Tag Archives: market competition

Thinking About Competing With Amazon.com? Think Again…

Competing with Amazon.com may prove to be a difficult if not an impossible challenge. You are up against an extraordinary company led by an extraordinary leader.

“Your margin is my opportunity”, dares Jeff Bezos, the founder, chairman, and chief executive officer of Amazon.com. According to Jessica Stillman, contributing for INC. , Jeff sees a competitor’s love of margins and other financial ‘ratios’ as an opportunity for Amazon. Says Jeff: “The competitor will cling to them while he focuses on absolute dollar free cash flow and slices through them like a hot knife through butter.”

The migration of Amazon.com from a sole online retailer (Clicks Only) to physical locations (Bricks and Clicks stores) is perceived by many retailers, big and small, as a threat to their existence. However, incumbent retailers can learn much from how Amazon.com conducts their business. Amazon.com is now an omnichannel retail giant that makes the most of the opportunities that digital technology in the new economy offers – showing the way for others to follow.

George Parker has recently converted from an Amazon hater to an Amazon admirer. George writes in Business Insider: “But perhaps the thing that impresses me most about Amazon’s unconventionality is its ability to structure its business model in unexpected ways. Because of the massive volume of product it sells 24/7/365, Amazon maintains 80 enormous warehousing and fulfillment centers scattered around the known universe.” Amazon.com is an uncompromising competitor with an unconventional business model.

How on earth can retailers compete with that?

Where is Amazon.com coming from?

Amazon.com was founded during 1995 and started as a website selling only books. They started out as an online bookstore and grew patiently but significantly to be the world’s largest online retailer. Being one of the few companies that survived the “dot.com” crash during 2000, Amazon.com made their first yearly profit during 2003. Net profit came in at $35 million, or 8 cents per share, compared with a net loss of $149 million, or 39 cents per share, in 2002 (Quora.com).

NASDAQ reported Amazon’s net income for 2016 was an impressive $2.37 billion. This income was mainly coming from its online retail business. RetailDive recently reported that Amazon dominates online sales traffic with an equal or greater share of sales compared to all other e-commerce sites combined, when measured across 11 retail categories. Indeed better than all the rest.

What is Amazon doing now?

Amazon.com is on a buying spree in the Bricks and Mortar retail market. They’ve also came to realize that adding Bricks to Clicks is the future of retailing. Richard Kestenbaum, contributing for Forbes concurs: “Now even Amazon has recognized that online alone is not going to work. In order to succeed in grocery, there will have to be a symbiosis of online and physical stores.” There seems no stopping from Amazon buying Bricks and Mortar retailers.

Competing with Amazon.com is getting more difficult. The Seattle giant launched a radical assault by acquiring a brand-name high-end grocery chain with 456 stores in the U.S. (436), Canada (11), and the United Kingdom (9). Whole Foods also owns three distribution centers (Brad Thomas, Forbes).

So, Amazon is now becoming a true Bricks and Clicks retailer and you will most probably have to compete with it. What are Bricks and Clicks retailers up against when competing with Amazon?

Competing with Amazon.com – the last crusade or new horizons for retailers?

Amazon’s business model is a formidable one, with deep moats on multiple fronts that make it tough for competitors to gain ground. The only way to stop Amazon is to either beat AWS [free Amazon Web Services], which holds a commanding lead in the cloud platform market, or replicate Amazon’s multi-layered Prime strategy [offering tons of benefits on Prime memberships]; (Leo Sun, The Motley Fool).

Kavadias, Ladas and Loch, (2016) have identified six recurring features in the business models of companies (also Amazon.com) that were successful in transforming their industries:

  1. A more personalized product or service – many new models offer products or services that are better tailored than the dominant models to customers’ individual and immediate needs. Companies often leverage technology to achieve this at competitive prices.
  2. A closed-loop process – many models replace a linear consumption process (in which products are made, used, and then disposed of) with a closed loop, in which used products are recycled. This shift reduces overall resource costs.
  3. Asset sharing – some innovations succeed because they enable the sharing of costly assets, e.g. Uber shares assets with car owners. Maybe independent retailers can share assets across the supply chain – what about sharing warehouses, or delivery services?
  4. Usage-based pricing – some models charge customers when they use the product or service, rather than requiring them to buy something outright. The customers benefit because they incur costs only as offerings generate value. The company, on the other hand, benefits because the number of customers is likely to grow.
  5. A more collaborative ecosystem – some innovations are successful because a new technology improves collaboration with supply chain partners and helps allocate business risks more appropriately, making cost reductions possible.
  6. An agile and adaptive organization – innovators sometimes use technology to move away from traditional hierarchical models of decision making. In order to make decisions that better reflect market needs and allow real-time adaptation to changes in those needs. The result is often greater value for the customer at less cost to the company.

