The Amazon Effect and How Retailers Can Slay the Beast
The past year has been brutal for retailers, with many respected brands closing stores or shutting down completely. Traditional retailers like Sears,
Kmart, JCPenny and Macy’s are struggling to find footing and losing customers. It’s not as if this wasn’t expected- Amazon has been disrupting the world of retail the last twenty years by driving online shopping growth and creating record breaking revenue. People call it The Amazon Effect.
But is this Amazon Effect real? Or is it just the natural turnover of poorly performing companies? According to the Census Bureau, retail spending as a whole is up 5% year over year, and up 17% in the last five years. The ACSI also says there is a rise in how people feel about retail in general. The overall score on the report, which is pulled from the input of roughly 70,000 people, showed a 5% overall improvement rising to a 78.3 on the 100 point scale. Customer satisfaction is at an all-time high.
It’s hard to directly calculate how shopping is affected by Amazon’s presence, but it’s clear that it has gotten into the heads of every retailer, both offline and online. Surveys suggest the main reason for fear is based on organizational inertia, which in the product terms, means companies have no clue how to get their teams to move forward. If you look at the data further, 60% of executives believe they will invest in “digital,” but making this investment will be futile without a clear plan on how to create value. Amazon clearly has inertia with 80 million people bought into the Prime service and every retailer understands that this loyalty will be difficult to break. Amazon is making it extremely difficult for traditional retail stores because they’re disrupting the future of everything in shopping.
Amazon isn’t satisfied with just winning online shopping, they’re also setting up pop up stores, establishing physical grocery stores, taking over shippingwhile creating new delivery methods, manufacturing their own product lines, and providing access to their technology know-how. Their incredible growth trajectory sets them up to be the first trillion dollar company.
Over the last few years we’ve learned a lot in our retail design and customer advocacy work at ZURB. We’ve worked with many retailers that are bucking the trend as their traditional counterparts struggle to find a path forward. In this post, we’ll explore areas product managers and retailers can tackle over the three areas of the customer lifecycle to improve their odds of success to avoid getting caught up in Amazon’s wake.
Generate new customers through awareness
How can retailers attract customers in ways that Amazon does not? The majority of Amazon’s lead generation comes from years of investing in three channels: search rankings, paid ads and their affiliate network. Here’s the deal- they’re really good at these channels, so it’s better to look for other techniques to drive awareness of your offerings. Find ways that don’t directly compete for people’s attention in the same places as Amazon.
Let’s be blunt, companies that expect to attract customers on price alone might as well forget that since Amazon’s dynamic pricing model makes it almost impossible to consistently win customer’s attention on price. It’s better to focus on telling a better story, as Simon Sinek puts it, “People don’t buy what you do; people buy why you do it.”
Craft better content
Amazon has created a strong affiliate network of Associates who drive traffic to their product pages. In order to compete, retailers must create unique product pages to capture the attention of shoppers. Forty percent of shoppers seek inspiration and discover products online prior to making a clothing or footwear purchase according to a recent report.
Amazon has a lot of rich content on their product pages- reviews, manufacturer information and other customer purchases. Product reviews are an essential part of Amazon’s business, and while it’s an incredible resource for customers, a recent study suggests that positive user ratings can only objectively predict quality 57% of the time. That leaves plenty of room for retailers to bring in content that improves the value of product pages.
Here are a few ways retailers can attract customers with better content than Amazon.
Compelling Product Pages
Amazon sells over half a billion products- this selection variety and inventory is absolutely astounding. However, this becomes a disadvantage when it’s forced to present products in a relatively uniform way to prevent unnecessary overhead for users browsing their site. A toothbrush product page gets the same treatment as a TV.
Let’s be honest, Amazon is not going to win any visual design awards, especially for their product pages, but they do win at continuous optimization to enhance the content. Amazon deploys to a production server every 11.6 seconds. To put this in perspective, if the average visit time on Amazon is over 11 minutes, the site will have changed 57 times in a customer visit and that doesn’t even include the personalized learned preferences that Amazon is applying in real-time!
The subtle and continuous manipulation of the product pages limits the disruptive change in the customer’s experience, but this advantage quickly becomes a disadvantage when greater changes are needed to adapt to customer behaviors. It’s an organizational mindset that starts to set into the design process. I’ve witnessed this first hand watching a prominent internet retailer get stuck in a two year cycle trying to update a product page, despite data that suggested a big change in design was necessary.
There are well over a hundred elements that retailers can include in a product page to influence a purchase, using everything from reciprocity and social proof to authority. To compete with Amazon, retailers need a point of view that tells a story with the content. Harry’s is an excellent example of a company that has created a compelling product page. The bold images clearly highlight and magnify every subtle detail of their products and the neat presentation elevates something as simple and ordinary as my daily shave to a near art form. Looking at this page, I almost feel a little guilty for how I hurriedly try to breeze through this tradition that has been passed down for generations, Harry’s treats it with the respect it deserves!
