The Amazon Business Strategy in 2018: Impact on the Retail Industry

Tips and insights to help today’s retailers improve the customer experience and stay competitive.

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’s strategic plan, 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.

An Update on Amazon’s Strategic Plan

In a blog post from last spring, CCG shared insights into  Amazon’s corporate-level strategy — in particular, the decision to focus on rolling out new brick-and-mortar store formats. Did their approach to improve the customer experience by leveraging online and offline data work? What did they learn — and how has Amazon’s business strategy changed one year later? Here’s an update.

Amazon Bookstores

The physical store format appears to be a success for Amazon, having grown to 15 bookstores nationwide. While shoppers can still purchase nearly any book on amazon.com, Amazon uses the stores to experiment with pricing and product selection. For example, 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. Another unique Amazon business strategy: Inventory varies by location, based on customer data and reading habits.

Amazon Go

This much anticipated brick-and-mortar store without cashiers or checkout lines opened earlier this year after extensive testing with Amazon employees. 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. Future plans for more stores are unknown.

Grocery Shopping Options

Amazon continues their test, learn and pivot strategy with grocery delivery and drive-thru service options. They’re reportedly considering consolidating Amazon Fresh and Prime Now grocery delivery services. Plus, with the addition of Whole Foods, the future of Amazon grocery shopping remains to be seen!

Roaming Treasure Truck

Tapping into the FOMO (fear of missing out) concept, the popular Treasure Truck has expanded to 25 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.

Marketing Takeaway

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.

Amazon’s Corporate-Level Strategy — and What It Means for Retailers

According to Amazon’s letter to shareholders the company is guided by four principles: 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.

In addition to the anticipated announcement of a second headquarters location, below are areas of focus for Amazon in 2018.

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. Amazon is reportedly 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 these co-branded 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.

Amazon plants.

A new site on Amazon lets shoppers purchase a variety of live plants online and receive care tips. The new concept is an example of how Amazon’s strategic plan leverages data to predict behaviors and shopping preferences.

Amazon apparel.

In a push to become the largest seller of apparel in the U.S., Amazon is experimenting with a clothing subscription service as well as private label athleisure wear. Future plans may include interactive shopping experiences, pop-up shops and fitting rooms with Alexa-controlled lighting.

The Whole Foods acquisition.

While Amazon hasn’t had the same success in the grocery market as it has with other types of products and services, they persist, 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. It will be interesting to see if Amazon combines physical grocery stores with their online delivery service.

Amazon Prime.

CEO Bezos recently announced that Amazon has exceeded 100 million paid Prime subscribers. (That’s more than Costco). While they recently raised the price of Amazon Prime, the focus appears to be more on retention versus acquisition. Recent products and services added to Prime memberships include free e-books, photo storage, discounts at Whole Foods, and Amazon Key, a service which enables delivery inside your home.

Marketing Takeaway

The customer data you hold provides unique insights into your customers’ wants and needs. Being able to take action on these insights can improve your customer relationships — and your profits.

New Loyalty Study Helps Explain Amazon’s Success

If you didn’t believe it already, a new Retail Customer Loyalty Study from customer.com helps prove that Amazon is a dominating force in today’s retail environment. The report asked consumers to list retailers they tended to exclusively shop for particular needs. And Amazon was mentioned more frequently than any of the other 300+ businesses referenced in the study. Watch your email inbox for an announcement when our first report from the study is available for download!

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.

On the bright side, 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.

Marketing Takeaway

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.

What Retailers Can Learn From Amazon: Five 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 2018, 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 success.

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.

Marketing Takeaway

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.

Are you leveraging your data to provide a better customer experience? CCG is a full-service retail marketing agency with a multi-functional team of customer experience experts and retail marketing consultants. As pioneers in the field of retail loyalty marketing, we have developed, launched and managed innovative CRM initiatives and other retail marketing solutions for retail clients across the country.

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