Independent or small retail chains need to “think outside the box”. Maybe you should pool your resources and thereby establishing a critical mass to counter the likes of Amazon.com. Also, your location and local knowledge may be a substantial niche – be the first to explore it!

Concluding

Competing successfully with Amazon.com will probably be not viable for independent or small retail chains. Best is to learn Amazon successes and failures and use that knowledge to compete locally in a niche market.

Further reading: Amazon.com and Walmart – Set to Face Off in the Omni-Retail Channel Space

Note

1 Kavadias, S., Ladas, K. and Loch, C. 2016. The transformative business model, Harvard Business Review, 94(10):90-98.

Image

Flickr.com

 

Amazon.com and Walmart – Set to Face Off in the Omni-Retail Channel Space

Amazon.com and Walmart are busy reacting to challenges in their retail channels. The outcomes of their strategies are setting up these retail titans for a massive collusion in the Omni-channel retail space. “Amazon and Walmart have become the disruptive titans of today’s business world” says Jim Tompkins, CEO of Tompkins International. The rest of the retailers are playing catch up as they create benefits for their customers at a phenomenal rate.

But what are Amazon.com and Walmart now doing? Amazon.com – by far the leading online retailer is opening physical stores. Walmart – the biggest traditional (physical) retailer is frantically trying to compete with Amazon.com in the online retail channel. In short, Amazon.com is adding Bricks to their Clicks and Walmart is adding Clicks to their Bricks. However, they will both end up as Bricks and Clicks retailers.

Both Amazon.com and Walmart has entered the Omni-retail channel simultaneously to achieve the ultimate title: The World’s Biggest Retailer…

The paths that Amazon.com and Walmart took to the Omni-retail channel

Although the paths that the two retailers took leads to the Omni-Retail channel, they took different routes to reach their destination.

Amazon.com – adding Bricks to Clicks

Amazon.com, the most successful online retailer by far, is now opening physical shops of all kinds – and fast. That begs the question – why? Amazon wants to enjoy the advantages that a physical shop offers.

According to Trevis Team writing in Forbes, Amazon is opening physical stores to: 1) provide a more personal shopping experience to its consumers; 2) reduce shipping costs by providing a store pick up facility; and 3) integrate the online and offline shopping experience for its consumers in addition to creating a strong brand image. It is adding Bricks to Clicks then…

Nathan Cohen-Fournier and others from Tufts University suggest that Amazon’s ability to maintain its dominating position in e-commerce is under threat. Once competitors catch up with Prime and same-day shipping (Walmart and Ebay already have similar offerings), consumers will demand even lower prices and differentiation. In this regard, Bricks-and-Mortars have the lead, due to immediacy, trial-touch-feel, and ease-of-return. Also, essentially, Amazon is choosing growth over profits says Mac Bartine in Quora.

“Does this mean that Amazon will have to open more Brick-and-Mortar stores than just the one in Seattle?” asks Wayne Rash writing in eWeek. Perhaps, but it’s unlikely it could reach the penetration of Walmart.

The ultimate answer likely will mean more innovation from both companies—and that means consumers will benefit.

Amazon.com is masters of online retailing

Amazon.com is masters of online retailing

Walmart – adding Clicks to Bricks

Walmart has a long history of taking the best of what other companies do and incorporating it into their own business model. It is now doing its best to oust Amazon. But, in a world that has quickly gone digital, where Amazon has continually refined and improved its delivery options, Walmart has not quite come up with an answer to challenge the online leader.

Wayne Rash suggests that Walmart did not succeed to challenge Amazon with online sales. Products on Walmart’s website rarely were cheaper than Amazon’s and fast delivery only happened if the desired product was already in a store near you. Walmart’s online offerings were broader than one usually finds in their brick-and-mortar stores. However, Amazon always had more offerings to choose from.

For a long time, Walmart had an edge over Amazon simply because it had a network of stores. “However, by building up its Prime membership, which offers free two-day shipping, and increasing its shipping capacity and options, Amazon has made that edge less relevant” writes Daniel B. Kline in the Business Insider.

All Bricks-and-Mortar chains, not just Walmart, have struggled because they haven’t sufficiently adapted to the fact that retail on the web is a harsher environment compared to what they face on land.

