This is a guest post by Andrew Youderian of eCommerceFuel.com.
Few companies can strike fear into the hearts of ecommerce merchants like Amazon. Its massive scale and focus on growth over profits allows Amazon to offer pricing that many smaller merchants simply can't compete with.
As an ecommerce entrepreneur myself, I would have an easier time hating on Amazon if it wasn't such an outstanding company. But unlike many huge organizations, it does a great job of providing quality customer service. And if you're an Amazon Prime member – like I am, full disclosure – you get free, fast shipping on just about anything you'd ever want.
So how can small merchants like us compete with such an appealing giant?
Brand Yourself as a SpecialistAmazon's massive size allows it to benefit from economies of scale, but such a wide scope can also be a weakness. With so many products for sale, it's impossible for Amazon to offer specialized, expert guidance.
SonicsOnline founder Dave Huckabay has taken the opposite approach, choosing instead to become laser-focused with his ecommerce catalog. He focuses exclusively on ultrasonic cleaners for jewelry and industrial use, a niche most people probably don't even know exists.
Take a product found on both his site and Amazon: the GemOro Ultrasonic Jewelry Cleaner. The item costs $120 on SonicsOnline, almost double the $67.95 it's listed for on Amazon. Yet it still manages to sell well on Dave's site.
So how does SonicsOnline compete with Amazon? Though not professionally designed, the SonicsOnline page is chock full of information, including videos, manuals and detailed specs. Perhaps most important is that customers know they're buying from a company with highly focused niche expertise. They can get specialized help for specific questions or problems.
The combination of quality information and industry expertise is powerful and has helped SonicsOnline grow to approximately $300,000 in annual revenues. When asked about successfully competing with Amazon, Huckabay said:
When done properly, real expertise comes across in a website. You can't fake it, and reviews by your customers are not a substitute.
By becoming a true niche expert – and successfully conveying that through your ecommerce store – you'll be much better equipped to compete against Amazon without having to rely on razor-thin pricing.
Create Your Own ProductsCreating your own product is undeniably the hardest (and most expensive) way to get started with eCommerce. But if you have a great idea and the resources to pull it off, it's probably the best way to build a highly profitable business and successfully compete against Amazon.
Just ask Dan Andrews of ModernCatDesigns.com. He and his business partner, Ian Schoen, were surprised at how expensive – and ugly – cat furniture was. So they decided to create their own line that would blend in with modern homes. Here's their popular 'modern kitty litter box' as an example:
One of the biggest advantages of manufacturing their own product was drastically better margins, which led to increased profits and growth opportunities. While many small resellers don't have enough margin to profitably advertise, pay-per-click has been an integral part of helping Modern Cat Designs grow to approximately $120,000 in annual revenues, despite having a catalog of only eight products.
Perhaps best of all, manufacturing allows you to control product distribution and set pricing guidelines to protect your margin. On competing with Amazon and pricing issues, Andrews said:
People buy from us because our products are unique. You just can't find them on Amazon. We also make sure that the dealers we do sell through follow strict pricing guidelines to prevent pricing wars.
Creating your own product isn't for everyone, but it's a great way to successfully compete against Amazon.
Sell With a Deeper PurposeBy connecting with the core values of your customers, you can build a loyal and passionate customer base that isn't shopping based on price alone. A quick Amazon search reveals more than 330,000 different shoes for sale. Yet Tom's Shoes has built a successful business based on the premise of donating a pair of shoes for each pair sold.
Hipcycle.com is another site with a deeper purpose: to reduce waste by selling products made from previously discarded material. The concept, called “upcycling,” is used to turn bike sprockets into bowls and computer waste into light fixtures. Here is one of their most popular products, Grey Goose Vodka rocks glasses:
Founded barely a year ago by Andrew Sell, the company already has two full-time employees and a sizable presence on Facebook.
When asked how Hipcycle positions itself to compete against Amazon, Sell replied:
We are passionate about diverting materials from landfills, and our customers want to support that. And we're definitely in the business of building the company one customer at a time and turning them into evangelists for our brand and for waste diversion.
Notice that he didn't mention fast shipping or insanely low prices. Instead, Hipcycle connects with customers over a deeper purpose – one that can't be found on Amazon.
Opportunities Still Exist for Small Merchants
Amazon's rapid growth, scale and pricing power make it a force to be reckoned with online. But despite its sizable influence, it's still very possible to succeed as a small merchant. You just have to be smart about how you position yourself in the market.
So how do you plan to compete against Amazon? Let us know in the comments.
Written by Andrew Youderian. For more on successfully competing with Amazon, download Andrew's popular free eBook on growing a successful ecommerce business. You can also follow him on his blog, eCommerceFuel.com.