Compare this with Amazon’s shaving cream story:
I’m pulled out of that reverence for the timeless tradition passed down by my father and his father and back into the fluorescently lit drugstore, and no, I don’t feel compelled to buy. There are other content areas retailers should explore such as well- written manuals, third party reviews, FAQ’s with personality, maintenance guides, tips and tricks and warranty information.
Another growing content area that retailers can explore is guided selling. Domain experts should use their specific know-how to support purchasing decisions. Guided selling aims to inspire a purchase and simplify the buying process by understanding the customer’s intent, recommending possibilities and then suggesting ways to fulfill those needs.
Retailers must effectively understand the needs of a shopper relative to the available inventory and recommend products that help them feel confident about the purchase. Victoria’s Secret does a good job of helping women make a better sport bra purchase.
Sephora takes it a step further by encouraging visitors to sign up for their club before they provide recommendations. Sephora showcases targeted products direct from the experts, humanizing the purchase decision journey by attracting curious shoppers with an engaging voice, much like you would experience in a store.
Since more than 50% of millennials use their smartphones to research products or services while shopping, it makes sense for strong retail brands to capitalize on the trust they have created by providing well thought out recommendations in a guided shopping experience. There’s an expectation and need for expert recommendations.
According to a report by Invodo, shoppers who watch a video are 1.7 times more likely to purchase something than those who don’t. This makes a lot of sense, especially for purchases where there are more variables in a decision. As a novice camper, planning a camping trip for a weekend can be difficult, especially when you don’t know a thing about tents.
Cots World Outdoor created a video showing off the product features of one of the MSR Hubba Hubba NX tent. It is an awesome tool on the product page, but it also serves as a lead generation tool on YouTube to create awareness. They share and demonstrate immense value in the video and present themselves as an expert to the customer.
Scuf Gaming leverages video as well, but they use it to present short lifestyle montages to evoke an emotional attachment, rather than provide instruction or product details (those are included in the web page). There’s merit to both approaches, but what’s most important is that retailers bring authenticity to their video production. Scuf Gaming also sends product out to gaming influencers who create elaborate 20 minute unboxing videos. This third party validation is compelling and reduces production cost by utilizing an audience to produce the video content.
Online video marketing is now viable because retailers no longer have to deal with a glut of bad connections and incompatible technologies interrupting our viewing. Instead they can and should focus on looking for ways to involve influencers in the marketing of products.
Amazon has a mind numbing amount of products and pages within their site, but they don’t focus on compelling vertical content. Retailers can use their expertise to set themselves apart by creating blog pages and how-to guides around a topic.
Threadless, a custom t-shirt company based out of Chicago since 2000, has a unique blend of artist blog content that attracts a specific type of customer. The blog reflects the community it serves by keeping a finger on the pulse of individuals in the community. It taps into the community conversation with responsive posts that build in their content so it remains relevant to the audience.
Just throwing up content, however, isn’t going to work. Retailers must create highly valuable content that is far better than sites currently ranked in the top 10 for the keywords they are targeting. The content must be 100% original and engage readers to stick around. In a Hubspot study, businesses who blog just 16 to 20 times per month get over 4 times more leads than those who didn’t blog.
FAQ pages, while often overlooked, can also have a huge impact on building trust with customers. The Flex Company, who sell a disposable tampon alternative that lasts up to 12 hours, does a great job incorporating videos and precise information in its FAQ page to inform women.
Win the email battle
Retailers must provide more context and a better experience in email through personalization and targeting. In order to compete with Amazon, retailers must address people with a personal touch that makes their offers more relevant. Amazon has done a great job of building a matrix of email triggers that ping and prod us at all the right times, but as Malcolm Gladwell brought out in David and Goliath, “Giants are not what we think they are. The same qualities that appear to give them strength are often the sources of great weakness.” Amazon emails are dry, sterile, and automated. They do little to build excitement, anticipation, or even make us laugh.
The average mobile internet user spends 42% of their time on email– that’s email for correspondence, task management, marketing and notifications. There’s a ton of different transactional emails including welcome emails, password resets, and receipts/invoices. These emails are a retailer’s lifeblood and can be used to drive up to 6 times more revenue than the average marketing email.
I recently rented a lens from Borrowlenses.com and got a quick email response. Below is an example of an email I was sent with the subject line, “An email you won’t want to skip.”
Now, given that they just gave me an extra day for my rental because of the Memorial Day holiday, they’ve missed a key opportunity to connect with me to make this email special. Why do they want me to know I can still order? I can order any time. This is a lost opportunity to give customers more reasons to try lenses in the future after having a great first experience with their service. In fact, everything in this email is skippable!
