Welcome to Part 3 of our series Beating Amazon: How the Independent Retailer Can Overcome Retail’s E-Commerce Giant

To jump to Part 1, click here and find out the one thing that is Amazon’s biggest strength and also it’s biggest weakness.

If you missed Part 2, you can click here and see the results of the most recent U.S. Department of Commerce study on E-Commerce and total retail sales.

So far, we’ve touched on two very important points that are critical to understanding Amazon’s current business model:

1. The face of Amazon is not a physical business or group of people, it’s a website.
2. Amazon is built on a specific business model – ECommerce.

We’re now going to take a look at the type of shopping that Amazon really excels at…

Bargain Hunting

There are many incredible E-Commerce-based companies out there today, from Alibaba and E-Bay to some exciting newer companies like thredUp or OfferUp.

These all serve a specific niche fairly well. Someone who likes a Craigslist-style purchasing experience typically likes OfferUp. It works especially well for local communities under 100,000 people.

ThredUp works well for people who like the thought of staying fashionable while also being able to effectively re-cycle their clothing. All that can happen affordably and without the more traditional practice of buying brand new clothing and donating your old clothing to Goodwill.

Amazon has arguably the most comprehensive platform in the market today for shopping. You can buy just about anything from Amazon, including this $40,000 comic book. But Amazon, just like any other business, does some things better than others. It still has it’s biases…

Amazon’s Specialty

Amazon excels with clients who comparison shop for the absolute lowest price and shipping. Their scope of vendors and clients is so vast that they have an unparalleled range of options for the consumer, all in one place. You can be fairly confident that you’re getting a decent price for an item if you’re price shopping on Amazon.

But what might you be missing?

Let me suggest three things:

• High-end or customized merchandise
• The quality of the company on the other end of that product.
• Personal relationships with individual companies that pay off in the long run.

The customized product (and experience)

Is there a market for location-specific jewelry? (I’m thinking of the little shops you see in tourist towns) Is there a market for restored classic cars? Is there a market for products that can be specifically tailored to your individual needs or tastes? Is there a market for high-end designer products that require the expertise of a true product expert? You get the idea…

I was in San Diego a few months ago and stopped by the art studio of Aaron Chang. He’s a highly acclaimed fine art photographer whose work is truly incredible.

As I wandered through his studio, I was blown away by the incredible artwork around me. This wasn’t just photography, it really was art. The studio was elegantly but simply designed, and each piece led you to another. The studio is small, but by the time you had made the trip through his semi-circle of artwork, you really felt like you had experienced his artwork. It made you feel like you had connected with him as an artist.

I’d encourage you to check out his work here. (We aren’t affiliated in any way, I just think it’s great work). Their website is great, but nothing compared to visiting the studio in person.

Now imagine his artwork on Amazon. Do you think I’d get the same experience, let alone want to actually purchase anything from him if I saw it on Amazon? Probably not. It looks like a really nice image on Amazon. But there are millions of really nice images on the internet. That’s where Amazon can’t (at least currently) effectively transcend the market barriers in Aaron Chang’s space.

The quality of YOUR company

“OK great,” you say, “but I don’t sell high end artwork. I sell retail items. What about my business?”

That brings us to our next point: it’s hard to accurately judge the quality of a product when you don’t know the company behind that product. The higher the price for the products, the more this matters.

As an example from American Retail Supply, let’s take ribbons. Simple little ribbons that you’d put on your products to make them stand out.

You can compare two ribbons that seem absolutely identical on Amazon. Same color, same size, same amount of material. But one is priced a little higher, and another is dirt cheap. It seems obvious to go with the cheaper one, right? The more expensive one might just be made by a company who can’t control their costs as effectively, so you should just go with the better deal, right?

Not always. Some ribbon manufacturers, especially with imported ribbon, will blow air into their ribbon, making it thinner and feel cheaper. Or they might make wraphia and use less material between each weave, making the wraphia look cheap and messy, completely negating the effect of having a bow or ribbon on your product in the first place.

Trust isn’t something that can be quickly and easily ascertained in the retail market. It’s earned.

Buying every product, even “commodity” products off of Amazon is not always as simple as it may appear. It’s still well worth it to a lot of your customers to KNOW that the product they are getting from you will be consistent with the standards they’ve come to expect.

Taking the long view

This leads to our final point, which is that a personal relationship with a specific company can pay off in the long run. Why? Well, the obvious answer is trust.

Businesses (especially businesses that are not competing with each other) thrive when they operate in a sphere of trust. That’s what business law is supposed to promote – you can trust that everyone has to play by certain rules, so you make decisions based off that trust.

The same is true in the B2C environment. If someone trusts your company in the small things, they’ll be much more likely to trust you when their big projects come along. Consumers do value price. They place a huge emphasis on it, and no one is saying that you shouldn’t pay close attention to your pricing structure.

But customers also care about a number of other factors, like customer service, consistency, speed, quality, accurate and timely advice, honesty, and a myriad of other traits that make you stand out from the competition.

We’ve talked a number of times about McClendon’s hardware stores. they are a chain of hardware stores that pride themselves on their selection and customer service. I’d rather go to that store, talk with an associate who is truly knowledgeable about projects and products, and then pay a little extra for my parts, knowing that I received the valuable add-on’s of expertise and customer service. I have absolutely no problem paying a little more for a commodity product, knowing that they have to mark up their products a little bit more in order to cover the cost of having qualified, knowledgeable product experts on the floor.

So what now?

There are a few things I’d recommend as we wrap up this discussion:

• It’s not a problem to gently remind your clients of these distinctive traits of your business every once in a while.  Send them an email, write them a card for Christmas, or put a flyer at your checkout counter.
• Don’t get caught up in the race to the bottom of the pricing war.
  • Review and periodically adjust your pricing as needed. But don’t race Amazon and everyone else to the lowest possible margin that you can stand (or sometimes lower than you should be willing to tolerate). Have some reasons clearly articulated to your staff about why your pricing structure is the way it is. That way, it’s easy for them to explain to clients who ask questions.
• Take a look at your product selection and ask this question: “Are we doing everything we reasonably can to offer our customers a way to tailor this product experience?” More options means casting a wider net. Don’t overextend yourself, but this exercise helps you to find any overlooked product opportunities that you might be missing.

For an example of a high-end store that is doing extremely well in this regard, tune in to our next Retail Tip of the Week. You can subscribe by filling out the short form below.

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