According to Amazon CEO Jeff Bezos, “Our customers are loyal to us right up until the second somebody offers them a better service. It’s super motivating for us.”1 That motivation appears to be fueling Amazon, turning it into today’s largest online retailer. Since its inception in 1995, Amazon has redefined the way people shop, forcing other retailers to rethink their marketing strategies in order to stay competitive and maintain their share of wallet. Below, we dive into Amazon’s general objectives, plans for this year — and what retailers like you can take away to bolster your own strategies.
Amazon’s Goals and Objectives — and What It Means for Retailers
In a letter to shareholders, Amazon outlines the four principles that guide the company: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence and long-term thinking. In both their online and physical locations, the focus is on selection, price and convenience. One key differentiator? They don’t stress about competitors as much as they are hyper-focused on their customers.
Last year, Amazon’s retail strategy was dominated by its acquisition of Whole Foods and a nationwide search for a second headquarters — all while continuing to focus on increasing its customer base with both online and offline shopping experiences. Here’s an overview of Amazon’s strategy in 2019, and what retailers can learn.
The physical store format continues to be a success for Amazon, seamlessly integrating offline shopping with the benefits of amazon.com. Inventory varies by location, based on customer data, reading habits and recommendations. In addition to books, the most highly rated devices, games and toys are also available for shoppers to try out in-store. Another unique Amazon marketing strategy? No prices are displayed. Instead, shoppers use their phones or in-store kiosks to check prices, further enabling Amazon to learn more about shopper browsing habits to improve its product selection.
Grocery Shopping Options
Amazon continues their test, learn and pivot strategy with grocery shopping and delivery service options, believing that selling groceries to a customer is key to selling them everything else. More importantly for Amazon, the strategy further embeds their brand into our daily routines.
Amazon Go, the first-of-its kind physical store without cashiers or checkout lines opened after extensive testing with Amazon employees, and currently has 10 stores in three cities. Offering ultra-convenience, the store sells grocery items and prepared foods. Using advanced technology, items are scanned and shoppers’ accounts are charged as they leave the store with their items.
A future element of the Amazon business strategy includes additional locations, possibly in airports. Other retailers, including Kroger and Walmart, are watching carefully, with many eager to tap into the technology that lets shoppers purchase items without waiting in a checkout line.
Amazon’s Whole Foods acquisition has allowed the company to experiment with grocery delivery services, offering discounts to Whole Foods shoppers who have an Amazon Prime membership and even selling Amazon devices inside the Whole Foods stores. Future plans call for additional, larger stores with space for more items and online order pickup services.
Amazon 4-Star and Pop-up Stores
One of Amazon’s more recent brick-and mortar ventures, Amazon 4-Star, is inspired by its customers. The stores sell items rated 4 stars and above, as well as new and trending items on amazon.com. Prime members receive special pricing, and customers who aren’t Prime members can sign up for a 30-day trial to instantly receive the amazon.com price in the store.
Amazon’s pop-up store concept was created a few years ago to give shoppers the opportunity to test-drive and purchase devices and get advice from Amazon consultants. This strategy has allowed Amazon to blend online price with in-store convenience in locations where consumers are already shopping. Recently, Amazon announced plans to close all of their existing pop-up stores. The reason? Amazon now has the capacity to leverage space in their Whole Foods and Amazon Bookstore locations to promote these devices.
Roaming Treasure Truck
Tapping into the FOMO (fear of missing out) concept, the popular Treasure Truck has expanded to 30 cities, according to Amazon’s website. Each truck contains new, trending and local hand-picked items, stirring up excitement and anticipation as it cruises through cities.
Promoting products on Alexa
Nearly one in five U.S. adults today have access to a smart speaker, according to recent research. The concept of shopping by voice brings new challenges to advertisers who must find new ways to get in front of these shoppers. The Amazon business model in 2019 reportedly includes exploring the idea of helping consumers discover new products through ads as well as allowing companies to target Alexa users based on past shopping behavior.
Amazon-branded bank accounts
Amazon is reportedly considering a product that would appeal to younger customers and those without bank accounts. Partnering with a financial company to offer co-branded financial services and products versus creating their own may enable Amazon to avoid burdensome regulation. What’s in it for Amazon? A strategy like this would give the retail giant even more valuable data on customers’ income and shopping habits.
In a push to become the largest seller of apparel in the U.S., Amazon is expanding its business model to experiment with a clothing subscription service as well as private label athleisure wear. Tapping into the convenience factor, they’re counting on more people shopping for apparel on Amazon due to the huge selection, free two-day shipping and ease of returns. Future apparel-related plans may include interactive shopping experiences, pop-up shops and fitting rooms with Alexa-controlled lighting.
