How to Beat Amazon
You can’t build a consumer brand in 2018 and ignore the 800-pound-gorilla that is Amazon.
Not only does Amazon control nearly 50% of e-commerce sales, the company has clearly set its sights on physical retail as well, having acquired Whole Foods and opened multiple retail stores last year.
And emerging consumer brands should be even more concerned now that Amazon is making a concerted push into private-label.
The e-commerce giant has a plethora of advantages over smaller startups; most notably, it has $20 billion in cash, which allows the company to operate with negative margins, effectively forcing competitors out of markets by undercutting them on price.
When building a consumer brand, you should ask yourself “can Amazon do this just as well?” If the answer is yes, proceed with caution.
Fortunately, while Amazon may be the Goliath in this story, there are plenty of stones left for the proverbial slingshot.
Create an aspirational brand. Amazon has an extremely recognizable brand, and that brand is intentionally mass-market and typically budget-friendly. While the company’s recent acquisition of Whole Foods signals an intention to move more upmarket, it’s still a long way from achieving credibility in the luxury space.
In the meantime, this creates an opportunity for startups to dominate in premium products. And luckily, this is a great sandbox to play in right now. Affordable luxury is on the rise as modern consumers increasingly focus on quality and brand values over traditional purchasing drivers like price and assortment.
Build a community. Amazon’s size and focus on mass-market put the company at a disadvantage when it comes to community building. Conversely, startups targeting more niche product categories can foster strong bonds among like-minded consumers of those products.
For example, emerging brands can build communities by hosting local events or deploying local marketing (e.g., Warby Parker’s 2012 “Class Trip” campaign which involved a yellow school bus turned library), creating a platform for consumers to communicate with one another (e.g, Glossier evolved from the beauty blog Into the Gloss), or even just building recognizable products that consumers can use to identify each other (e.g, Blue Bottle coffee drinkers may identify other epicurean coffee drinkers by the baby blue cups they’re holding).
By fostering these communities, startups facilitate word-of-mouth marketing and are able to grow more organically (and less expensively).
Personalize your products. Personalization is a fast-growing trend in consumer goods which Amazon is not well equipped to compete in. Yes, it has a wealth of data on customers and can personalize the online shopping experience by making tailored recommendations, but it can’t personalize products without sacrificing some of its mass-market efficiency. In other words, given Amazon’s desire to be “all things to all people”, product personalization just isn’t really a strategy fit.
However, emerging brands – particularly premium brands with a little more margin and tech-forward brands with innovative development processes – can afford to match consumers to personalized products. Companies like Stitchfix, Curology, and Function of Beauty have blazed a trail in personalization, but this trend is still in its early stages and there’s plenty of room for new brands to carve out their own spaces.
Deploy an omni-channel strategy. While Amazon may be dipping a toe into physical retail, it is, first and foremost, an e-commerce marketplace. As such, the company is ill equipped (for now) to create incredible offline experiences. This creates a great white space for brands to stand out in physical retail (because, let’s face it, incumbent retailers aren’t doing so great here either) or market to consumers offline. For example, Casper launched brick-and-mortar pop-ups starting in 2016 with a unique cartoon home style that served as a great acquisition channel for customers who wanted to try the product before purchasing.
Go niche over mass. Focusing on a niche category can be extremely helpful in competing against Amazon. Not only does this enable brands to foster community (see above), but it also allows for more targeted marketing. For example, Outdoor Voices focused on athleisure, not sportswear more generally, in order to “own” that category.
Commit to values. Everlane is committed to transparency. Tom’s is committed to social responsibility. The Honest Company is committed to making products free from chemicals. Glossier is committed to skincare first (makeup second).
Successful consumer brands stand for something. And that “something” must be specific, authentic, and emotionally meaningful to the consumer. Because that’s what consumers are demanding. They have a plethora of choice and are doing more research so they can support brands that align with their own values. While Amazon may be synonymous with “value”, it’s certainly not known for its values.
Don’t forget: it’s not just competition. Amazon may be a leading force in the new wave of consumer goods, but, fortunately, the $500 billion consumer industry has plenty of room for more winners. And remember, Amazon isn’t necessarily the enemy. Especially as the company endeavors to capture more of the luxury market, it may be a compelling partner for M&A down the road.