Image: Amazon
Rivals need to up customer experiences to compete with Amazon
In the wake of Amazon’s stellar holiday season, including word that Prime added three million more subscribers in the third week of December and that $0.51 of every new e-commerce dollar spent in 2015 went to Amazon, it looks like competitors really have reason to worry. Sure, Fire Phone was a flop, they don’t get everything right, and some innovations are reaches, but overall, Amazon executes effectively on its core business, meeting consumer expectations and outperforming major competitors.
Merchants looking to narrow the Amazon gap need to accelerate innovation, technology and enhanced messaging. But first, executing dependably on stellar customer experience is now, more than ever, mandatory. To illustrate the point, here are samples of retail failings and needed focal points from this author’s December shopping experiences.
Inventory/logistics
Macys: Very good online experience but multiple physical visits revealed stores were understaffed, over-packed, merchandise often jumbled, and the highly touted endless-aisle kiosks were universally ignored.
Message to merchant: Quantity (real and virtual) is not as important as product accessibility, availability, and consideration of the shopper’s time.
Customer retention
Swanson Vitamins: After e-mailing them about a missed promotion, one customer service rep, then another, each took a day to respond, each time with erroneous savings codes that failed in their cart, pushing me to competitors.
Message to merchant: Corporate promises, marketing, and PR are irrelevant to customers when actions don’t support the hype.
Execution
Lord & Taylor: A slow, somewhat tedious website with a burdensome shopping cart. It was improved over 2013’s shopping attempt, which ended with a catastrophic cart crash.
Message to merchant: User experience is crucial at every consumer touch point, especially for websites where the dominant competitor is a click away.
Omnichannel
J.C. Penney: A reasonably good e-commerce experience except when they mishandled a BOPIS out-of-stock and cancelled the order without offering alternatives.
Message to merchant: More than a means to order products, omnichannel must incorporate effective fulfillment and meaningful problem resolution.
While these issues and remedies aren’t unheard of, innumerable retailers are still mired at this level, not seeing the forest for the trees, eschewing logic and business sense. Given Amazon’s prowess, is there a plausible explanation as to why competitors are not taking every possible action to save themselves and their customers before being annihilated?
Discussion Questions
Do you agree that Amazon’s rivals are challenged when it comes to delivering the customer experiences that today’s consumers demand? Of Amazon’s strengths, which are toughest for rivals to match?
Poll
BrainTrust
Richard J. George, Ph.D.
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
Ben Ball
Senior Vice President, Dechert-Hampe (retired)
In e-commerce there’s Amazon and then there’s almost everyone else. Amazon is first because they excel at the basics: selection, price, speed and top-notch customer service. The need for the basics has been around since retail began, yet few retailers can deliver an experience that rivals Amazon’s.
When you think about what’s encapsulated in this question, it comes down to two things: 1.) Can you provide a good experience? 2.) Can you sell more stuff? The two aren’t actually dependent on each other. You can provide a horrible experience and sell more stuff — if the price is right. And you can provide a fantastic experience and sell nothing, if the products don’t appeal.
When you sell everything under the sun, though, you don’t have to worry so much about the appeal of the products. Here, the two are related: if you provide a good experience, you can sell more stuff. This is Amazon’s success. But I don’t think this is about finding Amazon’s strengths or weaknesses. This is about defining what YOUR good customer experience really is.
Where pretty much every other retailer seems to founder is worrying too much about selling more stuff at the expense of the customer experience. My latest example: Forever 21. My pre-teen daughter is in love with their prices, and on her budget I don’t blame her. But the last time we were in the store, there were 30 people in line (I counted — some of them were undoubtedly shopping groups, but it was still a ridiculous number). There were two cashiers and one of them WENT ON BREAK while we all stood there and watched. Best price or not, at some point the pain of the experience just isn’t worth it.
I see things like that happen and I start to believe that retailers don’t actually know what a good customer experience means. I think they think that if they sold a lot of stuff, it must’ve been a good experience.
And really, with that attitude, forget about price or assortment, or execution or omni-channel. If they can’t understand what customers want in an EXPERIENCE, they’re never going to beat Amazon.
There’s a HUGE difference between Amazon and “traditional retailers” by design, and hence by how they operate.
Amazon built all of their systems, strategy and infrastructure focused on “customer centricity” — quality of the consumer experience. From search to basket to fulfillment to service after the sale, it’s all about you and your experience so that you will return again and again.
