To Counter Amazon, Retailers Must Meet Scale With Agility and Play Up Unique Strengths

After a year of buying everything from patio furniture to groceries online, consumers are more reliant on Amazon.com than ever, and more positive about the company. For retailers to fight back, they’ll need a two-pronged strategy: meet what are now industry-standard expectations for convenience and shipping efficiency, and spotlight key offerings where Amazon lags.

Even Amazon was overwhelmed at the start of the pandemic last year, when orders for essentials surged 50-fold. Amazon's Prime Day sales event, usually held in July, was postponed until October. By then, thousands of hires and prioritized shipments had helped the company regain its stride, and Prime Day marked the de facto kickoff of the holiday shopping season — contributing to a record year for Amazon.

Pandemic Conquers Reservations About Amazon

A recent survey of more than 1,000 U.S. consumers conducted by Convey confirmed that Amazon usage has soared, primarily thanks to fast, free shipping and Prime. Four in 10 consumers now buy the majority of their goods on the site — growth of 83 percent since the pandemic began.

Perhaps because Amazon has served as a lifeline during lockdown, more than half of consumers now believe the company has a somewhat or very positive impact on retail, an increase of 14 percent from before the pandemic, when 45 percent believed Amazon was a force for good in the industry.

This popularity makes for a challenging environment for independent retailers. Even though 95 percent of survey respondents pledge to support small businesses hurt by COVID-19 shutdowns, just 13 percent always support independents over Amazon. And within that small percentage, 28 percent still report buying at least half their goods from Amazon.

Consumers Focus Even More Narrowly on Delivery

Amazon’s growing popularity is built more than ever on one chief advantage: shipping efficiency. Two of the top three reasons respondents cited for using Amazon are related to delivery: 73 percent said they choose the site for its fast, free shipping, while 67 percent are members of the company’s Prime shipping club, with guaranteed one- or two-day delivery on most items. An efficient site experience is also important, with 58 percent of respondents saying they choose Amazon for its easy and convenient purchase process.

Overall, 87 percent of respondents say delivery is important to the overall online shopping experience — and so far they find local retailers wanting. Higher shipping costs and slower delivery times are two of the top three reasons why they opt for Amazon over local stores, with only item cost outranking shipping concerns.

Efficient Shipping is a Deal Breaker, But Retailers Can Do More to Fight Back

The survey results underscore the importance of fulfillment and last-mile delivery for retailers of all sizes, which must adapt to rising expectations or be left behind. However, they can also proactively highlight other advantages they offer where Amazon has lost ground. The game plan:

• Get flexible with fulfillment. Independent retailers should build flexibility into their fulfillment systems to combat Amazon's scale with agility. The pandemic forced retailers to retool stores as delivery depots and pickup destinations, an evolution that's set to continue. Furthermore, broadening the number and size of carriers retailers work with likewise gives them last-mile flexibility.
• Maximize delivery transparency. Proactive communication about delays and delivery status was the least popular reason to use Amazon, with fewer than one in five (19 percent) saying it's a factor. This translates into an opportunity for retailers to stand out by showcasing excellent customer service and communication.
• Spotlight authenticity and credibility. Amazon's broad product selection, previously its second most popular advantage, dropped by 30 percent into fifth place in the survey. While pandemic-related shortages may be easing, the low score may also be driven by Amazon's increasingly prominent struggles with counterfeiters, which independent retailers can counter by emphasizing availability of authentic and unique goods. Similarly, badges and other verification emphasizing the authenticity of product reviews and user-generated content can help retailers stand apart from Amazon, which suffered a drop of nearly 20 percent in the popularity of its reviews. Headlines about fake reviews and an increasing number of sponsored product placements in recommendations may be impacting the value of these site features.
• Develop and promote a sustainability strategy. Positive sentiment about Amazon's impact on the environment has jumped by 36 percent, however, consumers who believe Amazon is good for the planet are still decidedly in the minority, at 36 percent — leaving more than 60 percent who believe Amazon's environmental footprint is harmful. If they haven't already, independent retailers should devise organizationwide sustainability strategies and promote them heavily, whether by emphasizing responsible sourcing and labor practices, offering "green" delivery options, or using low-impact packaging.

Amazon's dominance has only grown during the global pandemic, thanks to its ability to fulfill consumers' single-minded obsession with shipping efficiency. Independent retailers can compete by pairing fulfillment agility with initiatives to promote authenticity and sustainability — moves that not only help them compete against Amazon, but prepare them well for the challenges of 2021 and beyond.

Carson Krieg is co-founder and director of carrier operations at Convey, a leader in delivery experience management (DEM) solutions.