A better approach would be to give me more information on the lens I rented, a story from a previous renter with their photos, or a coupon to use for a future rental. Perhaps they’ve found getting customers to add an additional lens is possible, but long term relationships are built on trust, not the transaction. Most companies make the mistake of separating all their emails into transactional and promotional buckets and putting them on autopilot.
Retailers can try to outspend Amazon attracting customers, but it’s more cost effective to find clever ways to reduce marketing costs and increase the loyalty through engaging promotional emails.
Gap popularized the friends and family email technique to create a “velvet rope effect” to make people feel like a valued member of the “club” by presenting their campaign as an exclusive offer that’s just for a small group. So why does the Gap email work? 94% of social media users use it to connect with friends and family, and consumers turn to friends and family when seeking advice about a product or brand. When combined with email, this is a proven tactic to convert consumers to purchasers.
At ZURB we’ve helped many companies use our responsive email framework to build a system approach to reduce the headache of managing email styles across different marketing platforms. Emails must be timely and on point to be effective- you shouldn’t have to constantly spend time on creative.
It’s also important to focus on the intent of each email in the customer lifecycle. Amazon is very good at this, but their voice still comes from a large, faceless company. Using the right words, persuasion techniques, and stories can separate you from the competition.
Curate and find your voice
Create a movement around your mission and find believers! Many brands are able to use platforms like YouTube and Instagram to build engagement with their fans. Social media is a great place to hone a distinct and compelling voice, especially since Amazon struggles to really put a clear purpose behind their efforts.
It might be intimidating to begin creating an effective social channel, but original and distinct content will drive engagement. Retailers must be consistent and invest in the long term to find success. And to do this right, the effort should be limited to a couple social sites to find success.
Building a unique following requires getting followers excited about the brand story. Blackmilk and Trixin are two examples of companies that are using social to drive engagement. The content they share is product focused, but carries unique theming between each post and they utilize Instagram stories to give the viewer a look at photo shoots of new lines and the packaging process.
Cameron Parker, marketing manager at Blackmilk highlights, “My marketing budget is zero dollars. I didn’t spend a cent on advertising, don’t do AdWords, don’t do campaigns, don’t spend any money at all.” They attributed their success to three key factors on social media: authenticity, storytelling, and accessibility.
Public companies like camera maker GoPro are also able to capitalize on their storytelling by rarely sharing content that is directly designed to sell product. Most of their Facebook posts highlight great quality videos and pictures taken on their cameras. The content strategy for GoPro is designed to highlight the best, most unique, and exciting things about their products.
Brands can also leverage the content created by their users. L2 found that just 12% of the retailers hosted dedicated UGC pages and only five percent integrated socially generated content into their product pages. Building brand equity through social campaigns can also bring in new customers, especially when it’s coupled with a cause. A good example is Marriott, who ran a check-in campaign to encourage guests to check-in to the hotel. Marriott donated $2 to charity for each check-in, and by turning a routine social interaction into good, they created more awareness of their efforts.
Build a selling network
It’s predicted that 40% of the American workforce will be independent workers, which means there will be many people eager to provide value to retailers without adding heavy infrastructure costs. Part-time work allows people to set their own hours, have time for their family, and not have to worry about the grind of a daily commute. It’s worked well for Uber and services like Doordash, and we’ve helped many companies at ZURB build services around part timers.
This network concept isn’t new- direct selling has been around since the 1920s, improved by Stanley in the 1930s and made a bonafide success half a century ago by Tupperware. Tupperization was not popularized when Earl Tupper started out selling his Poly-T products. What had to be overcome was consumer distrust- plastic still had the image of being brittle, sticky, unreliable and smelly.
If you think this is a multi-level marketing scheme preying on the middle class, think again. My wife was persuaded to host a Stella and Dot party to encourage her extensive network of friends to eat, drink and wear. A home party plan like doesn’t require sellers to begin a downstream team. They’ve made it a social event to create awareness of the brand, as customers can still purchase jewelry directly from the website.
Another example of building a network is Monster Cable. They invested in training for sales people at Best Buy and other electronics retailers. They made an army of salespeople that would recommend their high priced cables and it totally worked. Their unique and differentiated training program gave retailers who carried Monster products a way to separate Monster products from all others in the minds of their partners. Monster products became the go-to brand for salespeople representing many products to customers.
Connect with a social cause
Retailers are smart to capture people’s attention by aligning their efforts with social causes that are important to their customers. When shopping for products, 50% of millennial parents say they try to buy products that support causes or charities. In fact, 90% of U.S. shoppers are likely to switch to a cause branded product when choosing between two brands of equal quality and price.
