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While no one is suggesting that Amazon is down to its last few cents, its most recent financial figures (released February 2022) indicate an e-commerce vulnerability that hasn’t been there for years or even decades.
Overall fourth-quarter sales for Amazon in 2021 grew 9.4 percent, the first period of single-digit growth since 2001. Even these relatively modest numbers were mostly attributable to the success of AWS, Prime, and Amazon advertising, the latter of which Amazon published financial figures for the first time.
When one focuses solely on Amazon retail, the numbers are even less impressive. North America saw growth of just 9.3 percent from Q4 2020 to Q4 2021, while internationally, there was actually a decrease of 0.5 percent.
For other retailers, the online giant’s less-than-impressive recent numbers means there is an opportunity to claim back market share that many thought had been lost for good. How can they go about such a challenge?
Owning Customer Access
The key point to make is that many retailers sell products via Amazon as well as their own sites. They need to come away from the Amazon ecosystem completely. Whenever a retailer sells via Amazon, they become nothing more than a logistics company offering a product for the best price. With this model, it doesn’t make any sense for the standard brick-and-mortar company or online retailer to think of hot and cold funnels or customer journeys.
The classic retailer doesn’t have its old role anymore in this new world. Retailers need to fight for customer access and become the go-to portal for specific customer problems. If they don’t own customer access online, they become just a logistics mechanism for Amazon.
Owning that customer access therefore becomes hugely important. And the ownership of customer access only can be done by delivering a compelling and personalized customer experience. This is determined by how a retailer is selling, not by what, and 90 percent of that is due to extreme, friendly personalization – rolling out new features, talking to the customer via their preferred medium, or giving out individual prices or offers that are unique to the customer. As a result, technology becomes a driver of differentiation.
Rapid Adaption is The Way Forward
Think about customers who refuse to buy from Amazon for ethical reasons, for example, or customers who want greener, more differentiated, more organic, or better-sourced products. They are the market that Amazon can’t help and another company could.
To help get there, retailers must avoid monolithic systems that make assumptions about their business model before bringing any actual e-commerce campaign to life. Those systems were never meant for rapid adaptation to changing circumstances. They are suited to environments where planning is key. But right now, rapid adaptation is key to making the most of Amazon’s faltering financial performance.
Finding E-Commerce Success
Amazon will continue to do well, of course. But make no mistake, it’s vulnerable right now. And all its revenue streams – AWS, advertising, Prime – are dependent on a strong core business, they are all interconnected. There is far less incentive for merchants to spend money on the Amazon advertising platform, for example, if the customers are not there.
If Amazon retail cannot turn itself around, then other elements of the business will eventually struggle, too. Retailers can capitalize on this window of opportunity by providing greater personalization via rapid adaption. For true e-commerce success, retailers should be bold and sell via their own platforms.
Alexander Graf is co-founder and co-CEO of Berlin-based marketplace experts Spryker and author of the bestselling book, “The E-Commerce Book.”
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