Three E-Commerce Retail Trends We Are Seeing In 2019

Amazon wants to be the marketplace, for everyone and everything. And it seems to be working. So should you even build an e-commerce store of your own, when Amazon already provides one for you? For some smart brands, the answer is clearly a resounding “yes.”

Amazon is Big, with Even Bigger Headaches  

Amazon is the new Sears, but with a big twist: there’s less regulation than you think. Because of its amazing growth, it has become the wild west of the global marketplace, with bad actors using ruthless tactics, and small businesses left with few options for recourse. According to an article on Verge about the dangers of the Amazon marketplace,

“For sellers, Amazon is a quasi-state. They rely on its infrastructure — its warehouses, shipping network, financial systems, and portal to millions of customers — and pay taxes in the form of fees. They also live in terror of its rules, which often change and are harshly enforced.”  

So, while most brands who sell products (and soon, services) probably need Amazon to be part of their distribution channel mix, the reality is that they need experts in guiding them to get to the top of the search results, and to stay there. These experts, lawyers, and Amazon enforcement issues cost a lot of money—dollars that could be spent on other distribution channels instead.

A Both/And E-Commerce Strategy

 So, while many retailers are already on Amazon, the smart ones are hedging their bets by investing deeply in their own customer-centric websites and user journeys. Casper, Huel, and a host of other well-known brands are playing in both areas: their Amazon pages are mimicking the information of their websites and using it for the conversion part of the sales cycle, while their websites provide a more tailored approach to the user, both in terms of information, as well as social proof (e.g. user reviews).

Why? They don’t want to be limited by Amazon’s highly controlled pricing and inventory structure, a review system that can be easily gamed (see above article), or being exposed to the dark underbelly of that marketplace. How do they get it done? They invest heavily in their brand message, creative, compelling content, and nailing down a customer-centric journey from ad content to purchase.

As seen below, Casper’s strategy was to launch with their website-only sales funnel first, and then branch out to Amazon as a secondary source. The Casper website has 10x the amount of user reviews, as well as richer informational content than could ever be on Amazon. To make things easier on the conversion facet of their website, they match their mattress prices to Amazon, as well as the free shipping and return policy. Organically, people know that it is no different buying from their site as opposed to purchasing it on Amazon. Knowing Amazon’s fee per sale, we can deduce that they are making much lower margins selling on Amazon, but because they are on there, we also know that it is still an important distribution channel for them.

Focus on the Lifetime Value of a Customer, Rather than First Purchase

Huel has a different approach. Huel sells their meal replacement products on Amazon, but they only sell their starter kit there. There is no option for Amazon’s “Subscribe and Save,” as they want the monthly customer to buy their additional products directly from the Huel website. To entice the user even further, Huel’s pricing strategy rewards customers for buying from the site to begin with. As seen below, their website pricing is significantly lower than it is on Amazon, and, like Casper, they match the free shipping option of Amazon Prime.

In this example, Huel is using Amazon in what we refer to as a defensive flanking strategy. How do we know that? Just look at the search results for “Huel” on Amazon:

If it weren’t for their sponsored ad (and extra ad dollars to have the coveted “Amazon’s Choice” ribbon), they wouldn’t show up at all on the first row. Their organic search result on the second row would be surrounded on all sides by the Soylent products. We can safely assume that the margins for Huel on their site are the same (or even better) than their margins on Amazon, even with the sizable delta in product price, considering the ad investment. Their “website-subscription-only” sales strategy is guided by their focus on the lifetime value of the customer (LTV), rather than the initial sale.

Bonus: Customer Data Is (Almost) As Valuable As Product Sales

Here’s the other part of both Huel’s and Casper’s (and everyone else’s) focus on directing some or all of their customers to their website: the brand owns the data. Like Amazon, intelligent retailers use customer behavior and analytics from their site to create better user experiences and offers. And you can only obtain that type of deep data if the consumer is on your site. Conversely, you can tell just as much why people aren’t buying your products by looking at site data, event tracking, and other attribution metrics. You can’t do that on your Amazon product page.  

 

Even more importantly, traditional customer demographics like age, gender, interests, and HHI (household income) tell about the “who” of the customer, and are commonly used to build brand personas. With site behavior and tracking of user experience from ad/organic all the way to purchase (and re-purchase), you are able to tell the “what” of the customer, what they are doing, where they are clicking, and what they end up buying. In many cases, the brand’s assumptions of “who” don’t match up with the “what.” With event tracking, heatmaps, and other behavioral data sources, you can target your messaging and better your customer’s experience, resulting in higher retention (aka increased lifetime value) of a customer.

Takeaway:

Retail brands are wise to position their own e-commerce sites as the go-to education source for their product. Amazon will likely be a sizable source of top-line revenue for brands, but the savvy brand managers use Amazon as a defensive strategy, at best getting the first purchase there, but at worst, making sure competitors don’t steal potential customers. Lastly, smart product and brand managers look at the LTV of the customer, rather than getting that one-time sale as a part of their overall customer acquisition cost (CAC). The lifetime value will go up tremendously if you aren’t paying the Amazon commission fee, but rather using those resources to interpret customer data from your website and create a better online experience for those returning customers.

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