3 Competition Strategies From Amazon That Go Beyond Price

The lowest price always wins in online retail, right? Not necessarily. Amazon.com is a perfect example of a company that doesn’t always offer the lowest prices, but has built up a strong perception of being a loss leader. While Jet.com has recently joined the online retail game, Amazon’s customers haven’t jumped ship just because Jet offers lower prices. So how can online retailers compete beyond price? Consider the following three strategies:

1. Loyalty perks: One thing Amazon has done right is its Prime program. By locking shoppers in with a $99 annual fee for a variety of perks, members buy more products more often. In fact, Prime subscribers spend twice the amount compared to non-Prime shoppers. While most retailers don’t have the resources to sustain potential losses from extensive free shipping that comes with a Prime membership, they can provide a comprehensive loyalty program that keeps shoppers coming back.

Any retailer can provide coupons. They’re a smart way to get customers to return. One of my favorite Etsy stores provided a 15 percent off coupon and a surprise free gift with my first order. That definitely caught my attention, and encouraged me to buy from it again. Whether rewards are plainly stated on your site or offered after the purchase, they can turn first-time buyers into loyal customers. Find your signature way of rewarding shoppers to keep them coming back.

2. Reviews and ratings: Shopping online can be tricky. You never know if an article of clothing is going to fit well, if the coloring will be slightly different than the one shown online, etc. For that reason, savvy retailers get customers to review their purchases. You might have to offer a small incentive to get the ball rolling on thorough reviews (e.g., a 10 percent off coupon for their next purchase), but even in that case it’s still a win because customers have helped to build your credibility and you’ve given them another reason to come back to your store.

A review will tell you much more than a description because it’s from a real person who has experienced the product — e.g., how durable the item is, what it can be paired with, etc. Reviews provide social proof and influence purchase decisions. Ninety percent of consumers say buying decisions are influenced by online reviews. Anyone can become an online retailer and offer products, but only the most trustworthy and consistent will gain a loyal following. A substantial number of positive reviews provides a snapshot of a product’s quality and makes it easier for shoppers to complete their orders, even if there's a cheaper option available.

ModCloth takes it a step further and includes customers’ outfits on product pages to show its products in context. This can give indecisive shoppers an idea of what they could wear with the product as well as how it fits different body types. Needless to say, customer-sourced information is very reputable and can validate higher prices. Therefore, incentivize customers to write reviews.

3. Shipping and returns: Back to the Amazon Prime example. One of the main selling points of a subscription is getting free two-day shipping. While this is a costly perk for Amazon to offer, there are ways that other retailers can make up for the costs. For example, Zappos has significantly higher prices than other retailers, but it offers free shipping and returns within 365 days. There’s a lot more to a purchase decision than just price.

Consider raising prices slightly to absorb shipping and return costs. The right price might be higher than you think, especially because the “right price” is always changing. Amazon is notorious for changing its prices often to improve its price position. It does this via dynamic pricing, which is the process of updating prices based on competitor pricing, supply, demand and other market forces.

Due to the ever-changing environment of online retail, competing solely on price is a slippery slope. Another retailer can easily undercut your price, so it’s important to dispel the myth that the lowest price always wins. By adding value in other areas of your business — e.g., free shipping, an abundance of reviews, a unique loyalty program — it's possible to offer products at higher prices to boost your margins.

Angelica Valentine is the content marketing manager at Wiser, a dynamic pricing engine for retailers.