Over the past decade, e-commerce has seen tremendous growth, and the COVID-19 pandemic has accelerated it further. The retail landscape has changed drastically, and retailers have had to find creative ways to compete with giants like Amazon.com. As we kick off the new year, it's top of mind for retailers to come up with strategies to beat last year’s numbers, offload excess 2020 inventory, and capture share back from Amazon, which continues to see record growth. Old methods simply aren't enough, and now is the time for retailers to explore new options. However, there are challenges standing in the way. Here are three key challenges that retailers must circumvent to fight back against Amazon and capture more of the marketplace in 2021:
1. Digital Channels
Most businesses have explored legacy online sales channels, whether directly or through marketplaces like eBay and Amazon, but all of these come with challenges. One issue is the overhead associated with maintaining the channels with high cost-of-sale. Retailers are forced to spend significant amounts of time and money to administrate and facilitate these e-commerce sales, pay high fees, and face high fulfillment costs due to the rushed shipping process required to meet these channels' demands.
Another critical issue is that online marketplaces like Amazon and eBay own the customer relationship, removing a retailer's ability to sell more to that customer and decreasing customer lifetime value. Retailers must expand into new digital channels where they can access customer information to enable future interactions and sales.
2. Price Segmentation
The COVID-19 pandemic created a massive surge in online shopping — we saw 10 years of growth in a mere three months! It also put pricing strategy and demand at the forefront for retailers. The pandemic created financial stress for consumers, and many have turned to frugal shopping. Price comparison is easy in the digital world, and frugal shoppers will put in the work to research and find the best prices.
Price segmentation is a pricing strategy to capture more of the marketplace by offering products to consumers at a range of prices, capturing the most sales revenue possible at a profit. This is used successfully in many industries, such as hospitality and travel. The difficulty is that retailers often cannot advertise competitive prices as they try to price-segment consumers due to minimum advertised price (MAP) agreements. In addition, retailers are often worried about cannibalizing full-price sales due to discounting. How can retailers reach these frugal consumers without violating pricing policies and without cannibalizing their full-price sales?
3. Load Balancing
With the recent surge in e-commerce, retailers have had difficulty meeting the demand and keeping up with what's in stock. Big warehouses get orders from Amazon Prime that they have to get out the door right away with crazy lead times, increasing the cost of sale and disturbing normal operations. Ideally, retailers could shift order processing to less busy days, which would prevent overwhelming the warehouse with rush orders that must be filled immediately. To avoid the requirements of third-party channels that demand immediate shipping, retailers need a channel that encourages the load balancing of their operations.
Tackle Challenges By Expanding Into New Channels
Where there are challenges, there's always an opportunity. To fight back against Amazon, retailers need e-commerce channels that have low overhead, allow them to dictate shipping speed, enable them to own their customer relationships, and price segment the market.
Finding a third-party channel or deal broker is a new way that retailers can circumvent these common challenges and clear excess inventory without the costs typically associated with third-party e-commerce channels. A deal broker can help retailers maximize their revenue with no cost of new customer acquisition and without the demands and high costs of legacy channels. They can also ensure that your existing physical or digital retail customers don't feel like they overpaid by seeing you advertise lower prices. A deal broker can take the pressure off of retailers, allowing them to offer the best price possible and clear excess inventory. For retailers that want to take back market share from Amazon in 2021, working with a third-party channel might just be their golden ticket.
Steven Hong is the founder of Discount Bandit, a company that helps shoppers save money by connecting them with retailers and manufacturers that sell items at a discount.
Steven Hong is an entrepreneur and business leader with deep expertise in e-commerce, culture building, and technology. He is the founder and former president of Sylvane, an online retailer and leader in the B2C air treatment category and the founder and president of Discount Bandit, a new kind of online shopping service.