The popularity of Amazon in the e-commerce space is widely known. By examining the practices of the e-commerce giant, electronics OEMs and e-tailers can learn some strategic lessons about how to take over and rule over their own corner of the e-commerce jungle.
Becoming the giant
E-commerce and logistics practitioners are conversant with Amazon’s level of dominance in the U.S. e-commerce market. In fact, the statistics relating to their dominance are staggering. For example, according to a Slice Intelligence Report, in 2016 Amazon accounted for 43% of all U.S. online sales. Amazon has an estimated 244 million U.S. customers with over 54 million Prime members.
In addition, Amazon is building customer loyalty through their $99 Prime subscription which now has an estimated 66 million subscribers. Not only do Prime members get free two-day shipping, but some orders are eligible for free same day delivery in certain areas. Also, in certain areas, access to Prime Now adds two-hour delivery from local stores and one-hour delivery from local restaurants. But that’s not all. Prime also provides free streaming music (albeit a much smaller library than Spotify or iTunes) and videos, ability to borrow Kindle books, free video game streaming, unlimited photo storage, and no annual fee Amazon Prime Visa Signature credit card offering 5% cash back on Amazon purchases plus many other card benefits.
Amazon’s astute e-commerce execution combined with essentially a loyalty program make it a daunting competitor. However, with the proper focus on key e-commerce capabilities, online retailers can successfully compete. One of the primary attributes of the Amazon experience is their continually evolving delivery capability. Delivery has become a key element of customer-centric e-commerce and Amazon is driving the bar higher. In a recent study commissioned by Metapack, 87% of e-commerce shoppers stated that they would highly likely/more likely to shop again with an online merchant, following a positive delivery experience.
When the Metapack survey respondents rated their delivery experience, Amazon was well ahead of other e-commerce retailers.
Source: 2016 State of E-commerceDelivery-Consumer Research Report - Metapack
So what are the attributes of Amazon fulfillment that set them apart from most others?
More than half (61%) of respondents in the Metapack study said they had bought goods from one retailer over another because they provided more delivery choices. Home Depot recently found that when they tested same-day delivery at a significant up charge, it was very infrequently chosen. However, overall order volume rose noticeably simply due to the choice in delivery options.
Delivery choices should be offered in a way to establish customer expectations. Having a specific expectation for delivery is a well-established feature of Amazon. In the examples below, the same Logitech universal remote is shown in the Logitech shopping cart (top) and the Amazon shopping cart (bottom).
Logitech’s website, as is typically the case with manufactures websites, has the selling price set at the recommended retail price where Amazon prices at significant discount. However, importantly the Logitech site lists the delivery time as either four to seven days or two to three days. Amazon, on the other hand, offers 4 day/date specific delivery times. Amazon allows the consumer to have a choice for delivery and accurately sets expectations accordingly.
According to the 2016 UPS Pulse of the Online Shopper Study, 48% of shoppers find guaranteed delivery dates important when checking out online. And while customers desire a variety of shipping services, 42% of the time they choose ground economy over other modes. In addition, 46% of shoppers abandoned their shopping cart because the delivery time was too long or not stated.
Of course, once the customer expectation is set, the delivery must be made as promised. It is essential to deliver as promised. E-commerce shippers must have comprehensive service performance reporting from their carriers. They need to use analytics to determine the best carrier for each service level to specific destinations. Choosing a national carrier for the entire U.S. oftentimes is sub-optimal in terms of service and cost. For international shipments the carrier selection can be a good bit more complex but here again analytics will assist in determining optimum carrier selection.
While delivery speed and flexibility rate very high with shoppers, order and delivery visibility is a close second. Once an order is placed, Amazon and the top tier e-commerce retailers provide a seamless status of the order. From order confirmation to ship notification to checkpoints along the journey to delivery, visibility is important to the customer.
The 2016 e-Commerce Packaging Study, Driving Customer Loyalty With Fast Delivery and Quality Packaging by Dotcom Distribution showed that almost half (47%) of shoppers have chosen not to order from a retailer again because of poor order transparency or a lack of insight into the status of a package throughout the fulfillment and delivery process. In a Convey survey, 75% of shoppers believe proactive communication is important with 38% expecting to be notified immediately in the event of an issue. The 2016 UPS Pulse of the Online Shopper Study found that 30% of shoppers cited an option to receive a text when the order has shipped as important when checking out.
For international markets the bar is even higher. A DHL study in Germany found that 88% of online shoppers said they wanted direct access to shipment tracking and 84% wanted to know the name of the delivery company, while 85% said direct links to shipment tracking portals were an essential part of any e-commerce experience.
Here again, selection of carriers is critical. Only those carriers that can provide the needed visibility, suitably integrated into the customer facing platform, will provide the competitive visibility expected by customers.
According to the 2016 UPS Pulse of the Online Shopper Study, returns play a critical role in consumer satisfaction with e-commerce retailers. The graphic below depicts consumer sentiment on key returns attributes.
Source: 2016 UPS Pulse of the Online Shopper Study
Amazon has set a lofty goal for quick, easy returns. The process is fully integrated with the consumer’s order history and is completely self-serve with free return shipping in most cases. Credit is usually applied when the return package is scanned by the returning carrier, not when it’s received.
Building a convenient, consumer friendly returns process touches all key components of a company’s e-commerce value chain. Starting with the merchant’s website, the return policy and procedure must be easy to find and understand. During initial fulfillment activity, return instructions and labels may be included as is a common practice with many e-commerce sellers today. Online initiation for returns should trigger the process including return label and shipping instructions, credit for returned item, return process tracking and final disposition confirmation.
An important consideration in the return process is the location to which the item is to be returned. The UPS study cited 60% of consumers prefer to return to a retail store. However, for pure play e-commerce retailers this is not available. So, for the consumer who ships their return package, access to a carrier location needs to be convenient. In the same UPS study, 55% of consumers preferred to drop off at a carrier location or access point and 21% preferred to leave the return in their mailbox or front porch for U.S. Postal Service pickup.
Nearly all carriers have a returns service that is designed to make returns easy. But here again, there may be a need to offer the consumer a choice since carrier access is a critical factor in returns convenience. While there are many of ways to structure returns, the overriding requirement is that the process be convenient, simple to understand, and hassle-free.
The e-commerce landscape is changing rapidly. So are customer expectations, led by Amazon’s influence. An e-commerce operation that executes effectively in delivery choices, order visibility and returns will go a long way in competing with Amazon.