Many retailers are listening and have taken their initiatives to the next level by integrating their causes into their business models. Blue Apron supports sustainable food production, TOMS donates a pair of shoes for every pair a person buys, and Warby Parker have distributed over two million pairs of glasses to people in need. There is a clear connection between the service, what the customer is buying and how their purchase contributes to the collective effort. Amazon is going to have a hard time creating the same type of emotional connection to the purchase.
Not all programs need to be about donating- Patagonia even has a program, Worn Wear, to help repair and sell used patagonia clothing to help the environment. Patagonia’s repair department is the largest garment repair facility in the U.S. and does about 30,000 repairs per year. In creating such a compelling story, it can highlight how it’s helping the environment, but more importantly, make sure people are aware of the value behind its products. Instead of just donating money, they’re using storytelling to turn customers into activists.
The (RED) product movement has raised over 465 million dollars and impacted over 90 million people across Africa to make it easy for people and businesses to join the fight against the deadly HIV virus. Companies like Apple and Swell create a positive sentiment among customers who identify with the cause- they become part of a larger marketing effort without having to invest in running an entire program themselves.
Acquire new customers with trust
Amazon has done an amazing job bringing innovation to the sale. From one click purchasing, to inviting other vendors into their marketplace, they’re experimenting with new techniques regularly. Not only are they making it easier to shop on price and shipping time, they have created the world’s largest inventory of products.
From every rational angle, Amazon has made sure to win customers over as they decide to make a sale. However, most of the time our brains run on autopilot, convincing us that we know what we are doing when making purchases. Which explains why our subconscious often dictates our consumer behavior better than our conscious brain. Gerald Zaltman, a Harvard Business School professor, says that 95 percent of our purchase decision making takes place in the subconscious mind. Which means, if retailers can win over the hearts of customers, there’s room to pull customers away from Amazon.
Sell unique products
Amazon has done a great job growing its third party marketplace, which makes it easier for retailers to reduce their marketing spend by helping them capturing new customers. Sellers are paying Amazon to store, pack and ship products through the Amazon Fulfillment service. In 2016 Amazon delivered more than two billion items from other sellers, more than double the previous year. This puts retailers in a tough dilemma. While retailers get access to a larger new customer base, they no longer have a unique selling proposition to truly stand out.
Retailers can compete by offering largely exclusive product assortments by choosing a “our-website-first” strategy. In order to accomplish this, retailers can do two things: buy from smaller manufacturers that lack mainstream distribution or manufacture private label products that can’t be found anywhere else. It’s an incredible advantage to sell exclusive products because this one-of-a-kind product can’t be price-compared with Amazon.
Ugmonk is a popular clothing brand started by Jeff Sheldon, a designer that sells his own uniquely designed shirts. He produces unique, one of a kind limited run anniversary kits of his products. In his own words, “Ever since the beginning, Ugmonk has been about my passion for design. Yes, we have more than four shirts available now. We’ve grown in a lot of ways, but at our core, we’re still the same. Every single item is still personally designed by me, and I think the designs are maturing alongside my own taste. Ugmonk will always remain a design-driven brand where design and quality come first.“
Mancrates is a unique company and it’s positioning frames all it’s products uniquely. Buying gifts for men is notoriously hard, so they organize by men’s interests and package collections of items in a unique wooden crate that has to be opened with a crowbar! It’s important to highlight that there’s a point in which brands can go too far creating unique items. Urban Outfitters has been on a roll lately, but it’s gotten in some hot water with some tasteless clothing items it’s produced like the concentration camp tapestry and bloody Kent State sweatshirt.
Another way of making products unique is to limit their availability. Supply and demand is an insane motivator. For example, Blackmilk clothing out of Australia makes extremely limited collections, some only available for 48 hours. In the words of our team coordinator at ZURB, “You better believe if it’s a collection I’m interested in, I’m stalking the website right when it drops.” In a 2013 DigitalCommons study, it monitored shoppers reactions to limited quantities and limited-time sales and found that the retail stores that had perceived scarcity produced psychological effects such as consumer competitiveness, urgency to buy, in-store hiding, and in-store hoarding.
Get it today products
Big products that have high social currency value are needed today when the “one of a kind” experience has a timeframe- think new video game systems, cell phone launches, and Nike shoe releases. The retail experience and excitement around buying them becomes the driver of the purchase. Surprisingly, it’s not just products that drive these behaviors. People have also been known to wait for hours and even sleep overnight just for the right to buy food at new Chick-fil-As, Dunkin Donuts and In-N-Out Burger restaurants.
So what drives people to waste their time waiting outside a store or restaurant? The willingness of these consumers to wait has nothing to do with the giveaways, or buying, or stuff according to Kit Yarrow, a consumer psychologist. Instead, these people participate with similar-minded people in what they perceive as a cultural event. They want to be a part of the experience and be able to say they were there. If retailers can foster the human connection, it gives people an excuse to be with others, like a festival or event.