Traditional retailers have a “product-centric” legacy of selling stuff and driving out operational costs to compete cost-effectively. The goal of many traditional retailers was to “make the sale today.” Systems were not setup to engage and sustain relationships, especially across omnichannel.
The single greatest strength of Amazon is three simple letters that are extremely complex and difficult to execute: CRM (Customer Relationship Management).
When I shop with Amazon they know what I’ve searched, keep track of my lists, instantaneously track my orders and shipments, track my purchase history and give me free two-day shipping with Prime, along with free music and movies. A holistic relationship built on CRM designed to make my life easy and flexible; before, during and after the sale.
No other retailer where I made a purchase this holiday season even knows what I purchased from them.
Amazon’s biggest advantage is its clarity of vision and continuous investments in support of that vision. It knows where it is going: best prices, best selection, best experience. With a team of high performers, the tactics in support of its growth model are almost on autopilot: keep pushing the envelope on the dimensions we plan to lead.
This singular vision is also how, despite incredible diversity, Amazon’s various businesses generally reinforce one another, strengthening the whole. Their platform investments (AWS, Marketplace & FBA, Alexa, Dash Replenishment Service, etc.) are force multipliers that create sustainable competitive moats and are viewed by competitors as distractions or tangents.
Many of Amazon’s competitors lack comparable vision and conviction to invest over the long-term. They collect tactics promoted by observers, often shifting direction by the quarter. Their newer ventures run the risk of diluting their mature businesses and their culture is to defend the past over fighting the future.
Without a doubt there is a reason Amazon received over 50 percent of every new e-commerce dollar spent in 2015. In addition, I suspect their overall retention of existing customers dwarfs that of their rivals.
Success in this space requires the following attributes: product assortment and availability, convenience (easy, fast, transparent), value pricing, and customer-friendly delivery and returns. Rivals struggle with matching Amazon’s convenience factors and customer-friendly delivery and returns. In particular, no one appears to come close to Amazon in terms of its logistics.
The Amazon advantage retailers have to match but will find tough is the Amazon Merchant Program, sourcing products from other sellers to offer consumers millions of items.
Retailers are going to have to swallow their pride of “curating” products/services and begin to offer endless aisle of products/service by multiple resellers similar to Walmart’s e-commerce operation with BOPIS capability.
Retailers tend to design and implement solutions that help them resolve retailing issues rather than focus on designing and activating solutions that help their shoppers! With all the discussion and pontificating on customer-centricity, the majority of retailers still spend too much time looking in the mirror rather than putting themselves into the shoes of their shoppers.
Amazon, for the most part, delivers on their promise to shoppers. They provide a means by which the shopper can search, compare, educate and discover on their terms and then facilitate an easy purchase and deliver process. It seems simple but it’s obviously not because most retailers haven’t been able to figure this out.
Amazon’s advantage is they don’t have to replicate the shopping experience in many different locations and they inherently have the endless aisle when it comes to product selection.
This is a great commentary by Ken. It highlights the issue and challenges so clearly.
Retailers have to be careful how they define “experience.” In the transition from brick-and-mortar to online there is a lot of hangover from the “wow ’em” mentality. Wow ’em with price. Wow ’em with merchandise. Wow ’em with decor, stimulation and even service.
But, the buyer has changed. The telling statistic in the article is that Amazon added 3,000,000 new Prime members. Three million people coughed up $99 so as not to be bothered with thinking about shipping charges (and other Prime benefits). Three million people committed to going to Amazon first. Three million people said, “make my life simple.”
They didn’t say “show me the best price.” They didn’t say “blow me away with your selection.” They didn’t say “stimulate me.”
They said “make it simple.” I don’t want to have to think about buying the product, I just want to buy it and get it quickly and have confidence if there is a problem it will be taken care of.
The only areas where Amazon falls down are home delivery and setup of big ticket product and … oh right … retail operations don’t make money.
Retailers can compete with the first — I’ll never buy another big ticket item from Amazon again.
For the second, there’s not much to be done. Play a waiting game is about all.
Absolutely. I think Amazon’s ultimate strength is that it’s now nearly synonymous with the whole concept of online shopping, it’s almost a shopping search engine unto itself — the site of first choice. The familiarity that comes with the longevity of the brand, its breadth, the sharp pricing and relentless innovation, especially on delivery cycle time, all make it extremely tough to beat. That’s the thing — there isn’t just one strength, that’s what makes it tough.
