There are a lot of costs involved in being successful on Amazon. They levy monthly fees on professional sellers, charge for warehouse space and take a cut of each sale. But, more importantly, they make it hard for small brands to succeed. How? By reducing their visibility in key moments like searches.
1. Pay-to-Play
Some brands like Tumi, PopSockets and Ikea are pulling out of Amazon’s marketplace. These brands are joining others that have abandoned the site for fear of losing access to their customers’ loyalty and purchasing data.
While e-commerce experts say ditching Amazon is possible, it’s incredibly hard to replicate the site’s logistics and shipping operations, massive traffic levels and mountains of consumer data. And without access to this audience, it’s difficult for brands to build brand awareness.
Amazon’s e-commerce platform prioritizes best seller products and pushes out those that don’t perform. This creates a tough environment for newer brands that aren’t profitable enough or aren’t able to keep up with amazon.com/code inventory demands. This ‘Culture of Metrics’ leads to a test-driven approach where ‘Data Trumps Intuition’ (Matt Round, E-metrics 2004). As a result, Amazon runs real-time experimentation tests on every aspect of their site and product offering. This allows them to quickly see what works and what doesn’t.
2. Excessive Shipping Costs
As a result, Amazon is spending more and more on shipping. This has increased its fulfillment costs, which in turn increases the amount it must charge for Prime memberships and other subscription services.
Amazon’s founder Jeff Bezos realized early on that his site would never become the “everything store” he imagined if it had to purchase and stock every item it sold like a traditional retailer. Instead, in 2000 he launched the Amazon marketplace to let third-party sellers use his platform as a distribution channel.
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To encourage sales, Amazon set low shipping rates and pushed its customers to buy multiple items in order to qualify for free shipping. This has led to an explosion of add-ons that range from dime-size earbuds to a jar of eye cream under one ounce. Because of antitrust concerns, company lawyers are always present when internal teams discuss pricing with outside vendors. As a result, Amazon can often force sellers to lower their prices or risk getting deactivated from the marketplace.
3. Pay-to-Play Incentives
While Amazon is a retail giant, it also offers a lot of incentive programs that can make the brand an attractive place to work. These incentives can be sign-on bonuses to attract new employees or loyalty bonuses to keep existing employees happy. But there’s almost always a catch.
Some Amazon warehouse workers are upset that the company will replace their RSU and VCP (variable compensation pay) incentives with direct stock purchase plans starting November 1. These bonuses boost employees’ paychecks by up to 8% depending on how many hours they work and meeting production goals. They also double during peak times like the holiday season.
The company’s newest incentive program encourages employees to leave their jobs to start their own delivery businesses. This program gives them access to the firm’s technology, hands-on training and a range of discounts for assets like vehicles and equipment. The company says annual profits for business owners can be up to $300,000. Denver hasn’t released its full bid to lure Amazon, but officials have promised tax credits for job creation and job training grants.
4. Customer Service
A business that provides a good customer experience generates loyalty and earns customers’ trust. This leads to increased revenue and repurchases. It also improves a business’s reputation and public image. Customer service strategies that work include straightforward communication approaches that prevent misinterpretation, accepting mistakes and apologizing, and providing transparency in the business.
Amazon’s customer-centric approach is what has made it one of the most profitable e-retailers. The company has used three customer service strategies to build its brand. These include transparency and customer empowerment, effortless experience, and reliability and responsiveness.
Streamlined buying and swift delivery processes are just some of the ways in which Amazon has improved its customer service. It also offers a wide range of self-service options including the ability to return products that don’t meet expectations. The website also features a help page where customers can communicate with Amazon directly and solve issues in real time. In addition, Amazon’s app allows them to check their order status and track shipments.