Not everything has to be event driven though, as Millennials will consider “Buy Online, Pickup In Store” as an incentive. An impressive 88 percent of millennials say they would consider buying online and picking up in store to save $10 on a $50 item. Retailers with physical locations need to create reasons to visit stores!
Shoppers have come to expect more individuality in their purchases and retailers can reap the rewards of this desire to personalize. Consumers will pay approximately a 25% premium for customized goods based on a NPD Group study conducted in 2011. Not only that, users who interact with products by designing and personalizing them are far more likely to purchase them.
However, this doesn’t mean retailers need to shift their business or product model, as personalization can be as simple as letting customers choose color schemes or adding their name to an item. It doesn’t need to be complicated, in fact it can be outsourced. Steve Chou of Bumble Bee Linenssays, “Even better than the competitive edge over Amazon, we have found that many of our most profitable products are personalized or custom items! We have developed a relationship with a local embroidery shop who customizes some products for us. Others are products like our hand-painted shower curtains.”
We’ve worked with retailers like Zazzle that have a huge inventory of products that can be personalized and customized. Ten years ago we helped them overhaul a twenty screen wizard into a single page experience that created a 3x lift in conversions.
Brands and manufacturers that don’t want to compete directly with their retail partners can implement strategies like Nike by implementing exclusive, customized inventory. Even smaller brands like Republic Bikes and Scuf Gaming do a great job of building excitement around customization. Fashion brand Mon Purse turned quality customization into a multimillion dollar fashion business.
Sell products direct
It’s more work for retailers to design and source their own products, but those that successfully do are rewarded with higher gross margins because they cut out costly middlemen and avoid direct price competition. According to a recent Forrester Research study, over fifty percent of consumers are already visiting websites of manufacturers with the intent to make a purchase. One third of those consumers actually prefered to buy from the manufacturer.
Being able to go directly to customers reduces the risks of holding onto costly inventory and removes the supply chain headache. Turning over inventory is key to the success of retail chains as well, though they lose opportunity when product companies sell direct. And if there’s hesitation to go this route, things like Kickstarter and Etsy have created markets that enable companies to practice going directly to customers.
Create a subscription service
Busy shopper buying habits are trending towards easy, hassle-free experiences. In order to meet those expectations, retailers can provide subscriptions that create convenience by removing the regular purchasing decisions that happen with replenishing supplies. Subscriptions also have the benefit of keeping a set rate, which helps shoppers stay within their budget. In many cases, these subscriptions bring greater value through bundling of items to reduce the need for making multiple purchases.
Subscription services have obvious benefits to retailers because they can get cash quickly by automating and optimizing cash collections while minimizing write-offs. Building strong relationships is at the core of the subscription business model… and without customer relationships, there can be no sustainable, recurring revenue growth! It’s much less costly to build on existing customer relationships than to acquire new ones.
Retailers must track member churn and engagement to insure success. Successful membership businesses focus on the long-term relationship and consider the first transaction as a way to service customers and continually evolve to meet the needs of members. No one product or delivery is as important as meeting the goals of customers- the subscription member’s mission should drive engagement, not the specific products or services.
The range of services vary from the mundane and practical, like men’s replacement razors, to the novelty items that bring delight, like Geek Boxes. Netflix, one of the most popular subscription services of all time, used physical delivery of DVDs before switching to an on demand digital subscription. There’s even premium community services for advice, where people can connect with experts on topics that range from healthcare to creative art lessons. Retailers must find opportunities with customers to build strong relationships.
Greater company access
Amazon has mastered the automation of almost every part of the purchasing process. What it doesn’t have are accessible service representatives ready to help customers through a purchase. Retailers can humanize their brands by bringing in community managers and partners to offer real-time support through social media channels, or on page chat. In fact, 44% of online consumers say that having a live person answer questions while making an online purchase is a key feature retailers can offer in the online experience. Providing live chat is the path of least resistance for many customers.
In much of our work, clients struggle to rationalize this customer investment, but the truth is, not talking to a customer is potentially a death sentence. Live chat can reduce the overall customer service costs by lowering average interaction expense. Chat also increases efficiency of each service representative by enabling them to handle multiple chats simultaneously, potentially eliminating the need to expand service center help.
Really active social engagement and super attentive customer service can be both reactive and proactive. Live chat and social media provide immediate access to customers’ pain points, and gives retailers earlier awareness to turn these problems into revenue opportunities. Discovering pain points can help retailers learn what new content to write for a blog or article or create benefits for marketing campaigns.
Instead of going all in with live chat, at ZURB we recommend creating a list of all the important pages on the site that are likely to attract prospective customers and focus on providing attentive support. Chat doesn’t have to solve every need, and much of the content can live in a support portal, like printing company Moo.
