The Amazon Effect: What It Means for Your Small Business
When was the last time you ordered something on Amazon?
Yesterday? Two days ago; maybe three?
In just a few years, this online retail giant has become a staple of our everyday lives. We use it to stream movies and TV shows. Some of us even order basic necessities – such as toilet paper and even food – and wait for those little brown boxes to arrive.
The popularity of this one business has changed the very nature of what customers expect from businesses. Even yours. Ready or not, the “Amazon effect” is here to stay.
How will it affect your business? How can you make it work for you?
What Is It?
The Amazon effect is simply a catchy phrase to describe how people’s shopping experiences on that platform have influenced their interactions with other businesses.
Because the vast majority of us use Amazon regularly, we’re well aware of a new kind of customer experience. We used to drive to the shopping mall, painstakingly search for items, and wait in long lines with little complaint. But now that we’ve experienced the joy of picking out things in our pajamas and clicking to have them shipped straight to us, the alternative seems substantially less desirable.
The Amazon effect has certainly rocked major retailers like Macy’s and Sports Authority. But the reverberations can be felt in businesses of all sizes and industries. Because Amazon sells practically everything, customer expectations have increased across the board.
Even if Amazon were to shock the world by going bankrupt, the effect would remain. Innovative companies, such as Netflix and Zappos, are already pushing the envelope to deliver better customer experiences.
Why Small Businesses Must Adapt – and How to Do It
Now that customers have seen what kind of shopping experience is possible, it has significantly increased their expectations for everyone with whom they do business.
It’s up to us business owners to adapt. Those who stubbornly refuse to update their old business models will go the way of Borders Books.
This sounds scary for small businesses. Without the inventory, resources, or distribution channels that Amazon has, how are we supposed to compete?
The good news: there are plenty of practical steps we can take to make the Amazon effect work for us and make our businesses more sustainable.
One of the most distinctive things about shopping with Amazon: you feel like they truly know and understand you better than other businesses.
With the help of a proprietary “recommendation engine” that tracks your viewing and purchase history, they’re able to suggest items they think you might like. How many times have one of those recommendation emails drawn you back to the Amazon website?
This results in a better experience for you – and more profit for Amazon. You get the cool feeling that comes with discovering a product you’ve never heard of, and they get another sale.
You might not be in the position to invest in expensive algorithm software, but there are plenty of ways you can better deliver personal experiences to your customers. You could create separate email lists based on previous purchases. Or divert different customer segments into different sections of your website.
Once you segment your customers into discrete groups, it’s easier to serve them with targeted content that appeals directly to them. You might not ever be able to deliver a truly personalized experience. But every step you take makes your customers feel more appreciated and understood.
The results? Happier customers and more business.
An Emphasis on the Customer Experience
One major reason why people are shopping less in brick and mortar stores is that Amazon makes it so simple not to.
While they offer a giant selection of products, that’s just one ingredient of their success. Everything about their website and payment process is designed to deliver a great customer experience.
Think about the last time you went looking for something on Amazon’s website. If you wanted to browse, it’s simply a matter of clicking on the appropriate category of products and sorting by price, customer reviews, or best sellers. To search for a specific item, all you have to do is type it into the search bar and hit enter.
Buying is easy too. After adding items to your electronic shopping cart, you can pay with credit card and shipping information that Amazon system remembers. Shipping is extremely fast, and returns are simple.
Small business owners probably won’t be able to directly replicate this strategy. But we can use what we do have – things like smiling faces and an intimate knowledge of our industries – to create better customer experiences.
If you have a brick and mortar store, you have something Amazon doesn’t. Your sales team can greet customers and recommend specific products based on their personal tastes. You can use customer management software, which is inexpensive and widely available, to better understand leads’ concerns and nurture them to become buyers. You can create an FAQ page on your website so visitors can get easy answers to common questions.
Ideas to improve the customer experience are only limited by your imagination! If you don’t know where to start, just ask. Your employees probably have a good idea of some of the most common sticking points. Or, better yet, use comment cards and online surveys to get inspiration straight from customers themselves.
A Willingness to Feature Customer Ratings and Reviews
If you’re in the market for a new car, who do you trust more: a friend at work, or a polished salesperson?
The choice is obvious. It makes more sense to rely on someone we like and trust. Someone who doesn’t have a vested interest in getting us to buy. A staggering 83 percent of us trust recommendations from family and friends.
The Amazon effect takes advantage of this. One of their best decisions was to feature customer ratings and reviews. It seems like such a simple thing. But checking the number of little golden stars can often make the difference between buying a product – or finding another.
With all the increased business opportunities online, there’s also a lot of skepticism. As small business owners without the global reputation of, say, Coca-Cola, it’s up to us to overcome that skepticism and show people we’re worthy of their trust.
This is why featuring reviews on your products online is a good idea. The thought sounds a little scary; it’s only natural to worry about someone leaving a bad review. But, if they’re the exception rather than the norm, they won’t tank your business. They’ll show you’re human. Better yet: respond to negative reviews and assure customers their concerns are being heard.
Sometimes it takes the words of others to convince visitors to become customers.
The final element of the Amazon effect is a low price. A lot of us shop there because it’s significantly cheaper than buying elsewhere. Even if we have to pay for shipping.
This is one area where we small business owners might not be able to compete – at least directly. We probably don’t have the resources, inventory, or scale needed to position ourselves as the cheapest option.
But that’s okay. We have other things Amazon doesn’t have. We have outstanding customer service from people who remember our customers’ names. We have unique experience and understanding of our local industries. Our products might not be the cheapest, but they’re high quality and often a better value.
It makes sense to stop competing with giant retailers like Amazon on price. Instead, we can emphasize the other aspects that make our products valuable. A lot of customers go out of their way to support small businesses, especially if they have a story or support causes that resonate with them. Don’t be afraid to share those with potential customers!
An Unprecedented Opportunity to Connect with Customers
There’s no denying that online superstars like Amazon have completely disrupted how the world does business. Customer expectations are sky high, and only the brands that can meet them will succeed.
This might sound scary for us small business owners. But it’s actually an opportunity in disguise. By fully understanding how customer expectations have changed, we can adapt and serve people better than ever before.
How have your customers’ online shopping experiences affected your business? Have you felt the Amazon effect? Leave a comment below and share your experience.
Corey Pemberton for Mastercard Biz.