Some See Big as Bad in Online Retail
Mom & pops often find some of their best customers are those who purposely avoid shopping major retailers, like Walmart. In the same manner, some smaller online stores are tapping into those looking to avoid filling the coffers of the bigger online players, like Amazon.
An article in The New York Times quotes Harold Pollack, a professor in Chicago, who used to spend $1,000 a year at Amazon but now only shops at smaller websites. Mr. Pollack said of the bigger e-commerce players, "I don’t feel they behave in a way that I want to support with my consumer dollars."
Any increased favor of ‘small’ over ‘big’ in the digital world comes as the larger e-commerce players — flaunting unbeatable pricing, free shipping and easy-to-use apps — are taking an ever-increasing share of the e-commerce action.
According to comScore, the 25 biggest online retailers, including Amazon.com, Target.com and Walmart.com, received 70 percent of e-commerce dollars spent this past November and December, an increase of three percentage points over last year. The biggest online stores also saw a 19 percent jump in revenue over the 2011 holidays versus 2010, while smaller online retailers saw a seven percent gain.
The biggest potential target in a backlash would be the biggest online retailer, Amazon. The company is gaining more publicity for what many see as their "bullying" tactics against the publishing industry, its tax breaks and other ways it gains advantageous pricing. Its controversial in-store pricing app this past holiday season was seen by many large and small retailers as an unfair price-comparison tool.
According to the Times article, smaller online stores — many of which are run by brick & mortar independents — are trying to capitalize on their few advantages. These include being able to extend more personalized deals such as gift-with-purchase that the bigger e-commerce sites can’t manage. If possible, many avoid carrying the same items as the bigger sellers that draw direct price comparisons on web searches.
Unable to match their massive inventories and deep discounting, however, smaller online players seem okay with playing up their smallness as a selling point.
Lacy Simons, owner of Hello Hello Books in Rockland, Maine, a small store with an e-commerce site, told the Times, "We know there’s only so much that we can do to compete against them, so you end up relying on what hopefully becomes an emotional or personal connection with the retailer online."
Michael Walden, a professor who studies regional economics at North Carolina State University, said "local" fervor can translate on a wider scale. He said, "A large number of Americans have a general suspicion of bigness in the economic world — they equate bigness with power, monopoly."
Discussion Questions
Discussion Questions: Do you see a consumer backlash coming against larger online retailers? If you were advising a smaller site competing against big online players, what would you tell them to focus on?
I wouldn’t call it a backlash, exactly. And I don’t think it’s an online phenomenon only. It’s more a recognition that vibrant neighborhoods are created by a healthy local economy, and that translates into independence from national chains. The same is true of online retailing.
Why not put money into the pockets of one’s peers, instead of an amorphous chain and its shareholders? That doesn’t mean I’ll stop shopping at Amazon (I think the Amazon ‘backlash’ is overstated … as opposed to the Walmart backlash which is real). It just means I like to give the little guy a break.
I don’t see a lot of difference in the advice I’d give online retailers vs. terrestrial retailers: Stay close on price and focus on customer service. To wit: A couple of years ago I bought a faucet online from a small retailer — I received a phone call letting me know that the delivery might be delayed by a DAY. From the owner. And just recently I bought a case for my Mac Air, and received a note saying “Our product was manufactured in San Francisco, where wages are high and the market competitive, just the way we like it.” Both retailers won my heart and made me glad I’d made the purchase.
I think this is a healthy return to the center.
There’s plenty of room in cyberspace for large and small retailers. Small etailers need to differentiate their offerings, consistently deliver great customer service, and build trust, if they are going to thrive on their own. This can be accomplished by subscribing to services that certify retailers, allowing consumers to post feedback and quickly responding to complaints and problems.
Although I don’t see a mega-wave of backlash coming against large web-based retailers, there are always going to be consumers who have a preference and the dollars to chose to do business with a smaller and more personal retailer. This really isn’t so different from how consumers behave with physical stores, where there are often many choices and the consumer spends their dollars based on the value they are able to receive.
It would seem that price and selection will continue to be two of the key variables in the value equation, for both web-based and physical stores, suggesting that large web-presence retailers will have their place in the market for the foreseeable future.
I don’t see a significant backlash. Prof. Pollack is indulging in his own personal wishful thinking, IMHO. People are short on time and money. Large online retailers offer a solution to both. If I were to start a smaller site to compete against the big guns, I’d find a solid niche for myself, and deliver on service and quality.
No I don’t see any real backlash. Some people will have principles they’ll stick to and avoid major retailers, but the majority will be indifferent.
Most of online retail is price driven, followed by brand perception, and user experience. If people can get a deal (perceived at least), they’ll almost always go with that over loyalty or principles. The biggies usually can squeeze the margins and offer the best deals and incentives like free shipping and sustain that over time. They can survive loss leaders and price slashing as well as afford promotions that small players have to add to pricing.
Just as there’s a rise in people using physical retail as their showroom and then ordering online (bolstered by in-store price comparison apps), there will be a continued trend towards the big guys beating the small guys, whether it’s righteous or not.
Consumers want best prices and as close to same day delivery as they can get from their e-tailers. If smaller sites can do that, they will thrive. The problem is, they can’t. Scale drives supply chain optimization which drives low prices and quick delivery. By definition, small sites don’t have that.
As far as competing on customer service, Amazon is consistently ranked in the top 2 or 3. I happen to know that Amazon ‘Customer Service’ stinks — but what they do is make sure the right product arrives, intact and quickly in the first place — so consumers rarely need to call Amazon Customer Service.