Retailers that want to utilize more technology for their customer engagement can hop on the latest trend of chat bots. Facebook launched their bots for Messenger Platform last year and companies like beauty retailer Sephora have been aggressively building chat bots, like the Sephora Reservation Assistant that lets users book a makeover appointment through Facebook Messenger and a shade-matching chatbot that identifies lip colors to match photos uploaded by users. It turns out people are engaging deeply and averaging 10 messages per day with the Sephora bot. Companies like Octaine AI make it easy for brands to create useful and entertaining bots and forge deeper connection with their audience.
Better search filters
Amazon has over half a billion products, which makes it a one stop shop for everything. The big problem with that large inventory is finding what you need, but it turns out it’s not just a Amazon’s search problem. In a recent 2015 study, only 16% of major e-commerce websites offer a reasonably good filtering experience. In some categories, basic search is enough to find an adequate product, but more nuanced product categories like bras need more specificity.
Retailers can customize the search to the needs of a niche by being more focused on nuanced decisions, like filtering on a popular new category like Bare Necessities does with Racerback bras. That highlight a definition on the top of the page, “Racerback bras have become one of the more popular bra styles for women.” Bare Necessities shows they are staying relevant with their technology, but they also explain the benefits of this bra type.
It’s important that retailers think about what people really want to differentiate between the various items. In our experience, the most important filters should stay at the top. Other important ideas could include theme filters or compatibility features when a device type or operating system matters. When niche site improve their search, good results happen. eConsultancy noted that kilt retailer Buyakilt.com saw a 26% increase in conversions and a 76.1% boost in revenue after creating a product filter to shop by kilt type and kilt pattern.
Hipmunk, a popular travel planning site, uses an interesting results page to help customers visualize which flight to select. Results are presented in a visual timeline to allow people to select the best flight for them at a glance, and users can also create multiple search tabs for easy comparisons. Hotel results have visual presentation as well, and are shown on a map so that people can view where in a destination they will be staying.
Keep customers by surpassing their expectations
Marketers often fall into the trap of chasing their next customer. In a recent report from Adobe, online retailers spend almost 80% of their digital marketing budgets acquiring shoppers, and for each 1% of shoppers who return, the overall revenue increases 10%. So if retailers held onto just 10% of their existing customers their revenue would double. Sounds good.
But in the high stakes game of competing with Amazon, the costs of acquiring new customers is a heavy burden, especially when dealing with a competitor that has deep pockets to outspend. Retailers must find sticky services and products that build loyalty with customers to reduce the challenge of acquiring new customers. According to Gartner Group, 80% of your company’s future revenue will come from just 20% of your existing customers. With Millennials about ready to surpass Baby Boomers in spending power, brand loyalty will be a factor in retaining these new customers. Millennials are 1.75x more likely than Boomers to say they’d like to be brand-loyal, but many of the challenges Millennials face with retailers are unique to them.
More personal service
Amazon doesn’t make it easy to talk with a person, and only recently have they enabled callbacks. While they have an amazing ability to deliver service with the volume, they lack a personal touch that can be exploited by retailers. But that doesn’t mean retailers need to rely only on people to bring this personal touch, they can use their service as a way to connect better. Opening up different communication channels can be challenging to manage, but they can separate a retailer’s service in a crowded space.
Domino’s Pizza refers to itself as a technology company-more than 60% of Domino’s orders are now executed on digital platforms. Using a smartphone app, Amazon Echo speaker, Domino’s website or online via Facebook, Twitter and other platforms, customers can order with discounts often included. There’s also a loyalty rewards program. The Domino’s app includes an order tracker that lets customers follow the preparation and delivery of their food to create more transparency in the ordering process.
The flip side of this personal communication however, is potentially detrimental to customer loyalty if it’s implemented in a way that is focused too much on the needs of the retailer. Target has rolled out a beacon strategy within stores to attract wandering customers to potential store isle deals. While it’s an opt-in experience, why would I want to be harassed to purchased unrelated, discounted products during a store visit?
Retailers can start small, even a personalized message or sketch on an invoice can inspire customers!
Make a loyalty program
It turns out that Millennials love loyalty rewards, and more than Generation X-ers and Boomers, they’re 80% willing to switch brand allegiance or shop at a different store if the switch would enable them to earn rewards they can redeem on purchases. Given their comfortability with technology, they also check their loyalty program rewards on a mobile app- 30% of respondents in fact, which is double that of previous generations. Retailers must know that Millennials are open to supporting stores if the benefits earned are relevant, convincing and cost saving.
