I will be your speaker, Dan T, and today I am going to take a step back to explore ways for an ecommerce store to establish a competitive advantage for the holidays and hopefully help you turn that into a long-term sustainable advantage in your market.
Before we jump into the holidays, I would like to challenge you today to think about ways to beat your competitors during the holiday season and then figure out how to turn these solutions into a long-term sustainable advantage. Today I will explore several well known advantages in retail so that we can use them as food for thought as they relate to your own business.
When we think about competitive advantages in retail, two companies come immediately to mind.
Wal-mart ? some business analysis may say that their competitive advantage is always having the lowest price, using their size to put price pressure on manufacturers and this drives their multi-billion dollar business. I would argue that their competitive advantage is a little bit more complex. I believe today they have now established a brand where their stores have the lowest perceived price by their consumers. An example: Using teaser products during the holidays to get consumers into their stores, like $99 iPhones, etc. These advantages may work great for the brick and mortar stores, but do they work online? I argue that they do not work well online, as we’ll see in a second Amazon often has a better price because of their network of resellers and used or refurbished items. Will Wal-Mart be able to adopt?
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As for Amazon, what is their competitive advantage? Some may argue that their competitive advantage is early adoption of the web, no costly overhead from hundreds of brick and mortar stores, 1-click shopping, or their vast selection. In the long run all of these advantages have helped Amazon become the number one online retailer, but not one single advantage is sustainable. Each one can be duplicated, even the patent on one-click shopping will expire or be revoked. I argue again that the picture is a little more complex. Where Amazon has developed a sustainable advantage, is by continuously innovating and adapting to an ever changing ecommerce world. Today they have been able to take advantage of their size and scale, but in ways that are not always obvious. Examples of this are:
- Personalization: We are all familiar with “Customer’s Also Purchased”, but did you realize that there are navigation changes based on what products you searched for before you even sign in? It is difficult to implement effective personalization technology without a ton of data about your customers.
- Speed: They have used their vast data resources to understand that reducing the perceived load time of their site improves the customer experience and their revenue, so they have made major investments into Cloud computing and found a way to monetize them.
- Power of their Network: by allowing other stores to sell on Amazon, they have effectively protected themselves from niche retailers eroding certain markets. If you sell on Amazon, they now have access to your product information and in many cases they will compete against you by dropping prices below market value. They can afford to do this because of the volume and size of their network.
Okay now that we know how Wal-Mart and Amazon use their size as a competitive advantage, how can you develop your own advantage as a smaller but growing online store.
If size is not your advantage then what is? After analyzing several ecommerce sites, here are my favorite competitive solutions that have shown sustained advantage over time.
One client was able to dominate his niche, and scale up by expanding into other niches quickly and effectively. Their competitive advantage is actually their backend operation. Instead of managing several different online niche businesses, they decided to open ecommerce stores that sold different products, but required the same backend processing. This allowed them to open as many different online stores as they wanted while only managing one business.
Another client developed a unique advantage by manufacturing their own products in a commoditized market. Allowing them to separate their product offering and pricing away from their competitors.
Many clients use their SEO visibility within a particular niche to fend off competitors. If they own multiple stores within a market and rank for similar terms they use SEO as a strong competitive advantage. I like this tactic because even if one store loses rankings they have another one right behind ready to accept that traffic and continue to sell.
Other clients have separated themselves by educating their customers through videos and buying guides. This can be a longer term advantage since it takes so much time and investment to duplicate.
Going “above and beyond” for customers has also helped many of smaller stores succeed against their bigger competitors stores. Instead of rigid return policies, these stores thrive because of their customer centric approach.
So what is your competitive advantage going into the holidays? Is it customer service follow up to make sure their gifts arrived on time? Or is it free shipping storewide? Think creatively and avoid following your competitors because if you do follow them you have no advantage at all.
We discussed a broad business topic today, but that’s because it’s wildcard Friday and anything goes!
Here is what we discussed
- Wal-Mart uses their size as a competitive advantage, but will this work online as they declare war with Amazon?
- Amazon’s sustainable competitive advantage is being able to innovate and adopt to changing trends.
- Avoid copying your competitors and be creative to find your own competitive advantage for the holiday season.
Well that’s it for now, enjoy your weekend and call us if you have any questions at 1-800-504-4324.
Thank you for listening – have a wonderful Wild Card Friday!