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5 tips for competing with Amazon

You have probably heard it. The Amazon rocket has refueled and is heading North with our Swedish neighbors as the first stop. A worthy competitor will soon meet the Swedish retailers, and the Danes should certainly not expect to avoid a visit from the Amazon rocket. Most probably, the rapidly expanding online chain will soon open its doors to the Danish market.

By Søren Brammer Riis
Retail · e-Commerce

In the US alone, Amazon has gone from a 34% share of the retail e-Commerce market in 2016 to 47% in 2020, and in 2021 it is expected that Amazon has taken over 50% of the market. In Amazon, the expansion is racing, and with that in mind, it will probably not be long before Amazon.dk is a reality.

Regardless of whether you sell products on- or offline, with Amazon's entry into Denmark, you will have a new, major competitor. No matter your industry or the size of your business. Amazon sells everything.

Several Danes are already Amazon customers. Surveys from Retail Institute Scandinavia show that 70 percent of Danes know Amazon and 30 percent have already shopped at the successful chain. According to Retail Institute Scandinavia, it is primarily in the categories "books", "electronics", "things for the home," and "computer and video products" that Danes purchase at Amazon. Danes choose to shop at Amazon primarily because of their large selection. It is estimated that the giant has over 310 million products, which is almost impossible to keep up with.

While the idea of a new giant competitor may seem scary, Amazon is certainly not impossible to compete with. It is about differentiating and taking advantage of Amazon's weaknesses (yes, they have some of those). We have listet 5 great tips on how to compete with Amazon.

1. Prioritize the customer experience
2. Use your brand and aim for niche markets
3. Do not compete on price
4. Focus on customer retention
5. Offer free and easy delivery

1. Prioritize the customer experience

Without a seamless customer experience, it is not easy to compete with Amazon, which is indeed a role model when it comes to creating a successful omnichannel strategy. To ensure your competitiveness, it is crucial that you, like Amazon, offer your customers a seamless, consistent, and personalized experience, no matter through which channel or device they interact with you. Do you want to know more about what omnichannel is and entails? Read here and get in-depth answers to the question: What is omnichannel? 

In addition to being successful with omnichannel, Amazon has a solid mobile presence, which is incredibly valuable today. According to retail.dive.com, approx. 49 percent of all e-Commerce purchases will be through a smartphone in 2020. Therefore, it will be an excellent investment to expand the business with a mobile presence in the competition against Amazon.

Now, we have clarified Amazon's strengths and how to compete with them. It is even more interesting, though, to look into the areas where you can surpass the online mastodon. One of Amazon's weaknesses is its user interface - what you visually encounter when you shop at Amazon. The goal of selling more than 400 million products under the same digital roof has resulted in an outdated, cluttered, and overwhelming visual customer experience. With a focus on delivering a cleaner, simpler, and more manageable design, you can create a better customer experience than Amazon.

2. Use your brand and aim for niche markets

When it comes to providing customers with a large number of options, low prices, and free delivery 24/7, Amazon excels. At the same time, by guaranteeing secure payment options, easy regulatory options, and showing reviews from customers who do not have a hidden agenda but want to help and advise fellow consumers, Amazon has built trust among its customers worldwide. Amazon thus takes the gold medal in both selection opportunities, price, and convenience.

How do you compete with that? Let us look into Amazon's weaknesses once again. Amazon is the webshop that has it all. You can find everything from socks to TVs - the list is endless. However, Amazon has made it difficult for customers to distinguish between the different brands, and most products have been commercialized under Amazon's brand. This means that many of Amazon's products are perceived as "brand-less". Therefore, with a unique brand, you can create a competitive advantage in relation to Amazon.

Amazon is versatile but has no particular expertise in one area. With a brand that illustrates expertise, you can surpass Amazon. Aim for a niche market where you can gain a reputation as the most informed and go-to provider.

Focus on communicating your brand's expertise through product descriptions and content. That way, you can illustrate your authority and build consumer confidence. Amazon cannot compete with the expertise of a company in a particular niche. With consistent, high-quality content that represents your expertise, you can surpass Amazon. For example, the company Skandinavisk that sells scented candles, fragrances, and body care. Unlike Amazon, they attach a story to each of their products on their webshop, which illustrates their knowledge of the product and what work has been put into developing it. It gives the customer experience of, Skandinavisk as a credible and severe supplier.

3. Do not compete on price

Most likely, you will never experience the same production benefits from economies of scale as Amazon. Therefore, it is not a viable solution to start competing on price. Instead, you can offer your customers unique products that are difficult to find elsewhere. For example, exclusive products in limited numbers or products only available to customers who have logged in to your webshop. Other alternatives are pre-orders or a bonus on a purchase over a certain amount.

You should consider implementing a loyalty program where your most loyal customers will experience benefits like reasonable offers, pre-access to products, etc. In addition to a "Prime membership" program, which customers pay for themselves to be a part of, Amazon has no loyalty program. Customers who shop more often or fill their baskets with more items do not experience more benefits.

4. Focus on customer retention

Many believe that the key to success lies in acquiring new customers. This is true to some degree, but the focus on new customers must not remove the focus from existing ones. Compared to new customers, existing customers spend more money. A customer who has purchased an item in your webshop is already familiar with your brand and your products. It is therefore much easier to sell to them again, rather than someone who does not know who you are or what you can offer. Surveys show that you have up to 70 percent greater chance of selling to returning customers. In comparison, the chance is only 5 percent for new customers. Returning customers are 50 percent more likely to try new products and spend 31 percent more money than new customers.

Again, we want to strike a blow for loyalty programs. With a loyalty program, your customers get benefits that strengthen their incentive to return to your business. As previously mentioned, Amazon has a loyalty program for "prime members", but it is up to the customer to pay. You can, with advantage, offer a free loyalty program to compete with Amazon. Tailor your loyalty program ambition to your resources and finances.

5.  Offer free and easy delivery

Today, the online shopper expects a fast, easy, and free delivery. Many studies show that convenience next to price is the most crucial factor for customers. To compete with Amazon and other e-Commerce businesses, you have to offer customers free delivery, the ability to track the delivery and return their purchased products quickly - also for free. With free and easy delivery, you will not necessarily surpass Amazon, but it will be difficult for you to be competitive without offering your customers this.