This Is Why It Is SO Hard To Compete With Amazon

I really feel for online retailers that are not behemoths. I know margins are generally quite small and competition is fierce. And Amazon has an unbelievable advantage in the space. I am keenly aware of all of this, and when I can I do like to support smaller entities, but when the difference in dollars is more than a buck or two, I just can’t do it.

Case in point – we desperately need something in which to store our daughter’s artwork. After some Googling and avoiding Pinterest (because really, who has time to feel more inadequate than the average day can already dish out?!?) I found some affordable portfolios that seemed like they would fit the bill quite nicely. The first site I found them on was what I will call “Not Amazon”:

"Not Amazon" Portfolio

Ooohh! Perfect size and really affordable price. I think I’ll even get two of them, one to use for last year’s artwork and one to start for this year… I put them in my cart and was all ready to check out on “Not Amazon” only to find that unless I order $49 worth of stuff, I will pay $9.95 for shipping, despite the little “Qualifies for free shipping” note on the product page. That shipping charge stopped me cold in my tracks.

What did I do next? Hopped on over to Amazon to see if they carried the same item (they do and it is Prime eligible):

 

Amazon Portfolio

Difference is price of actual product?

  • Amazon is $0.55 more expensive
  • Amazon will send it to me, free of charge, in 2 days – total cost $9.24
  • “Not Amazon” will ship to me, not in 2 days, for an additional $9.95 – total cost $18.64 (just over twice the cost of the Amazon option)

What do you think I am going to do?

Yup, order from Amazon. True, for the privilege of getting Prime shipping, I do pay $99 per year (which is so worth it if you do any kind of regular online shopping for stuff like we do, in my opinion). So you could argue that there is not, actually $0 cost for this shipping. But even so, I have already paid for my Prime membership for the year, so on this particular purchase, I am not paying directly for shipping, as I would be on the other site. This is an incredibly common occurrence. And, I imagine an issue that keeps smaller online retailers up at night.

So What Are Smaller Outfits To Do To Compete?

That is a really tough question. I’d love to hear what people who do regular work in the Ecomm space think about this. Free shipping without a high minimum order total probably would have had me order from “Not Amazon”. I might have considered ordering two of these in one order, rather than the one I will get from Amazon before deciding to order more.

Amazon, much like Zappos, has removed a crucial barrier to online shopping – risk of expensive consequences if you don’t like what you order. I can order one of these from Amazon and not pay any shipping. If it turns out to not be exactly what we need to solve our artwork storage issue, we will probably just find something else to do with it and not even get into trying to return it.

But, if you expect me to pay essentially $10 for shipping, you just seriously upped my consideration criteria for making the purchase. I need to be a lot more sure that what I’m ordering is what I actually want or need if I’m going to be just out that $10, ESPECIALLY when I have another, very trusted option, where that risk is nonexistent.

Understanding Your Market Is More Critical Than Ever

I had a company approach me a couple of years ago who was selling furniture online. Not unique furniture, but pretty readily available furniture. They were directly competing with the likes of Amazon, Target, Walmart, Overstock and the Wayfair family of sites. Sometimes our job can be to say what needs to be said, and in this case, my audit and assessment of what it would take to try to compete in that space boiled down to essentially, if you don’t have big (major) dollars to put into this, you are not going to be competitive. Those are my least favorite kinds of reports to deliver, for sure. But it represented the truth I illustrated above. If you want to sell things online, it is beyond critical that you take a complete inventory of just who else is selling the same stuff and at what rates, what shipping, what return policy, etc.

I feel a little guilty about finding the product I plan to buy on a site other than Amazon and then ultimately buying it on Amazon, but it’s hard to argue against this when there is a 100% cost difference. And, most people don’t have the knowledge that I do of this entire process, so their primary motivation will be to get the product as quickly as possible at the best price possible, no guilt included!

Love to hear what experiences you’ve had as an online retailer or as a PPC pro working with online retailers. As always, sound off in the comments or hit me up on Twitter (@NeptuneMoon).

Comments

  1. Was talking to a client about this recently. We see search query reports with their product/brand name + Amazon or product/brand name + Walmart and etc. We have tried pointing out some of the benefits of buying direct – like their money back guarantee and terminology like “buy with confidence direct from the manufacturer” and things of that nature, but it’s still really tough. And the tough part is knowing how much of your ad spend is actually helping to get the sale on Amazon/Walmart. Wish there was some attribution modeling there somehow 🙂

  2. Neptune Moon says:

    Thanks for commenting! Like I said, I really feel for these businesses. While it was once the great playing field leveler, the web (like most things eventually do) has become a place where bigger organizations have advantages over smaller ones. No easy answers either.

  3. Hi Julie,

    Great post! I agree with Mark that trying to point out unique benefits help, but are only a minor solution. Recently, I’ve worked with clients who emphasize a spend threshold to take money off. For example, if you spend $50 we’ll take $10 off your order. It keeps the shipping charge intact while giving a deal to the consumer. Again, not a great solution, but it can help.

    • Neptune Moon says:

      If it ends up feeling like I got value for the additional money, then it works. Perfect example is Kohls. I needed to spend $9 more dollars to get free shipping on an order of stuff I really needed. A bit aggravating, but I put one more tshirt in the cart and paid that $9 and at least got something for it, rather than just forking it out. Bonus – I got $10 in KohlsCash too, which netted me out ahead.

      So yes, being creative definitely helps (not that Kohls is a small company).

      P.S. I have no idea how Kohls makes money with all their discounts.

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