[This blog is part of a four-part series. Using SurveyMonkey, we surveyed 2,000 shoppers to understand sentiments around Amazon, and uncovered key trends revealing that the key to Amazon’s success is its industry-disrupting shipping offering.]
Over the last 20 years, the steady increase in online shopping has created a cultural shift in how consumers shop. Ecommerce now claims between 10-15% of the total retail sales pie. It’s a totally different shopping experience than the in-person social activity of the past.
Today, many time-strapped consumers are opting for online shopping: an activity they can engage in anytime, anywhere. Look no further than the surging sales of Cyber Monday 2019, where U.S. shoppers spent an estimated $9.4 billion on holiday purchases.
What’s driving the increase in online shopping is the convenience and instant gratification of the Amazon experience. Amazon Prime’s coveted two-day shipping has raised the stakes, and the rollout of one-day shipping continues the trend. However, there is hope: new survey data exposes Amazon’s blind spots, which retailers can use to increase sales and drive loyalty.
Amazon Prime Adoption Increases At Drastic Rates
In Convey’s 2020 survey on consumer sentiment towards Amazon, more than three-quarters of respondents were Amazon Prime members. As of December 2019, a study by Consumer Intelligence Research Partners (CIRP) reported that there are more than 150 million Amazon Prime subscribers in the U.S. That’s just shy of one-half of the total U.S. population (!).
The growth in Amazon Prime membership in recent years is staggering. CIRP reports that a mere 50 million U.S. consumers were using Amazon Prime at the end of 2015. That number increased to 100 million by the end of 2018. That’s only 3 years to double Amazon’s Prime subscriber base.
Prime Members Spend More… And Are Less Loyal
It’s not just Prime membership that’s increasing. Once shoppers become Prime members, they spend more (both overall and per visit), make more frequent purchases, and purchase more items. This change in behavior is fueling what’s known as an Amazon Prime Addiction. Just look at the difference between Prime and non-Prime purchase behaviors:
|Prime Members||Non-Prime Members|
|Average spend per year||$1,400||$600|
|Shopping times per year||26||14|
|Average spend per visit||$55||$42|
|Average items purchased per visit||2.2||2|
And here’s the kicker: once they become Prime members, shoppers become even more demanding in their expectations, especially around low cost – which may lead them to drop Amazon.
- One-quarter of Prime members in Convey’s 2020 survey said they would not use Amazon if they had to pay for shipping; and,
- Nearly three-quarters reported that even if delivery was free, they would ditch Amazon if delivery took more than 4 days.
It turns out that despite all of Amazon’s advantages, even Prime members’ loyalty is in question. And that’s what is fueling the opportunity for retailers to differentiate themselves and win new customers. Consumers would rather buy elsewhere – if retailers can capitalize on shopper reservations about Amazon.
Optimize the Retail Supply Chain To Meet Customer Delivery Expectations
First things first: in order to create an environment where retailers can take advantage of Amazon’s weaknesses, they have to start by closing the gaps in existing supply chain processes. For example, retailers need an understanding of how their deliveries impact the entire customer journey. That means grasping concepts like:
- What percentage of inbound calls are “Where is my order?” (WISMO calls) and how much they cost the company;
- What percentage of deliveries miss their estimated delivery date (EDD) and why; and,
- What percentage of total shipping costs make up the last mile.
Industry-wide, around 30-50% of inbound calls to customer care centers are WISMO inquiries. Each of these calls costs roughly $5 to resolve. The final mile of delivery can make up to 28% of a shipment’s total transportation costs. A platform that can decrease the number of WISMO calls and reduce final-mile delivery costs can very quickly improve a retailer’s bottom line.
With this information, retailers can prioritize problems to determine which ones require immediate attention. Last-mile costs might be through the roof, so the focus is on optimizing delivery routes and carrier spend first. Or exception rates from damaged shipments might require be sky-high, causing the company to hemorrhage cash and damage customer relationships.
Layer In Desired Amazon Power Shopper Experiences
While optimizing the supply chain in parallel, retailers can also capitalize on consumer expectations to drive increased sales. According to Convey survey data, several key areas of focus for consumers are transparency and sustainability.
Create Levels Of Transparency That Can Compete With Amazon
This means being as clear and timely as possible about shipping charges, available shipping timelines, and a variety of shipping options. Convey survey respondents reported the following:
- More than half of those responding want delivery dates guaranteed during checkout.
- Nearly 90% want to be notified ahead of time (via email or text) of a late shipment.
- Just under 20% reported that delivery notifications are a reason for shopping with Amazon.
Retailers that can connect shipping options to product detail pages, proactively manage exceptions to intercept negative experiences, and notify customers immediately can create an advantage without the expense of fast, free shipping.
Highlight Sustainable Practices
By doing this, your team can appeal to shopper concerns about the environment, especially given the current sentiment.
- Over one-quarter of Convey’s survey respondents have negative feelings about Amazon’s environmental impact.
- Millennials disapprove of Amazon’s environmental impact 50% more than the average.
- One-quarter of shoppers who disapprove of Amazon’s ecological footprint still buy half of their goods on Amazon.
Without making major changes to business operations, retailers can highlight the ways they have implemented sustainable practices. That includes how the company reduces waste in the manufacturing process, where product materials originate, and what emission rates are for various shipping options. With over three-quarters of respondents saying they would wait a week for free shipments, slower shipping is definitely an option.
Pre-emptively Resolve Shipping Issues To Reduce Customer Friction
With a lot of the heavy lifting done, retailers are free to use the information at their disposal to solve problems before they occur. That means making more cost-effective shipping decisions ahead of time, identifying delayed or damaged shipments in bulk before they arrive, and working to reduce WISMO calls before they happen.
Here are a handful of success stories from Convey customers:
- Build.com transitioned from a static routing guide to an automated shipment request process that garnered a 10% immediate reduction in freight spend and a 10% savings based on carrier optimization.
- Grove Collaborative shifted from a manual, email-focused carrier workflow to a uniform shipping view across carriers, enabling the company to solve over 110,000 points of contact in 30 days and increase their AOVC by 50%.
- Bodybuilding.com went from a disparate carrier handoff process to a unified shipping view that allowed the company to proactively manage exceptions, resulting in a 27% reduction in WISMO calls and a 4.5% increase in on-time delivery year-over-year (YoY).
By taking data and acting on it before problems occur, retailers can work to create a more efficient, connected experience that can compete with the likes of Amazon.
Retailers Must Take A Multi-Faceted Approach to Win Amazon Prime Lovers
To lure new customers and gain loyalty, today’s retailers must look at their business from all angles. That means analyzing the supply chain, identifying the gaps, and working to minimize them. Understanding the weak points in Amazon’s strategy, which include transparency and sustainability, can also drive new opportunities for retailers to increase sales. And finally, taking a proactive approach to common customer friction points can keep customers from leaving – and bring them back for more.