How to Compete with Amazon

One question I hear a lot from folks who are just starting out in e-commerce, or are looking to expand what they'd been doing in e-commerce so far, and are just coming to grips with the sheer scale of Amazon's operation.  Now, for the purposes of this discussion, let's assume you're not going with the "if you can't beat 'em, join 'em" strategy, and jumping onto Amazon's marketplace.BezosWhy?  There are a few very good reasons to carefully consider whether you should participate in their marketplace.  First, if you are in a price competitive vertical, their fees can very well eat up most or all of your margin.  Don't forget--you can't make up a loss with volume.  Further, if you're a pure retailer (ie. you don't control the brand on the box), there's nothing stopping Amazon from watching the unit velocities of your most successful products, buying a few containers of their own, and making all of the margin themselves.

They're not even shy about it.  If you're a retailer, Bezos has already declared war on you, whether you realize it or not.  The fact that you're augmenting their catalog and fulfillment is a temporary measure at best.  Once they've picked all of the juiciest products from you, they'll be happy to let you continue to source the least profitable, least convenient corners of the retail ecosystem for them.

Now, starting in the corners of the retail ecosystem where Amazon wouldn't want to be is a viable strategy, if you're intentionally and methodically targeting that niche.

Sell things they can't sell easily

The first thing you can do is sell things that Amazon can't sell easily. Amazon survives off of selling commodity products. These are things that are the same no matter what site they're on, so Amazon can always just beat on price and name recognition.

Now if you're focusing on products that have a certain amount of specialty knowledge required, that gives you to opportunity to be the source of the information that the customer is looking for during their research phase and be in front of them well before Amazon.

Sell things they can't sell at all

Another thing you can do is sell products that Amazon can't sell. If you create or manufacture your own products, then Amazon can't follow you. Sometimes white labels or exclusives can work but you still risk pressure from comparable products, especially from the same manufacturer. However, you could consider packages, bundles, or other ways you can offer deals that Amazon can't copy directly.

Sell things they won't sell

You could sell things that Amazon won't sell. For example, anything that doesn't really fit into the logistics pipeline they've built. If it doesn't ship easily using FedEx, UPS, or USPS, then there might be an opportunity there. Volatile chemicals, for example, can't generally be shipped the same way a laptop can due to safety and regulatory reasons. If you have a distribution system that is different enough from Amazon's, that alone can be a competitive advantage vs. them.

It doesn't need to be something that's literally dangerous to handle in order to take advantage of this angle. The most common type of product that I've seen successful in this way is something that requires a good deal of customization. One example of this is Canvas on Demand. They're a site that takes a digital photo and prints it on a canvas for you so that you can frame it like a painting. There's no way that Amazon currently can compete with that.

Focus on loyalty and quality of service

Now if you already have a preexisting business that's established that Amazon is a growing threat to you, you may have to defend the castle on your core products while nurturing new business in some of the ways that we've already discussed.

The first way to go head to head with Amazon is to focus on customer loyalty through quality of service. If your customers know your company's name off the top of your head, you're doing pretty well. If your customers know the name of a person at your company that's taking care of them and that they trust, then you will win.

Focus on providing valuable content

Another way to focus on loyalty is through providing valuable content. If your email program is helping, entertaining, or informing your audience, then you'll have more than enough opportunities to offer your products to customers in a context other than commodity price comparisons. An example of this approach is ThinkGeek. Even if Amazon carried every single product that ThinkGeek had, the context of that shopping is different. There's a shared joke between the customer and the company at that point that Amazon's not going to be able to emulate.

The fact that they use product action shots with customers submitting photos of them playing with these toys, they're using the products, is completely different than product reviews on Amazon. In fact, Amazon's product reviews are more often shared as a parody. These shared jokes and cultural references establish a relationship between the shopper and the store that is going to be completely different than what Amazon's going to try and do. Effectively, Amazon is a lot like a Walmart online. There's not a lot of personality there, and nor should there be. They're trying to be all things to all people.

What this does mean is that if you're able to establish a personality for your brand that is something that the customer is going to relate to, you're going to have an advantage over Amazon. Now that personality doesn't necessarily need to be one of humor like ThinkGeek. That personality can be one of expertise. If you're providing expert content that helps people understand the product better or helps them improve their lives, you're going to see that same kind of loyalty build up over time.

Focus on getting in front of your customers first

The best way to compete with Amazon on a product for product basis is a lot like I was saying in the first tip: crush them higher in the funnel. Get in front of those customers when they're still in the research phase and you won't have to compete with Amazon because the customer will already be familiar with your brand and the product in the context of shopping with you.

If you're trying to do this with something like Google AdWords or other PPC efforts, this can be a very expensive proposition. This is because there's a very low conversion rate on traffic that's still in the research phase. Things like PPC work very, very well if the customer's about to buy anyway and they already know what the product is that they want. They already know what price they are expecting to pay. Then it's just a matter of getting it in front of them.

However, when you're playing for content there's an initial cost of producing that content, be it writing a blog article or producing a YouTube video or anything like that, but after that initial cost there's no ongoing cost for additional traffic. It's low converting generally, but it is low cost as well after that so it ends up working out very, very well.

You end up with a snowball effect because every piece of content that you produce contributes to your long-term success, not just that click to that conversion. That snowball effect is what's going to help you build authority, and I mean that both in terms of the customer's perception of you, but also in Google's perception of your domain authority. This is a lot like the first tip, like I said. However, it is harder because you're actually trying to compete with Amazon on their home turf, a commodity product. The way that you're going to be able to do that is by building this reputation, building this authority, building this body of content that attracts people to you before Amazon.

The good news is that while search engine optimization does take work, it's not that technically difficult after you get some basic fundamentals down. If you're using a framework like Shopify or something like that, a lot of those gritty technical details are more or less taken care of for you. From there it's more about how you use the tool than it is the tool itself.

Rand Fishkin's Whiteboard Fridays are both a great example of content marketing, and explain how to do it well!

I highly recommend watching Whiteboard Fridays from Moz. They do an excellent job of breaking down strategies for making sure that the impact of your content is as high as possible when it comes to your placement in the search rankings. Further, Whiteboard Friday is sort of a great gateway drug to other Moz content. They have a lot of great blog articles. They get as technical as the statistics and correlation studies behind their claims, to community articles as well. It's really something that you should take a look at. If you're going to try and use this strategy you're going to need to teach yourself how to be good at writing rich content that's easy for customers to find through searches.

There you have it!

That's six tips for competing with Amazon if you're a small e-commerce site.

Have questions?  Drop me a line via the Contact form--I love to talk shop.

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