Retailers across the country may groan when they hear the name Amazon, but there is much that can be learned from the online retailing giant when it comes to providing a stellar customer experience. To say that shopper expectations have risen over recent years is a gross understatement, and Amazon’s Prime Membership is one of the key underliers of this major shift. Each time Amazon rolls out a new service on their loss-leading Prime Membership, it makes the service more valuable to shoppers — and more troubling for other retailers. As chains scramble to keep up with e-commerce shopper demands, how is Amazon managing to not only meet but exceed the expectations of their customers?
In one word: Data.
Amazon Sets the Bar High
What started as a play to encourage repeat shopping by offering free shipping for an annual fee has caused an entire generation of shoppers to stand by certain expectations — anything from free delivery and returns, to one-click ordering, to the instant availability of nearly any item under the sun. Trading partners across the spectrum are working hard to ensure that Amazon’s most loyal shoppers have access to the goods they wish to purchase. Near-continual innovation and a streamlining of their user experience — combined with a depth of analysis that most organizations would love to have — make Amazon a formidable adversary in the online shopping wars.
“The more Amazon gets into the CPG world, the more algorithms are determining what people buy and how we optimize the supply chain,” noted David Portalatin, food analyst at NPD Group. “It’s fair to say that traditional industries probably have some catching up to do to get up to speed to that level of data and analytics usage.” Amazon’s primary weapon is their incredibly popular Amazon Prime service.
Amazon Prime Unmasked
While Amazon is famous for refusing to reveal exactly how many members are paying for Prime, Jeff Bezos recently sent a missive to shareholders stating that there are over 100 million Prime members globally. Considering that each member pays an average of $119 per year in the U.S. for the subscription (which recently increased in May of this year), that’s a massive number. That number is not dropping either, as Amazon Prime subscriber retention rate is a whopping 85%. Here’s a rundown of everything Amazon includes in their popular Prime membership:
- Two-day free shipping on many of the items that Amazon sells
- Free one-day shipping to certain zip codes
- Free two-hour delivery with Prime Now
- Free release-date delivery on pre-order items that are eligible
- 30-minute early access to Lightning Deals
- Free access to Amazon’s massive library of well-known movies and television shows
- Free access to original programming, created by Amazon’s studios
- Free streaming music service with 2 million titles, similar to Apple Music or Google Play Music
- Free and unlimited cloud-based photo storage
- Free storage of up to 5GB of other content, such as documents and videos
- Free access to Twitch Prime, an online gaming community
- One free eBook per month from the Kindle Lending Library
- Kindle First program, which provides free access to one of six unreleased books each month
- Free six-month, auto-renewing subscription to the digital edition of the Washington Post
- Prime Now also allows for food delivery from their connected restaurants within an hour
- Prime Pantry is a curated set of groceries and household items, with inexpensive or free shipping for each “box” of items
- One of the newer items is Amazon Elements, a curated line of ethically-sourced items where consumers can track the ingredients and manufacturer of each item
- Amazon Dash Buttons, allowing shoppers to click a physical button within their home or a digital button on their mobile device to reorder commonly used items
- Discount on purchases at Whole Foods stores
Shifting Shopper Expectations
From the amount they pay for shipping to how their goods and services are delivered, Amazon.com has had a heavy hand in setting expectations for shoppers in the recent past. Their innovative delivery methods include everything from locker delivery to drone ‘beehives‘, as Amazon attempts to solve the last-mile problem. While the drone strategy is under review by the FAA, Amazon Locker is already active in over 2,000 cities. Amazon also continues to test their omnichannel chops with options such as Amazon Go, a way for shoppers to simply log into their Amazon app, shop a physical store, and walk out — with all charges posted to their Amazon account automatically. The Seattle test store is still ironing out some issues, but it’s likely that Amazon will figure out how to improve the experience sooner rather than later.
Today’s consumers are price-obsessed, with a strong secondary focus on product availability and convenience. Much to the dismay of high-end vendors, however, shoppers may not be as interested in sticking with their favorite brand as a reasonable alternative is available. Only 36% of online shoppers polled by a recent SPS Commerce survey were willing to stick with their retailer of choice if the product they wanted was available elsewhere. Shipping charges are very much a driver when it comes to shoppers considering the complete door-to-door cost of their items.
Brands Become More Digital
The best way to combat the infiltration of Amazon into your shopper’s minds is by offering a cohesive omnichannel experience based on your deep understanding of a shopper’s journey. Smaller brands such as Blue Apron are showing more established brands that the way to a shopper’s heart is through a positive digital experience. Those brands that are investing in enhanced data management solutions are the ones that are set to thrive in the future, with digital transformations leading the pack. Partnerships between retailers, suppliers, 3PLs (3rd party logistics), and other trading partners are creating opportunities to engage shoppers on a deeper level.
The good news is that while Amazon Prime members have plenty to be excited about, they are consistently shopping around for a better deal. This leaves the door wide open for other retailers who are actively looking for ways to engage buyers who are amenable to different options. A recent study by Digital Commerce 360 of a small group of Prime and non-Prime shoppers shows that Prime members tend to be much more likely to shop from a mobile device — making cross-device management of data an especially critical area for effort. As your company looks for ways to attract new buyers, there are plenty of opportunities to use creative messaging and ad placement to entice buyers away from your competitors. The majority of searches that are performed before reaching the Amazon site are centered around specific brand names — making this an ideal way to reach what can become your most committed shoppers.