How to Survive “The Amazon Effect” as a Small Ecommerce Business Owner

the amazon effect

You’ve just bought something that looked perfect online and you can’t wait to get it in your hands. Take a moment to pause and think about that last bit: How long would you actually be willing to wait to get your item?

For the vast majority of products—whatever your target marketpeople are willing to wait about two days. This desire to have what you want at that speed is what the industry has coined “The Amazon Effect.”

It’s turned a vast majority of the ecommerce world into a race to the doorstep, and plenty of things are falling by the wayside in the rush.

For small ecommerce businesses to survive and grow, you’re going to have to come to grips with this new reality and react to it in a way that your customers want, whether they know it or not.

Beware “The Amazon Effect”: Price, speed, and limited results

Amazon has more than 100 million Prime accounts and that mix of people and businesses is driving the American economy. We often hear about them being empowered to impact change and set offline expectations due to what they experience on the site, and this is somewhat true.

What’s likely more important for most small ecommerce businesses and owners like you is that people are narrowing their choices even further based on search while increasing their demands. They’re looking at price and speed, with a secondary glance at quality.

They’re also facing too many options to even consider. Specifically, on Amazon’s platform, they can’t even see all their options.

If you search “red baseball cap” Amazon tells you that there are “over 100,000 results” but limits you to just seven pages of results. They’re not even seeing seven full pages, as the last one cuts off roughly 30 items earlier than the rest. So, you can browse 306 different options, or 0.3 percent.

avoiding the amazon effect small business

Checking the “Prime” box drills that down all the way to just “over 9,000” results and choosing 4-star and higher rated products drills down to “over 3,000.” However, you’ll never be able to see past the 306th option on any search.

So, people who are using Amazon each day to determine the products they want are almost always drilling down further based on customer reviews and shipping speeds. They’re likely also being clued into this shipping speed as a hallmark of quality because, in that same search, every single item on the first page was a Prime item. The “Amazon’s Choice” designation also was limited to only Prime items and specifically notes that they’re “available to ship immediately.”

Your customer’s demands and understanding of value are being shaped specifically by the largest online marketplace, and it is directly linking value to something that’s difficult for small ecommerce stores to do on their own: offer free two-day shipping.

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Your business’s operations have changed

Competing with Amazon can feel overwhelming, and fewer are trying. Many are incorporating Amazon as just a single channel in their ecommerce business plans, hoping customers will shop there and like the brand enough to consider looking at Instagram, search engine results, or their own website for more information and options.

Part of getting your ecommerce business “right” is determining how (and if) you want to compete, or if you want to treat Amazon as part of your overall strategy. There are many successful brands and companies taking each path.

Incorporate Amazon sales into a subscription box business model

Media darling Dollar Shave Club built a major business through smart advertising and getting in on the subscription box craze ahead of the game. It could have continued a long successful run without ever stepping foot onto an Amazon page. However, they adapted part of their business model and the partners they use in order to seize the new channel.

dollar shave club amazon effect

Either Dollar Shave Club or some of its partners saw value in Amazon, much the same way consumers do. That’s what you will need to target.

Ecommerce businesses of all sizes must find a way to demonstrate and provide value to the shopping audience. Amazon has resources and scale that will be hard to compete with, so you’ve got to find a way to generate your own value. 

Subscription box businesses actually do this by eliminating the need to sift through and choose from hundreds of thousands of products; instead, the choice is made for the customer. They get a curated selection for an affordable price. It’s why on Amazon all you’ll get is a gift card to spend toward those chosen-for-you boxes.

Look for opportunities to create customer experiences, offer unique products, personalize your offers, or provide easy education on a product. If a customer is visiting your website to achieve a purpose like this, it’s more likely that they’ll turn to your site for the purchase too.

Instead of providing products, no matter if you’re B2B or B2C ecommerce, you’ve got to provide a value.

Be mobile-friendly

Developing a strategy that addresses The Amazon Effect depends on how well you know your audience, and how willing you are to keep the expertise so that you can respond correctly.

For instance, is your ecommerce site mobile-friendly? Your audience is on their phone more than ever, so your site needs to be ready. Cyber Monday 2018 was the largest online sales day in U.S. history and mobile devices accounted for more than a third, $2.8 billion, of those sales. That’s a 56 percent increase for smartphone-based sales.

That same review of 2018 holiday season sales looking specifically at your market shows that mobile accounted for 41.7 percent of the total e-commerce sales over the 5-day period from Thanksgiving to Cyber Monday.

Use personalization for different demographic segments

Mobile is just one way to highlight the need for a customer-centric approach to your business. Your audience might be more receptive to emails that greet them by name, marketing campaigns that rely on Instagram influencers, collaborations with other companies, or product combinations that make it easier to know what the “right” choice is for them.

small business personalization amazon effect

Personalization comes in a wide range of flavors, and people respond well to almost all of them—just don’t get too creepy. So, if you’re struggling with an opening move, start small and simply showcase additional and related products below the featured item on any given sales page. That’s also a very basic introduction to AI, where you highlight related items based on past site visitors.

As you grow and learn more, you can use more sophisticated AI and personalization tools to create more compelling offers. At its heart, though, your response has to be guided specifically by your audience.

Deliver quickly: Get the last mile right

The must-have is speedy, accurate fulfillment. It will push your business to be as efficient with deliveries as possible. That sends a lot of small ecommerce businesses our way—check out this list of the best ecommerce fulfillment providers that we share with owners just like you—for conversations around what it all means and how to respond.

You can outsource warehouse and fulfillment to someone like us who specializes in it, or you can run the operation from your site. There’s a lot of technology that makes either option possible, and there are different points in the life of a business where one option will make more sense than the other.

Don’t trust any company, whether a fulfillment provider or someone trying to sell you warehouse software, who says that there’s always one smart choice or that anything in ecommerce is one-size-fits-all. Just like when you talk to a lawyer, every quality answer is going to start with “it depends.”

The important part for your business is determining what you can afford and then promising that to your customers. If you or your partner can reach every home in the continental U.S. in two days, then say that. If you can’t, don’t promise it. 

customer service and the amazon effect

If you need to charge more for delivery, do your homework to see if your specific audience is more accepting of paying directly for shipping or if you need to bake that into your product costs. Again, it depends.

Do more than survive

For traditional ecommerce, your customers are going to judge you on the full process, from discovering your products through order, payment, and delivery. If they’re unhappy along the way, you get the blame. If you go the Amazon route, you get to skate on ordering and fulfillment. Unfortunately, the focus on Amazon there also means you’re building less of a relationship with your customers.

Surviving and thriving in the age of The Amazon Effect comes down to understanding how you want to run your ecommerce business, where you want to differentiate, and how you’ll build the long-lasting relationships with customers to keep your business going.

Is it right to compete on price, personalization, relying on your channels, or joining the big product lists and trying to be the best at Amazon SEO? It depends.

The good news for everyone reading this right now is that there are answers and options available no matter your business size or product categories. Treat your business and your customers right, and you’ll be able to do more than just survive The Amazon Effect.

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Jake Rheude

Jake Rheude is the director of marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.

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