Today we talk about the “Amazon Effect” across consumer industries. The company has become the defacto standard by which consumers measure shopping experience.
The toughest strength to match is Amazon’s maniacal focus on the customer and the luxury of being the disruptor in nearly all of the business segments it enters. Amazon’s ability to re-imagine their business model using technology and willingness to take and learn from risks sets it apart from nearly all other rivals.
Amazon does exactly what they promise to do, when they promise to do it, flawlessly — and darned near every time. When they do have a problem they go over the top to fix it.
Case in point. A friend ordered a pressure washer from Amazon after carefully considering the fact that you can’t return something after it has had gasoline in it. Sure enough, the machine failed to crank and a trip to the Honda repair shop showed a valve cover crushed in shipping. A $39 repair bill later and the machine is perfect. But when the friend contacted Amazon to tell them about it, they simply responded — in the very same call — that a new one was on its way and he should keep the repaired one as well. (BTW, it works great. Guess how I know!)
Could any other retailer have done that? Sure.
Do they? Not so much.
The big story in retail in 2016 is going to be execution. It’s one thing to talk about customer engagement, but if the music’s too loud and the clothes are on the floor, that strategy is meaningless.
The toughest to match is their long term strategic focus that has led to the building of a business where the whole is greater than the sum of the parts.
We know that in order to deliver EDLP Walmart needed to figure out things like cross-docking, streamlined logistics, VMI (which required Retail Link and knowhow around data warehousing) etc.
So in-order to deliver a brand promise, they needed to solve a bunch of niche problem. Now let’s look at the demand side and Amazon. Rather than go into details, here is something to ponder: this link leads to the github repository of Amazon Web Services. This is an example of the complexity behind the scenes. EDLP and one-click are simple words that are on the customer-facing side of an amazing machine. But skip all that, let’s bash Amazon for building drones. You have been Amazoned.
But there is still a chance. I believe humans can beat machines, and the human side of retail is thriving in various pockets. So for Amazon, their toughest challenge will be retail itself — an industry of survivors who have in their DNA an instinct to find a way. It’s time to scam the scammer.
Of course other retailers (not Amazon) will have greater challenges. They have stores. — stores, where merchandise is handled in public. They have multiple locations that are also customer-facing and procedures have to be handled consistently. That can be tough with seasonal staff.
Many of the comments in the post were in-store issues that cannot even begin to compare with Amazon.
Let’s talk apples to apples here. And that’s my 2 cents!
Amazon is the category killer and dominates most retailers on service, convenience and price. They toughest thing for rivals to match is that Amazon is becoming the one-stop shop for most items and winning on convenience. Why trek to multiple stores when one stop will do or for that matter why go to three websites when one will do?
One thing to note: Amazon doesn’t seem to win on price as much — my recent example, an LED WEMO light bulb is $22 on Amazon, $14.99 at Best Buy. Not eligible on Prime. Sure there are many examples of where Amazon is cheaper but I am thinking this isn’t the norm anymore.
I’ll sum it up in one statement: Amazon of 2016 is the Walmart of 1996.
The current discussions about the Amazonization of retail reminds me of the Walmartization of retail discussions of the late ’90s and early ’00s. Back then it was the conventional wisdom that Walmart was single-handedly going to put everyone out of business.
Retailers of every ilk were scared to death about the certainty of this behemoth capturing the market share of everything the consumer purchased. To combat the takeover, they attempted to emulate the Walmart model, which, for those that remember, jettisoned the customer experience.
The reports of the death of brick-and-mortar retail back then were greatly exaggerated. I think the same thing is happening now.
Retailers need to stop obsessing over the success of Amazon and start focusing on who they are and who their customer is and all that that implies with regard to the expectation of the experience and the service their customer wants.
Don’t believe me? Look at the winners of the brick-and-mortar holiday season. They were laser-focused on their customers’ expectations and delivered on their brand promise without giving away the farm.
Most retailers e-commerce is okay, until it isn’t. For the most part they are decent at taking an order, packing it up and shipping it. But when something goes wrong there is no good, easy, customer focused way to fix it. This is where Amazon shines.
I’ve rarely have had an issue with an order from Amazon which is pretty amazing considering the number of sellers they are dealing with. Most likely this is because the sellers have more at stake than a warehouse or customer service employee for a retailer. They have high standards for delivery and service and if a seller doesn’t meet these there is a very real threat of bad reviews and/or being banned.
