Amazon has had a good run, but it may soon come to an end.
That may seem like an outrageous statement. After all, its market capitalisation hit $1 trillion in 2020. The coronavirus has led to an unprecedented demand for its services. According to a Sky News report from the beginning of May 2020, they were compelled to hire 175,000 people just to serve their customers through the pandemic period.
A small business may feel compelled to use Amazon to sell their products. Often, businesses have been pushed to lower their prices because they were competing directly with the Amazon price. Amazon apparently not only controls the marketplace, it’s a competitor to any new entrant.
Furthermore, Amazon can subsidise its low prices via selling Amazon Web Services (AWS); Business Insider reported in April that AWS generated more than $10 billion in quarterly sales for the first time ever.
It’s no wonder that antitrust regulators across the globe are circling around Amazon: how much market power is too much power? Proposed solutions include forcing Amazon to sell off AWS.
Amazon’s leading position may have made it complacent. Small and medium sized merchants now have alternatives, such as UENI.
UENI offers a free website built by human beings for small businesses. It offers integration into e-commerce tools for those who wish to sell their goods and services online. It does not charge commissions.
Being a small business itself, it has an intimate understanding of how small businesses operate and has tailored its offering as a result. Despite being small, its footprint is global: it has particular expertise in US, UK, Indian, Australian and Latin American markets.
Anyone who sells without the benefit of Amazon will face the following problem: just as the go-to place for search is Google, the first instinct of many shoppers is to go to Amazon. Some merchants have bowed to this fact: for example, Richer Sounds, the stereo and television retailer, often sells its wares on Amazon. However, it has to constantly compare its prices to those Amazon has on offer.
Not using Amazon means a greater investment in marketing: however, UENI and other competitors to Amazon are working with its customer base to help them advertise themselves, for example, by aiding their entry into Google My Business. Furthermore, UENI have stated they will substantially increase their content in order to facilitate customer success activities: for example, providing advice on creating robust business plans.
Amazon’s bulk may be its undoing. A site in which it is possible to find everything may also be a site where anything can be lost in the mix. A generic term like “wood glue” will bring up a lot of pertinent results, instantly. However, look for something more niche, such as spare parts or specialised tools, and the search may be more problematic.
Furthermore, Amazon is not always price competitive. In the UK, Amazon recently closed it’s “Amazon Pantry” service which delivered groceries; in many respects, its prices were not comparable to those in supermarkets. It was forced to work with Morrisons, an established supermarket.
A less gargantuan merchant may find that occupying a niche is the way to go: a good example is Presto Classical, a retailer from Leamington Spa which sells sheet music, classical and jazz CDs.
Because of its focus, Presto has been able to develop relationships with classical music magazines to market its wares.
Second, it is in a better position to promote individual products via a newsletter and its website.
Third, it offers niche products which often Amazon struggles to provide: even Amazon cannot sell everything.
Fourth, it has a rolling series of special offers which run over a period of six weeks: one record label or type of classical music are given discounts. It also incentivises pre-orders through offering discounts. These discounts also make Presto price competitive with Amazon.
Fifth, to mitigate the competition provided by free shipping on Amazon Prime, it offers no-cost shipping for orders over £25.
Sixth, where possible, it has also offered digital products, i.e. digital music downloads.
Seventh, it reacts in a timely manner to events in the classical music world; for example, when the Polish violinist Ida Haendel died at the age of 91, Presto published an obituary which promoted CDs featuring her beneath the text.
Finally, it also has developed exclusive content which shows an intimate understanding of the products it sells; it often publishes music reviews and interviews. It also features a “CD of the Week” with an explanation as to why the work deserves this accolade.
All these measures have the effect of building confidence among its potential customers.
Despite the competitive pressure constantly exerted by Amazon, it has survived. Not all these tactics and techniques will be available to small and medium sized merchants, but the example provided by Presto shows that it is possible to inhabit a niche, develop it, and compete directly with Amazon.
This is one market, one small retailer; what it highlights however is that Amazon may be spread too thin to show the niche understanding of products which customers appreciate. Even though Richer Sounds competes with Amazon, and is not always successful on a price basis, nevertheless it continues to operate: it is the specialist understanding and its willingness to recommend packages that may be the key to its success.
Amazon is undoubtedly one of the great e-commerce success stories. It has earned its stock valuation. However, things pass, tastes change. We have become used to the convenience of having everything under the sun available via e-commerce, at a low price, and accompanied by free shipping. However what Amazon may not offer is the rich customer experience which more specialised merchants can provide; the likes of Presto and Richer sounds do and survive. A small business can work with partners like UENI to step up their game; that, along with getting closer to their customers, may mean that the fall of Amazon may come sooner than everyone thinks.
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