The Amazon Effect: Part One

The Amazon Effect where customer is king

Love them or hate them, Amazon is here to stay. Named Fast Company’s Most Innovative Company of 2017, the world’s largest online marketplace continues to push the bounds of what’s possible in ecommerce, an impetus dubbed “The Amazon Effect”. 

The businesses that thrive will control the margin by taking control of the customer experience, their way. In this series we’ll dive into five differentiators behind Amazon’s success. Then we’ll explore how your business, no matter its size, can leverage these factors to compete with your E-Giants.

The Amazon Effect

“The Amazon Effect” explains the pull of e-retailers toward a higher standard of customer service, operations, and innovation.

“Amazon is so large, we can’t ignore them or the experience they give customers. Enterprise ecommerce owners who succeed will consider what they can take from Amazon to revolutionize business.”
-Benjamin Arp, Solutions Architect, Miva

Here are three key factors to Amazon’s success in ecommerce:

Amazon Puts The Customer First

In an industry where customer-centricity is a buzzword, Amazon puts the money where their mouth is. CEO Jeff Bezos continues to innovate to improve the shopping experience—from personalized recommendations, to free shipping, to day-of delivery by drone. In fact, Bezos attributes the #1 reason to Amazon’s success to their focus on the end user.

So what’s the secret to good customer service? “Don’t [overcomplicate it]. Provide personal care, and be nice about it” writes Neil Patel of Kissmetrics.

  • Acquiring a new customer will cost anywhere from five to 25 times more than retaining an existing one (Harvard Business Review)
  • Increasing customer retention by just 5% boosts profits 25% to 95% (Bain & Company)

“A company doesn’t win merely by offering something. They win by giving it without being asked.” -Neil Patel, Kissmetrics

Truly, Amazon doesn’t merely abide by the Golden Rule; they go above and beyond even that. Take the story of Henry Blodget, a writer who took to Business Insider to share an extraordinary example of Amazon’s proactive service. The story goes something like this:

  1. Henry rents a $2.99 movie from Amazon
  2. Henry plays the movie from Amazon
  3. Henry encounters frustration with the loading quality of Amazon’s player (which he already expects with HD streaming and so shrugs it off)
  4. Amazon reaches out to Henry upon noticing this poor playback to refund the $2.99 rental amount
  5. Henry is shocked, delighted, and writes about it on Business Insider

When it comes to the Amazon Effect, this step of proactivity is a lesson for all. Where word-of-mouth once reached five people, a bad review can reach 5,000 online. In the world of business—and in general—going above what’s expected never returns void.

Amazon Offers Free Shipping—at a Cost

Though not the first retailer to sell online, Amazon’s introduction of free two-day shipping rocked the industry. Today, Amazon Prime reaches nearly half of American households, and 70% of upper-income American families. Truly, consumers not only expect fast and free shipping; they’ll pay in dollars and loyalty to those who offer it:

  • 84% of customers are more likely to shop with brands that offer free shipping (AYTM)
  • Nine out of ten consumers cite free shipping as the #1 incentive to shop online more often (WalkerSands)

Just the mention of “free shipping” sends e-retailers running, as it comes with a cost. In July 2016, this feature cost Amazon over $1 billion per quarter for three quarters straight (MoneyTips). So why do they do it?

“Prime membership and free shipping moves a lot more product,” writes Jeff Hoyt on MoneyTips. “The increase in sales justifies the increase in costs.”

In a day and age where it costs significantly more to attract new customers than to keep the ones you have, the Amazon Effect prioritizes long-term success.

Amazon Understands The Need For Personalization

Oxford Dictionaries named “selfie” the word of the year in 2013. In 2014, Wired wrote about “The Internet of Me”: an emphasis on building a hyper-personal online experience.

As the largest online marketplace, Amazon uses its reams of data to focus the browsing experience, saving customers time and enabling discovery of lesser-known retailers. In fact, personalization is so important to customers today, it can make or break their interactions with you:

  • 75% of consumers are more likely to buy from a retailer that recognizes them by name, serves up recommendations based on past purchases, or acknowledges their purchase history. (Accenture)
  • Personalized emails deliver 6x higher transaction rates, but 70% of brands fail to use them. (Marketingland)
  • 74% of online consumers get frustrated when content like offers, ads, and promotions show up that have nothing to do with their interests. (Hubspot)
  • Adding personalization to the ecommerce experience increased sales by 7.8% over a short period of time. Monitored over a longer period of time, sales increased by 19% across the board. (Econsultancy)

As competitors saturate the marketplace, recognizing and contributing to the value of each customer wins loyalty for life. It’s no wonder 70% of marketers name personalization their top data goal.

Related: Find out how Miva delivers custom ecommerce solutions to drive personalized success

 

No industry is safe. Technology continues to turn each area of business on its head. As Amazon continues to soar, harnessing their strategies to success combined with your market expertise is key to beating your E-Giant, your way.


Stay tuned for Part 2 of The Amazon Effect series, where we explore three more factors to Amazon’s success. Then, follow up with our Competing with E-Giants series to harness these differentiators for your own ecommerce enterprise.

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