Hundreds of retailers have filed for bankruptcy already this year, a more than 100% rise year-over-year compared to 2016.
While certainly not the sole cause of the surge in retail bankruptcies this year, Amazon is often cited as a leading cause and for good reason: the online retail giant is growing more and more powerful by the day.
Amazon’s power and influence are undeniable. Examples include the company’s pending near-$14bn purchase of Whole Foods Market, the announcement of which caused the stocks of other grocery retailers to lose more than $22 billion in market capitalization, Nike’s decision to sell its shoes on Amazon after years of holding out, and the dramatic rise of Amazon’s private label brands.
Their continued growth has convinced many businesses, including small mom-and-pop retailers and manufacturers, that Amazon cannot be ignored – even despite the significant loss of margin that comes with it. But while global domination can provide real benefits to retailers, the company’s power is also a reason why merchants need to develop their own off-Amazon strategies.
Consider, for instance, Amazon’s recent announcement of a new refund policy. Until now, third-party Amazon sellers who shipped orders themselves instead of through the Fulfilled by Amazon program, were not subject to automatically-authorized returns. This meant that sellers had the opportunity to communicate with customers before accepting returns – allowing them to establish the validity of claims before receiving them.
But new rules mean customers will now be able to return items for any reason without contacting the seller, at the seller’s cost. In addition, Amazon announced that third-party sellers would be subject to returnless refunds, which, under certain circumstances, allow customers to claim refunds without returning the item purchased.
Unsurprisingly, many third-party sellers quickly expressed dismay at the announcement. One third-party seller went so far as to tell CNBC that the changes “will totally crush small businesses that fulfill their own orders.”
While it remains to be seen whether such a bold prediction will come to pass, the policy change is just the latest highlight of the wisdom of developing an off-Amazon strategy.
So what are components of a successful off-Amazon strategy? Here are a few of the most important.
A compelling direct ecommerce site
The most important part of an off-Amazon strategy is the ability to sell to customers directly online. Typically that’s best done via a dedicated ecommerce site.
Fortunately, it has never been easier or more affordable for companies to launch their own ecommerce sites. There are large, mature ecosystems around popular open-source platforms and frameworks like Magento and WooCommerce, which let companies build robust ecommerce sites without reinventing the wheel.
There are also hosted platforms offered by vendors like BigCommerce and Shopify. Some of these vendors cater specifically to large merchants. For instance, to meet the needs of large sellers, Shopify launched Shopify Plus, which it bills as “a white-glove ecommerce platform for emerging brands and high-volume businesses.”
Customer experience innovation
While Amazon has arguably created the world’s most efficient ecommerce engine, the Amazon customer experience isn’t the end-all and be-all of online shopping and merchants selling specific categories of products have the opportunity to create customer experiences that are tailored specifically to those categories.
For example, bicycle manufacturer Brilliant Bicycle Co.‘s ecommerce website offers an interactive wizard that helps prospective customers find the perfect bike by asking a handful of questions about their preferred riding style, height, etc.
Once it has identified the ideal bike, it then provides an engaging interface through which the customer can select product options and complete an order. It even includes an innovative discount delivery feature, encouraging users to enter their email address and ‘spin the wheel’ to win a prize.
While it is of course possible to purchase a bike through Amazon, the experience offered by Brilliant Bicycle Co. is arguably far more efficient and pleasurable, demonstrating how companies can differentiate themselves from Amazon on the user experience front.
According to analysts at Morgan Stanley, who looked at sectors that are less vulnerable to Amazon disruption, “unique and bespoke items are less likely to be purchased through Amazon’s marketplace,” meaning that merchants selling them are less likely to face competition from Amazon, either directly or indirectly.
Examples of product categories include formal apparel, luxury goods and jewelry, and examples of merchants that differentiate themselves through customized products include Build-A-Bear Workshop, which allows customers to create their own unique stuffed animals, and Trumaker, which sells built-to-fit menswear.
While Amazon is working its way offline, one of the primary ways retailers with existing brick and mortar footprints have been trying to differentiate themselves from Amazon is to take advantage of their physical locations.
Many offer in-store returns and pick-ups and some are even going so far as to incentivize customers to order online and retrieve their orders at a nearby store. Wal-Mart, for instance, recently introduced a program called Pickup Discount, which, as the name suggests, offers discounts for online orders that are picked up in-store.
Superior sales and customer service
Perhaps no other retailer in the world is as good as Amazon at minimizing human interaction for sales and customer service. In fact, even if you’ve been making purchases on Amazon for years, there’s a good chance you have never interacted with human being at Amazon.
That’s probably a good thing, most of the time. But what happens when you’re considering a high-ticket item or have an order problem that requires urgent attention? Merchants who operate direct sales channels have the opportunity to use phone, email and live chat to provide higher caliber sales and customer service than Amazon.
A mailing list
One of the most valuable assets a merchant can develop to execute its off-Amazon strategy is a mailing list that gives it the ability to communicate directly with customers.
Just how valuable is a mailing list? According to email marketing platform provider Campaign Monitor, email is the most productive channel and generates a whopping $38 in ROI for every dollar spent.
What’s more, because merchants have the ability to capture even richer data about their customers, something they can’t always do when selling on Amazon, they can segment their email campaigns. Amazingly, Campaign Monitor says that segmented campaigns can drive a 760% increase in revenue.