I did have a near disaster this holiday season that Amazon nipped in the bud. I ordered a gift for my step son from a relatively new seller because the shipping was a bit cheaper. After a couple of days, Amazon notified me that my order had not yet been shipped and suggested I contact the seller, or cancel and order from another seller.
It really comes down to the basics of providing good customer service, but if this is a challenge for many retailers in the brick and mortar environment, it completely escapes them in the e-commerce world.
The thing is, you have to think of what it is Amazon CAN’T do, like great associates, wonderful store experience, “cool” displays, proprietary product, simple/easy navigation, and checkout. The examples are there: Apple, Starbucks, Warby, Whole Foods, LuLu, etc.
As Sam Walton once said, “It’s easy to compete with us, just do what we don’t do.” Exactly.
It doesn’t matter if a product failed (such as the Fire Phone). What Amazon gets right is the customer experience. That’s what the competition has to worry about. Amazon is big, has low or competitive prices, a huge selection, etc. And when you add in the amazing customer service that typically meets, if not exceeds expectations, you have a lot to compete with.
At the present time the numbers used to describe the growth of e-commerce and Amazon’s ownership of being the first place e-commerce retailer make for great reading from a selective or maybe even limited perspective. A very large portion of the total retail and business to business markets are and will remain inaccessible to the company. Of greater concern is the growth of successful omnichannel business platforms being built and improved upon by several brick & mortar stores. This growth should be seen as a take-a-way from e-commerce only retailers.
All aspects of retail are seeing a market that is continuing to shrink, thanks to the depression economy’s crippled recovery. What Amazon does best for retail today is to clearly demonstrate that consumers are always open to change that makes life easier to own and execute. What many retailers fail to realize is that 21st century retail success is and will be an omnichannel framework. This is something that Amazon will need to face over the long haul in order to expand into the consumer and retail markets that they can’t have participation in today.
Shipped and delivered on time. Tremendous selection. Reasonable (and many times better) pricing. Strong customer service. Suggestive selling.
Amazon.
Amazon’s greatest strength is immediacy. I’m one who is also surprised “Amazon it” has not yet become a verb, like “Google it,” as the Motley Fool article suggests. 🙂
Walmart and Target can’t compete with Amazon’s level of immediacy. But, they can create innovative in-store experiences that are mirrored online. They can use AR and VR to engage and inspire. They can move out of store and into communities through all types of disruptive retail, including fashion trucks, shipping container shop in shops, food trucks, or interactive touchscreens working 24/7.
And, they really must become fastitious in all the categories Ken has mentioned in this article.
The bottom line is innovate, or….
Last fall I began using the term “establishment retailers.” This represents those who are guiding their businesses by looking in the rear view mirror hoping and wishing that retail would return to the way it once was. For that group of retailers, their future is suspect at best. During the coming months I’m presenting a series of educational sessions titled, “Innovation Starts Now!” And honestly, for “establishment” brick-and-mortar retailers, innovation MUST begin now or Amazon’s selection, speed and seamless experience will put countless others in their rear view mirror.
Amazon’s rivals often lack the resources they need to provide superb customer experiences. Amazon is also always willing to try something new to take it to the next level. Amazon is simply in a category of its own and usually sets the standard.
I think Amazon’s flexibility is the toughest for rivals to keep up with. There’s nothing Amazon won’t try to keep customers coming back and that means that competitors are often struggling to keep up.
NO. Amazon has one big weakness, one Achilles’ heel. But to compete with it, one has to think upside down, and to work from a fully disruptive strategy. This one can run rather quickly. Today all strategies are top defensive. Think differently.
A key reality of digital is that scale is very difficult to beat. It is unrealistic to think that merchants who are managing physical locations as well as online can ever match Amazon’s fulfillment costs — so they are faced with the lousy choice of charging higher prices or treating online as a loss leader.
Where Amazon cannot compete is in-person. Physical retailers should focus first and foremost on incredible in-person customer experiences, and use their online systems to bring shoppers into the store. Many retailers have found that ordering online for in-store pickup results in shoppers buying additional items at the store — and encouraging this over pure ecommerce is a good strategy.
(Full disclosure: my company FutureProofRetail.com makes a system for improving in-store shopping experiences).