The clash of equals in the Omni-retail channel

So, if Amazon.com and Walmart will face off in the Omni-retail channel, what will happen?

Both retailers are treading on each other’s strong points, challenging each other’s competitive advantages. For Amazon opening physical stores it means it customer’s expectation can be met regarding the shopping experience. Amazon’s customers can now enjoy shopping at their physical stores, using their senses to experience the products. They will however still enjoy the advantages that Amazon offers as a leading online retailer.

Walmart, on the other hand, has hundreds of physical retail outlets, with proficient staff that know how to please customers.  Walmart is the master of merchandising and decorating and fitting a shop to encourage customer patronage. What Walmart however realise, is the need to do business online the same or even better than Amazon. Walmart doesn’t have the skills or the organisational culture to confront Amazon successfully on its own. It is therefore unsurprising that Walmart acquired Jet.com to jump-start their online sales.

Who will be the winner of this epic battle? It will probably be the retailer that knows and satisfies the needs of their customers the best. As Jim Tompkins remarks that there are five elements that every counter-offensive must have for retailers to thrive nowadays:

  1. Omni-channel
  2. Store Fulfillment
  3. Same-Day Delivery
  4. Planning-Execution
  5. Demand-Driven Value Network

Tompkins notes that it is not about how much you sell online, but about the impact of online sales. Therefore, as a small Bricks and Clicks retailer – don’t even bother to compete directly with the Amazons or Walmarts in the Omni-Retail channel. Rather identify a niche market and develop your brand to provide the customers the best Omni-retail channel experience they could ever wished for.

Note:

Nathan Cohen-Fournier, Adolfo Gatti, Angelica Nouhi  2016.   AMAZON VS WALMART – REAL VISION CASE COMPETITION, Fletcher School of Law & Diplomacy, Tufts University

Images:

wikimedia.org and flickr.com

How Direct Mail can help you to market your Website

Remember the ‘good old days’ when your post-box was filled to its capacity with flyers, brochures and promotion letters? For the most part you can now use direct mail to inform your customers and other consumers what they can find on your website…

Summer Gould writing in Target Marketing proposes 13 ways on how to use direct mail best to promote your website.

Direct mail to promote your website

  1. To generate traffic to a location, a website or event. It is equally useful if  you want to direct customers/prospects to a store, event or online location.
  2. Generate sales leads. You can target and reach qualified and interested leads easily with direct mail.
  3. Counter a competitive offer. Direct mail has some secrecy to it, unlike online.
  4. Customer loyalty. Reaching out with direct mail to customers with special offers and giveaways is a great way to reward your customers.
  5. Customer acquisition or referrals. Include these in your mail as a way for your message to be passed on to friends and colleagues.
  6. Improve customer service. Sending a thank you note to your customers is a great way to make people feel appreciated.
  7. Cross sell or upsell. You can mention other things you offer that they may be interested in based on what they have already purchased.
  8. Announcements.  Is a great way to get important information out to people quickly.
  9. Augmenting other media efforts. Direct mail ties in with so many other channels like email, web, social media, mobile, and so much more…
  10. Improving sales efficiency. Sending out mail that helps to qualify and clarify people before you sell to them is extremely important.
  11. Catalog, custom publications or newsletters. Direct mail give you the ability to showcase new information or offers to the people most likely to buy from them.
  12. Combining mailings with other companies. Co-branded mailings work well when each brand has the same target audience.
  13. Building brand awareness. Direct mail can be used to strengthen your brand’s awareness.

There is a great opportunity now to use the postal service to promote your online business because of the lower postal volumes.

Visit eBizplan for your business plan and marketing plan solutions.

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Business Plan: Competitors in the Market

A competitor of a business owner is a business or businesses that offer similar products or services to customers in his or her market. In other words, if you own a bakery on the corner, the supermarket in the shopping mall is your main competitor.

How do competitors influence the success or failure of your business?

Your business’s competitors may drive prices down in order to gain market share. As result, they may even try to “steal” your best workers, and, once you are on your knees, they may offer you a ridiculous price for your business – only to close it the next day. In today’s business environment, even to be second-best is not good enough. The winner takes it all.

Competitive analysis

Since competitors have such a great influence on your business, they should be analysed regularly by asking the following questions:

  • Who are your present and potential competitors?
  • What are their positions that they have established in the market?
  • What are their strategic objectives and thrusts?
  • What are their present and future strategies?
  • What are their strengths and weaknesses?
  • What are their response patterns?

Once you have all the answers about your competitors, you should compare your business with their strengths and strategies to see where you can compete the best.

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