Customers Over Competitors: How to Build a Lasting Competitive Advantage

Across the e-commerce landscape, brands and business leaders are reckoning with economic conditions that present serious challenges to growth and profitability. Inflation is higher and consumer sentiment lower than at any point in multiple decades. Continuing disruptions from compounding crises of the pandemic, supply chain, and war in Ukraine have rendered nearly every organization’s growth and financial plans obsolete. At the same time, e-commerce platforms like Shopify continue to lower barriers to entry for new brands to compete in the direct-to-consumer (D-to-C) industry. The uptick in online shopping behavior in 2020 and easily available capital encouraged many new entrants to the D-to-C space over the last few years, leading to fiercer competition as consumers rethink their household budgets in light of changing economic fortunes.

In such a competitive environment, one natural response business leaders have is to worry about their competition — i.e., trying to counter moves by rivals that threaten their market share or undermine their existing business. While it’s certainly prudent to be aware of competitive offerings, framing the problem as “us vs. them” can trap a business in a downward spiral of competitive focus that leads away from the most important component of success: customer obsession.

Customer obsession is the phrase coined by Amazon.com and the core of its Leadership Principles. Despite being a simple concept and Amazon’s leaders' constant reiteration of its importance to the company's business model, the phrase is often misunderstood or ignored as a platitude. Customer obsession isn't a reiteration of the tired retail adage “the customer is always right.” Customer obsession is a mindset that requires diligent and relentless focus on the needs and desires of your customer. In a competitive environment where consumers are reevaluating their spending, delivering on a product that directly meets their needs is more critical than ever.

The need to focus on your customer may sound like a given, but consider how easily a competitive focus can supplant customer needs if this mindset is not core to every decision. If a competitor launches a new product, promotion or feature it’s tempting to immediately counter, like-for-like. What starts as a simple effort to combat a competitive move leads to decision making that places more and more control of what your business does in the hands of external forces, namely the actions of your competitors. If that move doesn't serve a specific need of your customers, it's pure waste and comes with the opportunity cost of not using that time, effort and resources in discovering and producing real value for your customers.

All too often, competitors become locked in a struggle to counter each other’s latest moves, leading to increasingly confused, frustrated and underserved customers. This leaves those players very vulnerable to disruption by more customer-obsessed businesses. If your decisions closely align with customers' needs you will build customer trust and loyalty while consistently maintaining an advantage over competitors (even if they copy your moves). Jeff Bezos summarized this aspect of customer obsession succinctly: “If we can keep our competitors focused on us while we stay focused on the customer, ultimately we'll turn out alright.”

Let’s put this principle of customer obsession into practice in subscription e-commerce. The ability to lock in a predictable stream of revenue is obviously a tempting proposition for merchants, but it comes with a temptation to incentivize “Subscribe & Forget” behavior. After all, what good is a recurring revenue product if customers can just cancel or switch to a competitor whenever they want? This flawed thinking is hard to resist when your business depends on that revenue.

The principle of customer obsession, however, demands that we start with the customer and work backward. Customers want the convenience and predictability of a subscription product, but also want the control to make that subscription fit their needs.

So what does the future look like for D-to-C brands that obsess over their customers? Our research and analysis shows a clear trend: customers want more engagement, more connection and more autonomy. The vast majority of Shopify brands, however, still have e-commerce sites that are completely optimized for converting first-time visitors into buyers. Offering a subscription does more than create recurring revenue; it redefines the e-commerce experience for your best customers, building affinity and engagement through a branded account portal. Rather than getting the same experience as a new visitor, subscribers interact with your brand in an environment that knows their needs, offers them control of the experience, and maximizes upsell and growth opportunities.

Ben Downey is the chief operations officer at Smartrr, a company that helps DTC brands by creating a seamless checkout and customer portal experience for their subscribers.