of traditional eCommerce to make the purchasing experience more unique, and worthy of using something other than the big guys. There are many third-party applications that can help you create such personalization that are worth looking into, rather than custom building it from scratch.
- Sell on the marketplaces. In my article, if you can’t beat them join them, I encourage everyone to look into this. This could be one of the best ways to grow. By leveraging the marketplaces you can see what sells and what doesn’t and how to best compete on your own site. By investing the money you make from the marketplaces back into your site and brand, you could eventually build that up to beat out the competitors.