CEO Bezos recently announced that Amazon has exceeded 100 million paid Prime subscribers. (That’s more than Costco). While the price of an Amazon Prime membership has increased, the focus appears to be more on retention versus acquisition. Recent products and services added to Prime memberships include free e-books, photo storage, ad-free music, discounts at Whole Foods, and Amazon Key, a service which enables delivery inside your home.
Retailers that embrace a test-and-learn approach to improving the customer experience will not only learn more about what their customers want but will better position themselves for success in the ever-changing retail environment. If budget or staff resources are a concern, start small, testing a single campaign at a time, for example.
Keep in mind that staying competitive starts with understanding what compels people to buy from Amazon in the first place, as well as understanding who your own customers are. Use your data from transactions, surveys and employee feedback to create a more seamless shopping experience for your customers.
Loyalty Study Helps Explain Amazon’s Success
If you didn’t already believe that Amazon is a dominating force in today’s retail environment, a Retail Customer Loyalty Study from customer.com helps prove it. The report asked consumers to list retailers they tended to exclusively shop for particular needs. Amazon was mentioned more frequently than any of the other 300+ businesses referenced in the study.
Statistics from the report also gave insights into why Amazon is ruling the roost, and it comes back to the retailer’s focus on the customer experience. For example, consumers who favored Amazon cited a convenient and positive shopping experience and trust among the top factors driving their loyalty. That shopping experience also helps Amazon attract more “Loyalists” (shoppers who tend to stick with one store for a particular need) than competing mega-retailer Walmart.
The study also uncovered factors that can help any retailer drive greater customer loyalty. For instance, price is, not surprisingly, an important factor — but receiving a good value and ease in making purchases actually have greater impact for the majority of consumers. In fact, if access, price and products were equal, consumers say that a convenient shopping experience and ease of making purchases are the top two factors that would encourage them to shop at one retailer over another.
What Retailers Can Learn From Amazon’s Marketing Strategy: 5 Tips for Success
Both brick-and-mortar and online retailers face competition from Amazon, but that competition also invites opportunity. To survive and thrive in 2019, retailers will need to adapt to changes in consumer behavior and develop customer-focused strategies that integrate data and technology to deliver more personalized customer experiences. Here are five takeaways retailers can learn from Amazon’s business strategy.
1. Know thy customer.
In addition to understanding your customers’ wants and needs, understand what compels them to shop elsewhere. Take that knowledge and put it into action.
2. Maximize data.
Take advantage of every touchpoint to create a more personalized customer experience. Leverage your customer data to gather behavioral insights. Reach out to other departments in your organization for additional customer feedback and data.
3. Get obsessive with customer service.
Start by building a customer-centric culture from the top all the way down. Empower your line associates. Stronger customer connections will lead to more useful feedback that helps keep retailers focused on delivering what matters to customers.
4. Be innovative.
Test new ideas and don’t be afraid to fail. For example, update design and merchandise to attract customers or embrace technology to provide better service.
5. Create a comprehensive CRM strategy.
Integrate transactional, demographic and behavioral data with the right systems and technology to develop actionable customer profiles. Use data and technology to add value to the customer experience by offering more personalized experiences.
Understanding consumer behavior is key to successful long-term relationships and healthy bottom lines. Don’t be afraid to take risks and try new things. After all, even Amazon doesn’t get it right every time.
Strategy: An Eye on the Future
Amazon’s business strategy is based on one primary goal: to seamlessly link the digital and brick-and-mortar shopping experience in order to be part of every single purchase made. More than merely wanting to sell as much stuff as they can to the most people, Amazon strives to become so ingrained in people’s lives that they can’t imagine living without it. This presents challenges as well as opportunities for retailers who stay focused on current trends, embrace a customer-centric culture and turn their data into action.
CCG has focused on helping clients build stronger, more profitable customer relationships for more than 40 years. Our retail marketing services and solutions include strategic customer-centric initiatives, data tactics and technology support. To learn how we can specifically help your organization meet its customer retention goals, contact one of our retail marketing consultants for a complimentary review.
1 “Why Amazon Is the World’s Most Innovative Company of 2017,” by Noah Robischon, Fast Company, posted Feb. 13, 2017, https://www.fastcompany.com/3067455/why-amazon-is-the-worlds-most-innovative-company-of-2017, accessed May 28, 2018
Sandra Gudat is president & CEO of Customer Communications Group (CCG), a full-service customer relationship marketing (CRM) agency that helps Fortune 2000 retailers and financial institutions improve their bottom line by improving their customer relationships, loyalty and retention.