Battling Amazon

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Abstract

Having been the president of an online retail company from 2001-2019 and owner of a start-up manufacturing company from 2005-2019, I have seen Amazon grow from an online book company to a retail competitor through the years.  Most recently, over the last 5-7 years, I have seen Amazon destroy consumer retail as it was known and understood.  This paper will reflect observations from my firsthand experiences in the competitive battle with Amazon. Competing with Amazon only comes from understanding their successes.

Impact of Amazon’s Marketing Strategy

                Amazon is a behemoth.  There is no question that Amazon has great influence with consumers.  Amazon started as an online bookstore that eventually came to be viewed as the source for all types of books, a testament to the size they achieved.  This first step for Amazon was important in their growth because it resulted in their name becoming a recognizable company in a newly forming venue of consumer retail.  I believe the choice of the name Amazon was ingenious.  It brings forth images a grandeur, as in the Amazon Forest.  It also elicits reference to mythical prowess and greatness as in Amazon Warriors, but most important, it is easy to remember, and it refers to largess.  No one knows the exact strategy that was employed prior to Amazon’s growth but looking back at that timeframe, it was the right strategy because the success that Amazon enjoys stems from those early moves, in my opinion. 

                Successfully naming a company and promoting does not guarantee success.  During this time AOL was another behemoth.  When it first became public, the stock price went through the roof with no reported earnings, that time now being referred to as the dotcom bubble.  AOL had an early vision of what Amazon achieved, a provided, all-inclusive service that controlled the consumer content, email communication and shopping.  Everything was experienced inside the AOL community.  Their plan never crystallized because the consumer at that time still had abundant choices through alternate web search.  Internet shopping was too novel and the discovery of strange or different retailers was novel and gratifying.  Amazon began to offer other products in addition to books (Kerin & Hartley, 2020).   They incorporated and A to Z marketing campaign that set the stage for selling everything.  I remember Amazon being a novelty with a grandiose strategy of competing with everyone online.  Our company did not take it serious as their online platform was archaic in comparison to most other websites, limiting in its technological offerings such as product variances, but the biggest negative for Amazon was a lack of customer service.  During this time (2001-2005), it was still novel that you could be anywhere and order nearly anything and it would be delivered to you…it was almost unimaginable. 

                Amazon’s next step (in my opinion) cemented their success.  As mentioned, Amazon did not and still does not have any knowledgeable staff a customer can call to find out product information, allay concerns of internet purchasing, or simply placing an order with a person to ensure accuracy and reliability of the merchant.  Amazon started to modify their product return policies to a degree that it was a novelty.  Policies that were the norm in online retail, such as restocking fees, no credit after a stated time, damaged items not refunded, customers returning an item and assuming responsibilities for damages in shipment were all the norm, based on covering charges in stocking, personnel, or damaged goods replacement.   Amazon obliterated these concepts so fast and effectively that customers demanded the same policies when they purchased anywhere else.  The final element that changed the landscape was free shipping.

                As people often say, in a perfect storm…it was during this time that the strategies of Amazon were enhanced due to factors in their favor but not controlled by them, the evolution of the smartphone and the popular use of apps.  Consumer purchasing behavior changed with smartphones.  Yes, you could use the internet to access any website, however, due to the apps that were included with the smartphone purchase as well as the ease of acquiring apps, consumers resorted to shopping via apps.  Amazon had positioned itself to have the most customer-friendly policies which alleviated online credibility uncertainty as well as an expanding “stock” of available goods that could be compared by price and searched with ease.  These factors were so important that shopping as a result of product information was nearly non-existent.  Amazon’s e-commerce platform was still archaic in its product presentation ability.  The confluence of these shopping policies, behaviors and ease was cemented with the concept that customer could get the best pricing on most anything at Amazon.  Brick & mortar stores today offer few advantages to Amazon.  This is reflected in the product that many believed would never be bought sight-unseen, the automobile.  Now you can purchase an automobile online, receive it, drive it for a week and return it for a refund.  Conventional stores offer the customer two aspects that are of unique benefit; the touch and feel experience and the I need it now satisfaction when purchasing.  Amazon is trying to combat these last bastions by offering same day delivery in larger cities as well as attempting to control delivery logistics by acquiring the infrastructure to by-pass conventional delivery services, control delivery options and times, thereby saving more and reinforcing their market dominance, called platform power (Culpepper & Thelen, 2020).  The advantages of conventional stores are diminishing rapidly and this in confirmed by an accelerated liquidation of many brick & mortar stores and franchises, competing with Amazon has become more challenging.

Brick & Mortar Stores Reactions

                Some larger brick & mortar stores are fighting the retail creep if Amazon.  We see this mostly in stores such as Walmart, Home-Depot, Tractor Supply, Target, and the larger grocery stores.  They have capitalized on the convenience factor, or the I want it now philosophy.  Drive-up, pick up, and home delivery are examples of new ways they are resisting the allure of Amazon.  Another novel idea that is not new but now more directed towards Amazon is that of price matching.  In the past, price matching was primarily a focus among local retailers, however because local is now re-defined, price matching does occur on core products that bring customers into the brick & mortar stores.  These efforts must be resulting in measurable benefits or they would not be continued.  The increased competition in online retail can be seen in Walmart’s online expansion with free delivery as well as Saturday and Sunday delivery.  Pricing is a very important element and subjective to many.  I believe that there is an attempt to minimize pricing of products and focus on the services surrounding the buying experience.  This makes sense as living by the cheapest price often means dying with the cheapest price.  There needs to be other reasons that customers will repeat business. 

