How Brands Are Attempting to Compete With Amazon's Domination
Amazon.com is like a huge juggernaut powering through the retail market. While Amazon’s stranglehold on the consumer market is tight, brands are fighting back. In this article, I'm going to look at how U.S. brands are innovating to compete with the mighty Amazon.
The Rise and Rise of Amazon
Since it began in 1999 as an online book seller, Amazon has increasingly dominated the world of e-commerce. It's now the fourth largest company on the planet, accounting for 43 percent of all online sales in the U.S., and the third largest U.S. retailer. The company ships 1.6 million packages a day, which contain enough cardboard to cover the entire state of West Virginia.
Why is Amazon so Successful?
To understand how to compete with Amazon, you must learn why the brand has become so successful. An analysis of how Amazon operates provides a few clues. Scott Galloway, a clinical professor of marketing at Stern School of Business, concluded that Amazon’s success is largely down to its ability to take risks. Rather than going full-steam ahead on big investments, Amazon dips a toe in the water and then kills projects when they show signs of failure. This approach frees up investment capital for other projects.
Brands that embrace Amazon’s high-risk philosophy are more likely to retain market share than those that play it safe. On the face of it, competing with Amazon is a tall order. Amazon does it bigger and better. It stocks more than 12 million products, and when you take Amazon Marketplace sellers into account, this figure balloons to 353 million. Other brands can’t compete with this. But selling millions of products isn't the only benchmark of success. Ultimately, a success or failure in retail hinges on meeting customer demand.
Urban Outfitters is a great example of a brand that has thought outside the box and come up with an innovative solution to attracting customers.
Buying online may offer instant gratification, which customers love, but payment options are often limited. Customers like to spread the cost of larger purchases, but they don’t always want to use an expensive credit card or personal loan to do this.
Research from SplitIt, an installment plan provider, revealed that 54 percent of customers would rather spread their payments over installments than take advantage of free shipping. Fifty-three percent preferred installments to a 10 percent discount.
Urban Outfitters has gotten this message. It's the first U.S. retailer to use AfterPay, a digital platform that offers interest-free payment installment plans. Now, when customers shop at Urban Outfitters online, they can spread out the cost of their purchases for free.
Meeting Customer Demand
This service is provided at no extra risk to the retailer since AfterPay assumes all risk of nonpayments. AfterPay earns money from fees and commissions charged to retailers, as well as any late payment fees paid by customers. It’s a win-win for everyone: the customer has access to a new service, and the retailer is able to attract new customers who want to spread the cost of their purchases.
Urban Outfitters says the implementation of AfterPay has generated incremental sales and conversions by 20 percent to 30 percent. This strategy has already been proven successful in Australia, where AfterPay works with more than 14,000 fashion and beauty retailers.
Retailers Must Innovate
To compete with Amazon, retailers must adopt new ways of thinking outside the box. Costs are rising, and online retail is a huge threat to traditional brick-and-mortar stores. AI and devices like Alexa are making online shopping even easier, with voice searches projected to top more than 50 percent in the next five years.
Brands must listen to customers, create a personalized shopping experience, embrace technology, and move with the times. If they don’t, they risk being left behind.
Murray LeClair is a freelance financial writer, and can be reached at email@example.com.
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