Urban Outfitters gets 20% to 30% of their sales online with it’s investment in technology. Their loyalty program, UO Rewards, is strong and gives customers points for posting on social sites, and offers the ability to scan items and create a wish list. The learnings they get from the online data makes the retail stores more effective and helps the experiment online by being more aggressive with their hunches. It makes sense to pursue customers this way- a multichannel shopper spends 2-3 times more than a single-channel shopper.
Retailers that want to set up a loyalty program should note that personalization is important to the success of creating a compelling customer experience. Companies should study Starbucks’ loyalty program.
Provide local access
With big box stores proliferating in all areas around the world, you’d think the desire for local products and services would be waning. However, a huge growth market right now is local food and it’s expected to be a 20 billion dollar industry by 2019. Customers are willing to pay more for the certainty that their food purchases do things like create jobs, promote local communities, guard groundwater, protect the environment, preserve farmland and support the treatment of animals. It’s called being a “locavore” and the food industry has found ways to bring the local stories into their products.
While Etsy has struggled as of late in the market, it’s focus on bringing local products to the masses has helped it create consistent revenue growth and positioned it as a world leader. Their focus on local search brings local products front and center, while it’s events and retailers search makes it easy to connect with producers in local markets.
Organizations like SFMade create interest in local goods. The city of San Francisco has global awareness, but organizations like this can be advocates for manufacturers that want to directly reach their home market. SFMade is a voice for locally produced products.
Create a movement
Selling online is not just about building a solid, appealing retail website. It’s also about bringing people on an amazing journey where they can visualize a better tomorrow. You can buy a watch, shorts or a kettle anywhere, but they can’t necessarily make you feel part of a larger purpose. Retailers can find unique ways to build a story that makes their customers feel like custodians of the brand.
Huckberry is a great example of a site that wants to build a passionate community. By forcing a website login upfront, they’re serious about telling customers that this journey is only for people who want to be part of the movement. In their words, “Huckberry is equal parts store, magazine and inspiration to help you suck the marrow out of life.” They share stories on Dwell from bloggers, capture lifestyle video segments, and create a blend of stories and products on their social feeds.
They take it a step further in their welcome email. “Thanks for joining the 1-million strong Huckberry community. We started the Huckberry community in 2011 for people like us- those who live in the city but live for adventure. Today we’re 100% funded by our customers, and having the time of our lives.” All of their emails build on the idea of bring you along on the adventure.
What does it take to make a movement happen? Time and patience are most often required, but Derek Sivers breaks this down into one, very clever video. There’s a lot of hard work, but the key to creating momentum is found in Guy #3. Find people who align to your vision, but don’t tell them how to live or buy… invite them on the journey!
Provide mobile ordering
Convenience is an area that Amazon continually wins, but there’s room for service oriented businesses to use the talent of their people as a competitive advantage. It’s tough to create consistency in a service business, but retailers that are able to incorporate technology into their plans will put themselves in a better place to compete with Amazon.
Starbucks has done a great job incorporating mobile payments into its service, turning 7% of all their transactions into mobile payments since rolling out mobile ordering nationwide in 2015. Its mobile-order-and-pay success in the US is fast becoming the pillar of Starbucks loyalty program which is one of the most successful programs in foodservice. Starbucks is continuing to innovate- they just recently launched My Starbucks Barista, which uses AI to allow customers to place orders with voice command or messaging, to 1,000 US consumers with a more extensive roll-out planned in 2017.
When the Starbucks payment service was first launched about a year ago, it was at about one-third of all orders in some stores where the customer density in high, but it has recently increased to over half of all orders in some locations. It has the potential to improve customer experience, but from a financial perspective, it can fuel an increase in revenue per employee (Starbucks has gained 50% more per employee since 2010).
I’ll be honest with you, I’m a 20 year Starbucks drinker that started dating Petes, and then Philz Coffee after interviewing their CEO at our ZURB Soapbox. However, my recent trips to Starbucks have me impressed by the digital adoption of their mobile ordering app. It seems each time I walk into the a store more people have their drink orders ready. There’s a feeling of being left out and the idea of gaining another five minutes on my commute is more attractive, especially when traffic seems to be backed up.
Collect prototype reactions
Prototyping is great way to get customers invested in your products and services. A 2011 Forrester study tracked the evolution of economies from the Age of Manufacturing (1900-1960) to the Age of Distribution (1960-1990) to the Age of Information (1990-2010) to our present day reality of the Age of the Customer- an era of power that comes from engaging with demanding consumers.
An industry that has to quickly adjust to customer trends and demands is fashion. Fashion retailers that produce product can cut their lead times in half to six to eight weeks by using a supply chain strategy that enables testing and reacting. Steve Madden uses a sample factory at its headquarters to launch prototypes that are sent to stores within days to get customer reactions, thus reducing risk of overcommitting to costly mass production overseas.