Lastly, what is ‘local’ in the online world? It’s not like you’re stopping into a local shop where you know the proprietors and want to buy from them because your kids go to the same school. Or like buying a souvenir from an adorable cottage store in a resort town. It’s mostly anonymous and may be run by parties you wouldn’t want to have anything to do with. Chances are, that ‘local’ online retailer is also an Amazon 3rd party merchant, anyway.
Point is, Amazon, eBay (why does everyone always leave out eBay), and soon enough, Walmart are going to be pretty tough to beat in the consumer products world.
The opening seems to be for sites like Etsy (custom, handcrafted products) and flash sale sites — at the moment — until something more interesting develops.
It’s interesting that in the bricks and mortar world there is a segment of shoppers who have a strong preference for local merchants (shop local, indy owners, community owners, etc.). These shoppers feel better about the perceived contribution to a business owner that is more like them than to a large corporation. There are lots of things that local retailer can do to play into those preferences and win that shopper segment.
But online, it’s much harder. Trust is still such a major factor in shoppers online purchase decisions, and it’s far easier for the large established brand to convey trust online than it is for a unknown merchant. And of course, it’s far harder to have a local vibe online. I can certainly think of some tactics here, but not ones I’ve seen frequently used.
Can anyone think of examples of online sites that effectively leverage “Shop-Local” vibes?
I see nothing wrong with a big retailer providing seamless service in fulfilling my orders. Stress-free shopping. How can I complain? However, I also shop at small stores’ sites because there is a better chance of getting the same person on the line if there are any questions during the transaction/ delivery.
Bottom line, customer service “delivers” for retailers, big and small.
No, no and no. There is no backlash against not purchasing from a retailer because they are “too big.” When is a retailer too large? Is a million dollars too large? What about a billion dollars? 10 Billion? More? Trader Joe’s is a multi billion dollar company as is Whole Foods and they are often mistakenly pointed out as “smaller retailers.” Online, it becomes even more difficult to determine how large a company is. The online business of Walmart or Costco is a fraction of what their bricks and mortar stores do. Would they still be considered too big? What about Best Buy? Safeway? These companies have very small online businesses, especially compared to their on-ground presence.
In these recessionary times, the consumer is trying to find value first, and worrying about their retailers size somewhere at the bottom of their selective shopping list.
This sounds like the pitch for the movie “You’ve Got Mail” with Meg Ryan and Tom Hanks, about the big, venal superstore chain and the charming, lovely corner bookstore owner. At the end, however, the big chain was in business and the small store was not.
My sense is that each customer will gravitate to the retail outlet that best serves their particular needs for a particular product. Some like the the personal touch and supporting the “little guy.” Others could care less.
The key point in the article is the small site that avoids carrying the same thing as the big chain. This is, in my view at least, the best and smartest way for the smaller retailer to not only compete, but flourish.
I can’t see the backlash as a backlash. I see it as a discomfort with the status quo of the larger retailers monopolizing the ecommerce market. These smaller retailers getting in to ecommerce need to find a way to get their names in front of the buying public. How they are to accomplish this, I don’t know. But this is their problem to solve (unless they want to pay me to work on it for them).
First of all, I don’t personally think consumers are creating a backlash against the large online retailers. There are a lot of ruffled feathers from competing retailers, and much discussion in the industry about the various machinations developing, etc. But the actual consumers having issues or dissatisfaction with the likes of Amazon? Where’s the data or even anecdotal evidence of it?
That aside, when considering what strategies and tactics smaller retailers should embrace, I’d point squarely at shopper marketing principles and customer experience. If you’re in a niche retail category, communicate that you’re the experts and will provide the best experience and most knowledgeable service.
If you have both physical and online stores, build bridges between the two so that customers are getting the best of both worlds. Online can deliver more choice and convenience, while lowering the hurdles of higher inventory and real estate costs at the physical store. And store associates can provide valuable personalized experience and knowledge to your online efforts. Find ways to marry the two channels, and ask your customers how to make it better.
Not yet; there’s still too much advantage in terms of scale for the bigger guys, especially when it comes to price.
My advice to smaller online players would be the wise words of Sam Walton to his competitors: “competing with us is easy, just do what we don’t do.” Right.
I think there is a growing understanding of the impact from Amazon in particular to regional chains and mom and pops. States are going to have to close the loophole that has allowed them and the rest not to have to collect taxes.
But the other backlash is against shoddy shopping experiences. And they are voting with their wallets to never return.
Smaller retailers should abandon trying to compete with the big boys online as I’ve written.
I’m a huge advocate for extending the reach of traditional brick-and-mortar beyond its four walls. But for the local retailer, it needs to be on “localization” not “globalization.” Competing head-on with the biggest of the big is never a good strategy. Doing something different and special can make all the difference. And, promote the fact that you just opened a new location for your shopper’s convenience … and it’s open 24/7!
Although in any business there are advantages that accrue to larger players (such as brand awareness, negotiating power, and marketing leverage) online on the whole has been a great equalizer in the retail space. A web store has considerably smaller startup costs than a brick and mortar store, and small retailers have the advantage that the whole world is available as a target. Many of these smaller retailers have used this opportunity to highly specialize on a particular product or quality or target customer, and in so doing they can offer a more focused shopping and service experience than would be possible otherwise. That’s a harder thing for large volume sites that are focused on broad appeal.
That said, remember that none of this is new. eBay started as a site for trading Pez dispensers. It doesn’t get much more specialized than that. At least among internet pure-plays (as opposed to the online versions of established stores), they all started once upon a time as niche players, and they became big. Even Amazon was a usurper not that long ago. So now there are new usurpers. That’s how it works in matters of technology.