How to beat Amazon at its own game
Amazon’s success, bolstered by the pandemic-driven shift to e-commerce, is inarguable. With revenue of $302 billion in 2021 and more than 157 million Amazon Prime members, the company is a formidable competitor to most retailers. What’s more, it is now expanding into the pharmacy space with its “Basic Care” private label line of over-the-counter medications and Amazon Care clinic launches.
While Amazon may seem like it’s doing everything right to win the customer, it also faces significant challenges and limitations. Shopper trust continues to be a struggle, as Amazon appears in the news regularly with claims of counterfeit goods and fake reviews. The lack of curation creates headaches for shoppers. Buying cross-category in a one-size-fits-all shopping experience can be challenging for shoppers, and for conversion. Lastly, a pure-play e-commerce model presents financial headwinds to long-term profitability in the retail pharmacy space.
While it’s tempting to race to beat Amazon at its own game — offering the fastest ship-to-home options and earth’s largest selection — retail pharmacy is a long-standing retail format that shoppers know and love. Many retailers have spent decades honing their assortment strategies, understanding their customer, and developing trust and training their staff to help guide shoppers to live their best life.
The limitations of e-commerce marketplaces present retail pharmacy with an opportunity to differentiate — and win. Rather than focus on the fastest shipping or largest assortment, a tried-and-true strategy of differentiation will likely produce the best outcomes. Below are four ways to sustainably win against e-commerce giants like Amazon.
1. Build and leverage a trusting relationship with shoppers.
For Amazon, shopper trust has wavered in recent years, compromised by risk of counterfeit goods, third-party sellers and fake reviews.
With a low barrier to entry for third-party sellers to list their products, digital marketplaces are ripe for safety issues, often being cited as the least trustworthy sources for products we put in or on our bodies. In fact, 23% of U.S. shoppers describe themselves as being “hesitant” to buy supplements online.
As Marketplace Pulse’s Juozas Kaziukenas reported to The Verge in 2019, “The same powers which built Amazon, which is the infinite shop, the infinite shelf, and the open marketplace, is also what’s now causing many of the issues it’s having — the counterfeits and frauds like this hijacking.”
Retail pharmacy already has a leg up on Amazon when it comes to relationships, given the human element, product knowledge and expertise available in physical stores and through pharmacists. Ensure you’re fully exploiting this advantage by taking a few extra steps to build shopper trust, both in-store and online:
- Make sure the shopper knows that, as a retailer, you carefully select your products and suppliers to maximize quality and safety. Tell this story to your shoppers through your website, signage, email communications and more;
- Carefully vet your e-commerce experiences for fake reviews. Take swift action when you find them to protect the shopper experience; and
- If you offer marketplaces, slowly add sellers you know and trust, and put thoughtful programs in place to police their actions.
2. Present a curated assortment plan that has a point of view.
As more shoppers transition purchase behavior to e-commerce, Amazon’s minimal focus on curation also poses headwinds for growth. While it seems that more assortment would lead to increased sales, more assortment may not drive a great shopper experience or loyalty. In fact, according to a survey conducted by Digital Commerce 360, only 31% of shoppers cited “breadth of assortment” as a key reason they shopped on Amazon. With tens of thousands of search results for any given search term, decision fatigue can hinder shoppers from finding the products they want.
In retail pharmacy categories such as health care and beauty, where shoppers often have a shopping list worth of items to buy, each of these small decisions can be overwhelming. As Scott Galloway wrote, “Choice is a tax on your time and attention. Consumers don’t want more choice, they want confidence in the choices presented. They want someone else to do the research and curate options for them.”
Here are ways that retailers can maximize the benefits of a curated assortment:
- Keep a tightly curated, easily shoppable assortment that represents your shopper’s needs. Is your shopper interested in new beauty, cruelty-free products or brands that help them manage issues related to aging? Whatever it is, ensure your brands and products speak to your shopper and drive a cohesive message; and
- Ensure the physical and online experiences are easily navigable to save your shopper time and energy relative to the competition. Ensure signage and online search directs shoppers to the products they’re looking for. Make sure product categorization is clear.
3. Customize the shopping experience for the category.
In addition, Amazon’s one-size-fits-all shopping experience offers little room for category-level customization, such as shopping by medical issue (i.e., sore feet) or by ingredients (i.e., paraben free). Lastly, category-specific loyalty programs are difficult for retailers such as Amazon to replicate due to selling products across so many categories.
- Customize the online shopping experience for the category. With fewer SKUs than Amazon and a focus on many fewer categories, retail pharmacy has an opportunity to get more granular in site navigation, such as allowing a shopper to select Skin Care > Moisturizers > Facial Moisturizers > Oil Free Moisturizers;
- Offer product reviews on specific attributes such as fragrance, ingredients, etc.; and
- Take full advantage of your shopper loyalty and sampling programs. Understanding the shopper and offering benefits and customized, category-specific offerings that suit their demographics and needs is a clear point of differentiation. Ensure these programs transition easily between in-store and online.
4. Leverage physical locations as a competitive advantage.
Particularly in retail pharmacy, the lack of an omnichannel experience puts marketplaces such as Amazon at a disadvantage with the shopper. The ability for the shopper to easily compare packaging and ingredients of typical pharmacy items and consult a pharmacist are critical conversion drivers that are challenging, if not impossible, in an e-commerce format.
In addition, retail locations provide opportunities for cost savings in programs such as buy-online-pickup-in-store (BOPIS), gaining efficiencies by picking from stores, and larger basket building. While Amazon has been quick to offer same-day and even one-hour shipping, shoppers aren’t always looking for the fastest delivery. In fact, a recent study by Coresight Research showed that delivery speed was actually cited by only 40% of survey respondents as the “most important factor” in shopping online.
If retailers offer — and focus — on fast online shipping options, they’ll do so at a great cost, which might not translate into value for the shopper. As Rodey Wing of Kearney says, “Delivery doesn’t have to be a hero moment.”
- Ensure store staff and pharmacists are well-trained on everything from the store format to product assortment so they can easily answer shopper questions and provide insight; and
- Encourage fulfillment methods that contribute to long-term financial sustainability. While a ship-to-home option is critical in today’s competitive e-commerce landscape, encourage the shopper to visit the store for special offers or displays, and ensure your BOPIS experience is easy and convenient.
While Amazon may seem like a formidable competitor, it isn’t perfect. Knowing its risk areas — such as shopper trust; a challenging, one-size-fits-all shopping experience; shopper decision fatigue; and financial vulnerabilities related to ship-to-home — will help competing retailers develop differentiated strategies.
Focusing on building shopper trust, a curated assortment, category-level shopping customization, as well as leveraging physical locations for economic sustainability, will help retail pharmacy and other competitors to e-commerce marketplaces succeed long-term.