Can Retailers Bridge the Amazon Gap?
Brands that are able to convey accurate expectations of product availability and delivery windows can win customers and gain market share, according to Dynamic Yield.
While Amazon continues to do massive amounts of business during the coronavirus pandemic, the company has also fallen short on the quick deliveries and competitive prices for which they are known. With so many quarantine consumers looking for alternatives to meet their needs, can bands capture new audiences?
Despite all the challenges brands and retailers are facing, it is also an opportunity for brands to reposition themselves in the market. “It is vital to remember that the golden rule still rings true: Think about the customer first,” said Nathan Richter, vice president of strategy and Insights at Dynamic Yield. “If organizations root their business and marketing decisions in how they can help the customer, they will fare better in the end. We have yet to see what the ‘new normal’ looks like with consumer behavior, but brands that can interact accurately and meet a different set of expectations provide the most valuable thing we as consumers can have right now: some level of certainty.”
Here, Richter talks to WWD about an emerging gap created by Amazon, disruptions in retail, opportunities for growth and how companies can effectively restructure for a post-COVID-19 world.
WWD: How has COVID-19 created a unique disruption in retail?
Nathan Richter: Disruption has come at retailers from all angles as a result of the COVID-19 crisis. In other times of disruption and downturn, there is an element of singularity in an organization’s response, in which it needs to dial down operations across the board — an organization-wide trimming. What makes the COVID-19 crisis so complex for retailers is that each part of the organization has been affected differently.
The common dilemma here is the issue of whether to close or re-architect the store experience. This initially meant ceasing most, if not all, in-store operations. Conversely, the digital side of the business is likely to see increased demand. So, the largest part of an organization’s business is grinding to a halt, while it simultaneously figures out how to increase capacity and operations on the digital side.
The other issue that we see arising directly as a result of the crisis is a shift in consumers’ merchandise demand.
While there is an uptick in transactions and traffic, in many cases it is focused only on a subset of the product catalogue. Merchandisers are now in a quandary where they are managing two different catalogues: those products that are moving faster with greater demand and those that are moving slower or not at all. Organizations now need to determine how to increase capacity in certain segments of their logistics and supply chains while liquidating other parts.
WWD: Has coronavirus’ impact on Amazon created an opportunity for other retailers?
N. R.: While we know Amazon is doing a massive amount of business, they are also unable to deliver on their two usual market differentiators: price and delivery certainty.
The natural balance of their marketplace is to create low price points. The increase in demand in certain categories has had the opposite effect and we are actually seeing higher prices on standard items. This appears to be the result of now limited “vendor” suppliers, who often fulfill orders from the same manufacturer or drop shipper, and in many cases, variable pricing that will push pricing limits up if demand stays consistent.
On the shipping side, the sheer volume of orders has basically broken the Amazon Prime two-day delivery model. While part of Amazon’s inherent value is owning the delivery supply chain, the COVID-19 crisis is exposing there is a limit, at least currently, to that scale. Whether its Amazon’s warehouse safety and pick, pack and ship times that are to blame, or its last-mile van capacity from warehouse pick-up to customer door dropoff, Amazon is now providing a delivery window, which is an entirely new concept for Prime members. The capacity issue is exacerbated by Amazon’s recent policy of prioritizing its list of “essential” products for quicker delivery, which doesn’t take into account a likely customer value score that is determining customer fulfillment priority.
WWD: How can brands position themselves as viable alternatives to Amazon and stand out to consumers to capture demand and close the Amazon gap?
N.R.: Brands and retailers have a chance to grab some of this market demand by comparing and highlighting where their price or service features are actually better than Amazon’s. They should adopt and implement messaging in their stores to show a comparison of their product pricing versus what consumers would pay for the same products on Amazon. One way to do so would be to highlight their own ability to pack and ship on the same day or display delivery windows that are more precise based on arrangements with their fulfillment partners and then deliver accordingly.
Amazon’s COVID-19 woes have turned expectation into a new currency that retailers can use to start or strengthen their relationships with customers. While these Amazon issues will dissipate over time, they have certainly created an opportunity for retailers to capture demand and close in on Amazon, and, if done well, retailers can make lasting impressions on consumers that will carry over post-crisis.