For years, we’ve been insulated from the hyper-successful Amazon behemoth – out of their reach; across a vast ocean; with a population small enough that we have economies-of-scale too small for Amazon to really care about.
And it’s no surprise that most Australian ecommerce stores are nervous about Amazon’s entry to the Australian market.
But the truth is – even in the USA, where Amazon already controls 43% of all online retail sales – there are ecommerce stores that are surviving, and indeed thriving.
It’s All Because Amazon’s Biggest Strength Is Their Biggest Weakness
One of the reasons why Amazon is so successful is because of their results-focussed culture.
Good ideas are tested at scale – and live or die by their results. And they have the scale to test a lot of ideas quickly.
They way they do it is the same way I work with ecommerce and online lead-generation websites here in Australia.
You begin with some good ideas around what could potentially increase sales for me, based on my codex of past successful results.
Then you mock them up on the website; and test to see how real users respond.
Do real users buy more when they see Version A of your website? Or Version B?
If you know what you’re doing, you run the numbers, and make sure that your results are statistically valid and likely to continue performing at the same rate into the future.
Then you repeat the process – and keep building on the lessons you’ve learned from the feedback the market has given you – and keep building building your profits.
For my niche ecommerce clients, it’s common for them to achieve 10-50% improvements in sales from the first round of website tweaks. This can mean $100,000’s to $1,000,000’s per year in additional revenue.
For Amazon, their scale $136 billion USD in revenue in 2016 means a tiny 1% improvement could add over a billion dollars in additional revenue – more than the entire GDP of Vanuatu!
By measuring and following what works, Amazon has been able to test sometimes crazy ideas, and massively increase their profits. In recent years, they’ve tested a wide variety of business model tweaks:
- The layout of search results, and product pages;
- The use (and targeting) of personal recommendations;
- Prime (fast-free shipping service);
- Prime Video (video streaming service)
- Echo (voice activated digital assistant)
- And the Amazon Fire Phone, Tablet and TV
Some of these tests have led to windfall gains – such as Amazon Prime and Personal Recommendations.
Others have fallen short – like the Amazon Fire Phone – leading to either investment-cuts, or strategy-pivots.
And it’s a strategy that can work very well for all businesses and ecommerce stores – yours included.
But when you have the kind of scale that Amazon has, it very easily leads to “blind spots”.
Amazon is a single portal used by a diverse range of shoppers – from tech-savvy early adopters of new technologies, to redneck NASCAR fans, to elderly folk simply wanting pet food delivered.
Yes, Amazon’s great strength is testing ideas at scale.
But because Amazon is testing their ideas on a mass audience, what “works” for Amazon is simply what what the AVERAGE Amazon visitor responds to – not what a specific subsegment of users will respond to.
This means they can only achieve “average” results for any particular segment of their user base.
And this is where smaller, more agile, niche-market-specific competitors can easily slay the Amazon behemoth.
If Amazon was a big box grocery mega-store – with aisle after aisle packed with every canned and packaged foodstuff you can imagine…
Then Amazon’s successful competitors will be the amazing deli, the high-end health food grocer, the restaurant, the weight-loss or weight-gain ready-made-meal and supplement store, and the place that sells that rich dark chocolate that is to die for.
These are the places where customers go to buy outcomes or experiences – not just food.
These are the stores that often develop their own communities and followings – rather than relying on convenience or price.
These are the stores that can afford to sell at higher margin – rather than selling commodities.
Scale is Amazon’s biggest competitive advantage.
But scale is also Amazon’s achilles heel.
It focusses Amazon on what appeals to the masses – and prevents them from serving niches well; helping people to achieve outcomes that appeal to deeper (non-mass) values than price and convenience; developing a sense of community; or even developing a website that appeals specifically to subsegments of the market.
So, if you’re concerned about Amazon taking over your business – then focus in the areas where Amazon struggles: Community; Niche Appeal; Optimisation; and the Outcomes your customers value.
P.S. This month I hired a new programmer to help me implement more tests like the one above for clients.
It means I have capacity to work with five new clients over the next five weeks.
If you’d like to work with me, and increase the number of Leads and Sales you generate online without spending more on ads or traffic – let me know here.
I can’t guarantee a 605% increase in revenues like I achieved for Nando’s; a 47% increase in sales like I achieved for a large ecommerce store last month; or even a 20%+ increase in leads like my recent blog post.
But I do guarantee that your investment in me pays for itself in the first month – or you don’t pay a cent.