Can an Even Playing Field Exist?

                Amazon has undoubtedly changed the retail landscape.  The business model developed by Amazon has proven itself to slowly strangle conventional retail.  Small businesses cannot compete head-to-head with low margins, selling the same items as Amazon.  Where there is still competition is in manufacturing.  Producing and item creates an advantage that Amazon can only counter with similar products, or alternative choices.  This advantage exists only as long as Amazon does not venture into direct manufacturing competition, such as Walmart does with their Great Value product lines.

                There are ways to compete with Amazon.  The advent of artificial intelligence (AI) is an area that can create value for a small entrepreneur.  AI can be reflected in many areas, however, a smart website that automatically adjusts pricing based on the navigational history, that results with prompts of various levels of discount can secure sales that otherwise might end up on Amazon.  This same AI is most commonly found in a newer developed approach to website content delivery called headless e-commerce (Thakker, 2020).  Headless e-commerce allows a company to advertise across platforms taking advantage of direct customer presentation such as in supermarkets through digital video product presentations.    It also allows for more effective messaging in social platforms.  This is critical as the average consumer relies more and more on social media and apps for products and services than ever before.  Small businesses that do not fully engage in social advertising and awareness as well as involvement with any app available, do so at their own risk.

                                The other area that is growing exponentially is that of direct sales from manufacturers.  Amazon can be credited with this as well.  Middle merchant wholesalers are being squeezed out of the equation due to Amazon.  Amazon has very stiff commission schedules that closely resemble discount rates for wholesalers, leaving no room on the table.  Merchants are being forced to sell on Amazon due to its market share, however, the profit percentages are meager after Amazon gets their commission and fees.  Manufacturers, who in the past discounted their products to trade representatives and then wholesalers, now sell directly on Amazon, actually realizing more profit that they would experience through previous channels.  Manufacturers are also taking advantage of conventional retailers that sell their products in what customers now often exhibit as a shopping behavior called “showrooming” (Shounak et al., 2020).  This is the act of potential buyers looking at intended products in conventional stores to satisfy their purchasing questions, then searching online to make the purchase at the best price.  Savvy manufacturers satisfy those customers by directly offering their products on Amazon as well as other competitive platforms to realize the sales and enhanced profit. Manufacturers are essentially passing off advertising costs that are now absorbed by conventional retailers, reducing their margins even further.

                Amazon is continuing to grow with their product and service offerings that include Wholefoods, Amazon Fashion, Amazon Logistics, AmazonFresh, Amazon Web Services, Amazon Video and Amazon Music.  The immense and sustaining cash-flow of Amazon will allow it to grow into most any field it desires.  Can there be an even playing field, or fair competition?  It is possible, but unlikely and it would depend on the definition of success attained.  New technology or application will be drivers in determining the effectiveness of any given new business model.

 Amazon’s New Technology and Future

                Amazon’s investment into the logistics sector is in my opinion a major move.  If successful, they will be able to operate and control their own infrastructure to deliver what is already considered to be the largest volume of products in the U.S.  This expansion of logistics would then be a small move to being a direct competitor to established residential and business couriers.  It is feasible to see them eventually replacing the U.S. Postal Service given their current trajectory.

                Amazon’s drone delivery campaign may be a precursor to various other business sector ventures such as surveillance, tax assessment, and situational intelligence / monitoring.  The development of artificial intelligence capabilities will strengthen their position and dominance.  Congress has become aware of anti-competition concerns and are investigation many of the larger technology firms with regard to monopoly.  As the consumer relies more and more on their services, Amazon may become more diversified to maintain their current business positions.

Biblical Implication

                Whereas it is possible that Jeff Bezos understood that he should have dominion over the retail landscape, the brick & mortar stores, the planes in the air and the ready to be butchered cattle, and over all the earth, and every available product that is manufactured upon the earth,  the Lord tell us “no man can serve two masters; for either he will hate the one, and love the other; or else he will hold to the one, and despise the other.  Ye cannot serve God and mammon” (Matthew 6:24).  Unfortunately, it is with the passage of time and consequence that one is judged as good or evil. Amazon has achieved extraordinary changes in the retail landscape that could be viewed as positive, they also might in the end be viewed as sinister or self-serving at the cost of others’ hopes and dreams.

References        

Culpepper, P. D., & Thelen, K. (2020). Are We All Amazon Primed? Consumers and the Politics of  Platform Power. Comparative Political Studies, 53(2), 288–318.     https://doi.org/10.1177/0010414019852687

                Thakker, H., Ecommerce PREDICTIONS. (2020, January-February). Information Today, 37(1), 35+.https://link-gale-com.ezproxy.liberty.edu/apps/doc/A611333601/BIC?u=vic_liberty&sid=BIC&xid=150ecd3c

Kerin, R., & Hartley, S., Marketing: The Core, 8th Ed. Published by McGraw-Hill Education, New York, NY, 2020, IBSN: 978-1-260-08886-1

        King James Bible. (2017). King James Bible Online. 

 https://www.kingjamesbibleonline.org/ (Original work published 1769) 

            Shounak Basak, Preetam Basu, Balram Avittathur, Soumyen Sikdar

Manufacturer driven strategic coordination as a response to “showrooming”, Decision Support     Systems, Volume 133, 2020, 113305, ISSN 0167-9236,    https://doi.org/10.1016/j.dss.2020.113305.

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