Amazon’s Customer Loyalty Is Amazing: Time to Become a Third-Party Seller?
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Amazon’s results over the past holiday season are mind-blowing. While the company holds some data close to its vest, like the number of customers that ordered and the dollar amounts those orders represented, it reported that this past Cyber Monday was the single biggest shopping day in Amazon’s history, surpassing Prime Day 2017, which until then was its biggest day ever.
Throughout 2017 its Prime membership has been the linchpin of its growth strategy. For an annual $99 subscription fee, members receive free two-day shipping for many, though not all purchases, unlimited streaming of movies and television shows with Prime Video, lending-library services for Kindle users and special discounts on products only available to Prime members.
Such special Prime services have enticed an estimated 70 million-90 million people to sign up for membership, though the company doesn’t reveal the exact number of Amazon Prime members. It did, however, report that in 2017, Amazon shipped more than 5 billion items worldwide via Prime and it signed up more new paid members throughout 2017 than in any previous year.
Amazon’s dominance of ecommerce in particular and retail in general will no doubt continue unabated this year. Amazon is simply “too big to fail.”
Signing up more third-party sellers is next on Amazon’s agenda
Now with its customer reach second to none, Amazon is intent on capturing more sales through its third-party sellers program. While third-party sellers are limited to a range of open categories in which they can list products for sale, other categories are subject to approval and require sellers to step up their level of commitment to Amazon to the professional level for an additional $39.95 monthly fee.
Nonetheless, such third-party agreements are appealing to many small businesses and individual sellers as the company reports, “More than 40% of Amazon’s total unit sales come from third-party selections.”
For small businesses seeking new customers, selling through Amazon can be mighty attractive. Over the past holiday season, the company reported, “More than one billion items were ordered from small businesses and entrepreneurs worldwide this season – and over just five days, from Thanksgiving through Cyber Monday, nearly 140 million items were ordered from small businesses and entrepreneurs.”
Why joining rather than fighting Amazon might be best for small businesses
Every small business is already competing with Amazon, like it or not. But rather than fighting it, which seems increasingly a losing proposition, maybe a better choice is to join it and see how it can help businesses reach new customers. As the saying goes, “Better the devil you know than the devil you don’t.”
A new study from Feedvisor, which describes itself as an “algo-commerce” company that uses big data and machine-learning algorithms to help online retailers make business decisions, has just published a study conducted among nearly 1,600 American Amazon customers in partnership with Walker Sands Communications.
Amazon Prime members comprised 65% of the sample, while 35% were non-Prime members. Written specifically for Amazon’s third-party sellers or businesses considering the opportunity, it gives an inside look at the customers who make Amazon their go-to destination for many of their shopping needs.
“One of the most interesting things we found in the study is that Amazon is truly the ‘one-stop shop’ for consumers,” says Claudia Hoeffner, Feedvisor’s vice president of global marketing. “Consumers go to Amazon for almost every activity possible in their shopping experience. And, for activities like browsing for new deals and discounts, comparing prices, and checking availability, Amazon is head and shoulders above other marketplaces and retailers.” Of note, the study sample was only conducted among US Amazon shoppers, not consumers in general.
Among the study’s key findings are:
- Amazon is addictive – An astounding 85% of Prime shoppers visit Amazon at least once a week, while 56% non-Prime shoppers report the same.
- Amazon closes the sale – One-third of Amazon users come to the site ready to buy. Further, over 45% of Prime members purchase on Amazon at least once a week. Its success rate with non-members is far behind, with only 13% reporting weekly purchases.
- Amazon is their one-stop shop – Compared with Walmart, eBay, Alibaba and Jet, Amazon leaves these competitors in the dust in terms of browsing products, deals, comparing prices and checking availability and delivery speed.
- Amazon is for savvy shoppers — Customers’ top reason for visiting Amazon is to compare prices (51%), and nearly half (44%) say they will always check prices on Amazon before purchasing on another site. When they find something they like, more than half (54%) say they always read the full product description. Product reviews play an important role in giving them confidence to buy, with just over 60% saying they wouldn’t consider purchasing items with less than a 4 ½ star rating.
The study further finds that Amazon users are rapidly adopting mobile devices in their shopping, While desktops remain the most popular method for customers to shop online (51%), mobile is rapidly gaining ground. Forty-seven percent of customers said that they shop using mobile devices, up from 41% who shopped with mobile devices last year.
“Amazon is a major player in the increased shift towards mobile shopping,” Hoeffner says. “Many retailers have realized that a streamlined mobile experience and app is a key factor in their bottom line, and Amazon has been at the forefront of this change in buying and browsing behavior. The company’s Prime users are also more avid mobile shoppers, with half reporting that they use mobile devices most often to make a purchase, compared to 41% of non-Prime members.”
In evaluating and using any research study, it is important to keep in mind the sample, in this case Feedvisor studied just American Amazon customers. For this sample, however, they deliver a robust report.
The key takeaway for small businesses considering partnering with Amazon through its third-party platform is the access it provides to Amazon’s dedicated, loyal and truly committed Prime customers. In comparing the Prime and non-Prime customers in the study, Hoeffner states, “Prime members are super users in the ecommerce world.” They shop more online in general (46% vs. 22% more than twice a week); they shop more on Amazon (85% vs. 56% more than once a week); and purchase more from Amazon (46% vs. 13% at least once a week.) In other words, they are ready, willing and able to buy from third-party sellers that list their products on Amazon.
Consumers, and most especially Prime members, trust Amazon as their shopping partner of choice. It’s reputation as a good company is growing dramatically. In 2017 it ranks No. 8 among the top 10 most reputable firms in North America and No. 18 among the world’s most reputable companies, according to the 2017 Global RepTrak study by the Reputation Institute. In 2015 it didn’t even place in North America’s top ten and advanced from No. 24 globally.
2018 maybe the year when small businesses reevaluate their position on Amazon. Rather than trying to hold back the tide, it may be time to catch the Amazon wave.
More about Pam Danziger: Pamela N. Danziger is an internationally recognized expert specializing in consumer insights for marketers targeting the affluent consumer segment. She is president of Unity Marketing, a boutique marketing consulting firm she founded in 1992 where she leads with research to provide brands with actionable insights into the minds of their most profitable customers.
She is also a founding partner in Retail Rescue, a firm that provides retailers with advice, mentoring and support in Marketing, Management, Merchandising, Operations, Service and Selling.
A prolific writers, she is the author of eight books including Shops that POP! 7 Steps to Extraordinary Retail Success, written about and for independent retailers. She is a contributor to The Robin Report and Forbes.com. Pam is frequently called on to share new insights with audiences and business leaders all over the world. Contact her at firstname.lastname@example.org.
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