Three Ways Amazon Is Killing Retail, and What To Do About It

Let’s play the shortest game of Clue ever. Several retailers have been found dead across the United States.

1. Who did it: Amazon
2. Where: Online
3. Weapon of choice: Prime membership & eCommerce dominance

 

Death of (some) Retailers:

2017 has started with a bang for many retailers restructuring or shutting down their business entirely. The most recent casualty is BCBG Max Azria, which announced it will close all 175 of its physical stores.

Other closures include:

  • The Limited; closing nearly all its 250 stores and is converting into an online-only retailer
  • Wet Seal is closing all of its stores this year
  • Mega retailer, Macy’s, is closing 15% of its stores across the United States

Amazon is the “Prime” suspect

As retailers are restructuring or closing shop entirely, Amazon disclosed in its most recent earnings release that it now accounts for 43% of ALL online sales in the U.S. and has increased its online market-share from 33% in 2015 to 43% in 2016. Amazon’s performance is nothing short of massive and it’s hitting mid-range apparel retailers particularly hard.

As Amazon continues to grow, retailers continue to struggle. The correlation is clear. However, it’s important to understand the root-causes and trends behind this shift to see how it will affect your business. The primary cause of this shift is Amazon’s continued improvement of the customer experience and the subsequent impact on consumer expectations now applied ubiquitously any time a consumer shops for anything.  

Here are 3 ways Amazon has increased customer experience expectations, how it will affect your business, and what to do about it.

1.    Amazon Prime

Consumers love Amazon’s Prime-membership. It’s not difficult to see why, 40 million products that can arrive within 2-days plus access to premium on-demand content for $99/year is compelling. This wide-spread adoption has led to the increased expectations of consumers on retailers to provide the same or similar shipping programs.

How it will affect your business: Fast and free shipping is now an expectation, not a perk. Consumers will implicitly abandon experiences that don’t offer low cost shipping options at a minimum.

What to do about it? Re-set your expectations that shipping will break-even or be profitable. The goal for online retailers and brands should be repeat customers and increasing order value to drive profitability. Retailers that shift focus from individual order acquisition to customer loyalty and retention can avoid the Amazon death blow. In fact, Bain & Co. found that for every 5% increase in customer loyalty can lead to at least 25% increase in profitability. Retailers must connect with consumers by delivering engaging experiences that keep the consumer from thinking to price-check on Amazon. This includes in-store experiences and online.

2.    Speed

Amazon has increased customer expectations by investing millions of dollars into its own site performance. Amazon itself found that for every 100 milli-second (1 thousandth of 1 second) in latency (think lower page load), they lost 1% in sales. Consumers now expect all pages to load instantaneously without any loss in functionality.

How it will affect your business: If key pages of your eCommerce site take 2+ seconds to load, it is likely costing you conversion rate.

What to do about it? Work with your technology team or vendor to evaluate your page-load speeds for key pages (home page, product detail page, cart, checkout) to determine what, if anything, is slowing down your site. The common culprits are:

  1. Poorly written or non-optimized front-end code (HTML, CSS)

  2. Slow 3rd party vendors that use Javascript tags on your pages – common ones include analytics tags

  3. Poor use of page caching to render high resolution images or content onto the page

3.     User Experience

Arguably the most crucial impact Amazon has had on consumer expectations is the actual site experience and usability. Like technology infrastructure, Amazon employs hundreds of usability and design team members that focus solely on optimizing the on-site experience of their desktop, mobile, and mobile app experiences. It’s earned them top ratings by independent consumer surveys. To their credit, they’ve done a great job. Amazon is incredibly easy to shop on.

How it will affect your business: If you do not provide baseline features or follow best practice site layout and design, you can expect higher bounce and abandon rates on your site. This leads many retailers to discount their way to sales which puts them at a further disadvantage against Amazon.

What to do about it? The following steps can be taken to improve the user experience of your site. Some at higher cost than others but each will support meeting the Amazon-set expectations your consumers now bring to your site.

  1. Run a $99 test on UserTesting.com – this tool is great for you to get quick anecdotal data from your consumer demographic on the usability of your current site. This low-cost solution can validate why certain campaigns or categories are not converting.

  2. Identify the baseline features your eCommerce site should have including product search, ratings & reviews, product recommendations, or high resolution product images to see if there is anything missing in your basic capabilities that is turning consumers to Amazon over you.

  3. Work with eCommerce user experience consultants to identify any low-hanging fruit in your site design or navigation. This may lead to a full-redesign, mobile optimization project, or small tweaks to impact conversion rate.

  4. Add personalization to your product detail pages. Episerver customers that utilize our Perform product see an 18% average lift in order value by introducing individualized product recommendations that use machine learning algorithms to display the highest converting product recommendations to customers. These algorithms analyze the behavior of other consumers, product attributes, and the individual consumer shopping to determine the top recommendations.

Amazon is a serial retail killer and we can expect more apparel, sporting goods, and electronics retailers to close or downsize in the coming year. To avoid becoming one of them, you must meet the implicit expectations of consumers including shipping costs, site speed, and user experience and focus your growth efforts on customer retention and loyalty programs that increase repeat orders and average order value.

 

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Edward Kennedy

Edward Kennedy

Commerce Strategist @Episerver

Email: Ed.Kennedy@episerver.com

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