Madden, the designer and owner, proudly states in Vibe, “Unlike other brands that have to send prototypes out to get shoes made, we go right into our sample factory twenty feet away. We have the ability to design a shoe, make whatever changes we want, all in one day. Then we send those shoes to our stores in New York or Miami, and we’ll see very quickly how they perform in those regions. If it looks like they’re hot, we’ll go all in and roll out those shoes to the rest of the world.”
Steve Madden has focused on being consumer-centric. Successful fashion brands understand their customers and integrate their reactions into key product and experience decisions through direct interaction. In order to meet the demand, Taylor Stitch and Gustin use crowdsourcing to determine what and how many products to make.
In our project work experience, customers are excited when they’re asked for feedback and feel more invested and loyal to the brand as a result.
Stock shallow and exclusive
Costco and fashion brands like Zara choose to stock up only a limited quantity of each product to keep their merchandise new and fresh. It’s a strategy that retailers are using more frequently in order to compete with Amazon. The inventory turnover competitive advantage Amazon used to have has slowly eroded over time as it’s added more and more products to its site.
Zara doesn’t try to predict styles, it limits clothing runs and switches them out frequently. Basically, Zara’s brazen and unique business model eliminates the risk of competing with fast-fashion retailers, which have buyer teams that source trending fashion from third-party vendors, and traditional specialty retailers, which have design teams creating product they believe will be popular twelve months out.
“The company’s strategy involves stocking very little and updating collections often. Unlike brands that update only once a season, Zara restocks with new designs twice a week,” Suzy Hansen writes in The New York Times Magazine. The strategy works two ways, according to Hansen. “First, it encourages customers to come back to the store often. It also means that if the shopper wants to buy something, he or she feels the need to buy it to guarantee it won’t sell out.”
Larger retailers like Costco can take advantage of this strategy. Jim Sinegal, CEO of Costco, reveals how the warehouse chain takes advantage of that mindset, “We refer to it as a treasure hunt. We carry about 4,000 stock-keeping units, and about 1,000 of them are constantly in that changing mode.”
Build experimental stores
Stores large and small have begun to utilize retail space in different ways to build new relationships with customers. Whether the purpose is to experiment with new products, get feedback or give customers a chance to experience a home entertainment setup, retailers are finding unique and clever ways to engage potential customers.
The Lululemon NY lab is a unique 2,893 square foot store that is split between retail boutique floor space and a studio where 15 designers and pattern makers work amongst the customers. You shop with the designer who was responsible for the pants in your hand as you browse the latest collection.
Experimental stores won’t necessarily create revenue, but it does give Lululemon a pulse of style trends and a chance to try new ideas out. “The Lululemon lab is a centre of creativity for functional and experimental design that taps into the culture, trends and technology of the people and place it celebrates,” says Lee Holman, creative director. “It serves as a hyper-local conceptual design and retail space within Lululemon and an incubator for design innovation and functional product experimentation beyond activewear.”
There are plenty of other unique concepts that retailers have experimented building. In the NY Meatpacking district, Starbucks has a Roasterysuperstore, Pepsi is opened a swanky restaurant, and Pernod Ricard’s Absolut Elyx vodka set up an apartment.
Showrooms are essentially a safe place for editors, buyers and stylists to experience a new fashion collection. Like any industry show, it’s a place to ask questions, inspect details, feel fabrics and understand a garment’s nuances.
Nike has taken an innovative approach to showrooms at 45 Grand, where trainers are some of the same ones that create workouts for Nike’s Training Club app. They trainers also teach at other higher-end workout spots around town which creates a word of mouth, exclusive experience. Nike has made the fitness studio space invite-only and it doesn’t even sell clothes.
Prototyping isn’t just limited to products. It might seem counterintuitive to invest in a store that might be torn down, but a physical retail store can be prototyped for consumer feedback. The overhead of investing in construction, employees, tools and experiences can seem intimidating, but the learning and experimentation can be a catalyst for growth.
Extra office space, or a small rented space, can be all it takes to mock up a new store or service concepts and rituals can easily be tested and iterated in actual stores. Again, it doesn’t have to be perfect. Most consumers can exercise a bit of their imagination.
Amazon has done an amazing job bringing innovation to the sale. From one click purchasing, to inviting other vendors into their marketplace, they’re experimenting with new techniques regularly. Not only are they making it easier to shop on price and shipping time, they have created the world’s largest inventory of products.
As the Amazon juggernaut continues to roll on, companies unwilling to adapt will find themselves squarely in its path. Applying these suggestions will enable you to not only exist alongside them, but take them on with your eCommerce business. Over the last two decades, we’ve been fortunate at ZURB to help dozens of eCommerce companies develop strategies, storefronts, and integrated systems that help them carve a unique niche in the marketplace.
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