Reality speaking: The Vulnerabilities of Amazon and Online Retail 

Doom and gloom announcements foretelling the demise of brick and mortar stores never cease, but the data doesn’t support that message. The International Council of Shopping Centers reports that 78% of consumers prefer to shop in-store, and physical stores still generate 94% of total retail sales. 

Take Wal-Mart. Less than 20 years ago headlines screamed “Wal-Mart can’t be beat”! The seemingly unstoppable Walmart juggernaut repeatedly entered towns and cities of all sizes and forever changed the retail landscape. Wal-Mart first captured the #1 spot on the Fortune 500 List of companies in 2002. While Amazon has risen to #7 on the list, Wal-Mart is still the number one retailer in the world. 

The truth and reality of those future retail predictions is baseless from both a fact and sentiment basis. In 2019, eight out of 10 of the top U.S. e-commerce platforms, including Amazon, have both brick and mortar and e-commerce presence as online-only platforms are proving to have limited appeal or long-term profitability. 

According to a Google/Ipsos online survey, 61% of shoppers would prefer to buy brands that have both a physical and online presence as opposed to only an online presence. 62% of shoppers want to touch and feel the products and 49% want to take their items home immediately (1). And, nearly 80% of shoppers will go to the store to buy when they have an item they need or want immediately (1).  Gen Z shoppers are opposing this trend of online-only purchase habits. An IBM and National Retail Federation report stated 98% of Gen Z consumers purchase products offline some or most of the time.

Related: Amazon Prime Members Prefer Shopping Locally

What does that mean for natural retailers? It’s time to change the narrative and remind your customers that your physical store is more alive and relevant than ever. The action now is to focus on the total customer experience and expectation. 

Online sales, specifically on Amazon, are showing its vulnerability and overall flaws in safety and security of the marketplace. This erosion in Amazon trust offers opportunities for natural retailers in these four areas: 

  1. Dynamic Pricing Practices
  2. Consumer Information Security
  3. Retailer Margin Erosion
  4. Consumer Selection

 

1. Dynamic Pricing Practices

Amazon and other e-tailers apply a practice called dynamic pricing. Pricing online can fluctuate minute by minute based upon a number of criteria including competitor pricing, customer buying habits, customer location, and more. Much like what Uber has often implemented, dynamic pricing is a form of “surge” pricing. Target recently received a maelstrom of consumer backlash when it was found to be raising online prices to customers who were searching online prices while physically in the store. Prices displayed while a customer searched from their car at the back of the Target parking lot were approximately 15% lower than when the customer viewed the same items in store. Target has since changed its pricing policy to indicate online versus in-store pricing. While Amazon itself claims to not allow “surge” pricing, its third-party sellers are found to be at fault in this regard. Reports ahead of Hurricane Florence in the Carolinas last year showed several 100% increases for water and other basic supplies. Additionally, third-party sellers account for 54% of Amazon sales with the average consumer having little awareness about the differences between direct from Amazon Sellers and third-party sellers. 

Related: Core Vetting Keys for Lapping Amazon at Retail

Natural Retailer Opportunity: Assure your customers you promise to offer honest and competitive pricing without concern for issues such as surge pricing or any pricing games.

 

2. Consumer Information Security

There have been ample stories about identity theft from online platforms. Hackers and breaches can result in identity theft and account compromises. Less known, but equally egregious, are retailers who sell their customer data for marketing opportunities for which the consumer never gave authorization. A 2019 BigCommerce Survey indicated that three quarters of consumers believe retailers are collecting email addresses, physical addresses and phone numbers; 56% of consumers believe online browsing falls into the scope of a retailer’s data collection. More and more consumers are questioning the role these data collectors are serving in the growing issues of spam and telemarketer nuisances and scams. 

Related: The Amazon Effect on Dietary Supplements

NR Opportunity: Online data security is a legitimate concern for your customers, and you should be continually vigilant. While identity theft is prevalent in many sectors of retail, let your customers know your store is in tune with this concern and that you continue to provide security and protection for any information shared. Reassure, on an ongoing basis, the commitment to never sell or share their information with any third party. 

 

3. Retailer Margin Erosion

The Amazon concept of bringing an overflow of sellers to its platform made for an exciting opportunity for many wishful entrepreneurs. While eBay offered the opportunity to sell product as an individual based on auction selling, Amazon provided a more professional selling and buying experience. In many cases, the same type of consumer was enticed to enter the marketplace. Over the years, the Amazon premise of fair and equitable margins has changed to an ever-increasing game of margin erosion for the sellers. Most sellers will tell you that the more tenure and success you have on the Amazon platform, the higher the fees and services contributions are expected by Amazon. 

Related: Amazon-Whole Foods Two Years In

NR Opportunity: Online sellers are often selling products at unsustainable prices, making the likelihood of continuous product quality and customer service quality questionable. The opportunity is to make your customer a long-term customer based not solely on price but on value:

 

  • Communicate with your customers frequently and conversationally to determine what they want and need from your establishment. 
  • Build a community of customers by providing a delightful customer experience, not just a transaction. Surprise your customers with great service and customer support before and after the sale.

 

4. Product Selection

Amazon became the go to place for brands and retailers to offer low price and convenience in one location. Recently, Amazon has been using the promise and premise of a fair and equitable meeting place for selling product against the brands and retailers that have been the core of the Amazon marketing for almost two decades. The curved arrow in the Amazon brand reaches from A to Z depicting the full spectrum of products Amazon portends to provide. While retailers and brands have worked to demonstrate new ideas and markets, Amazon has been progressively creating a bevy of private brands that are receiving priority or replacement positioning for brands being sold on Amazon. Imagine how unpleased your vendors would be if you took advertising dollars to promote their brands and then placed those ads next to or behind ads for your own private label brand. Imagine your shelves stocked with product but placed behind private label product only to be seen if the customer chose to navigate around the front facing product of your choosing. This is what is happening in many sectors of the Amazon marketplace. 

The nutritional supplement “aisles” at Amazon are receiving a major reset. Since June, the number of dietary supplement brands offered on the Amazon website has been cut almost in half. We have not been able to determine the criteria for removal of sellers, but it does not seem to be tied to responsible marketing efforts by Amazon but instead more visibly to lessen the competition with its own brands.

Even while eliminating many sellers for unknown reasons, though, as of September 29, 2019, Amazon has surprisingly continued to allow one company—Confidence USA—to continue selling on its site, despite the fact that the Department of Justice filed a complaint against Confidence USA to stop selling product. 

WholeFoods Magazine Article May 24, 2019 DOJ v. Confidence USA

Related: Counterfeit Supplement Concerns at Amazon; NPA Points to SSCI to Protect Consumers

NR Opportunity: The message is that your establishment does not engage in unfair business practices, perceived or real. The action is to provide a marketplace dedicated and transparent to the needs of the customer. Consumer selection is curated through careful vetting, which we wrote about in our April column.

 

The Bottom Line

The reality is the marketplace will ultimately be dictated by the organizations that best meet the needs of the consumer, long-term, whether they’re online or offline. Not every consumer has the same needs or priorities but, with careful determination, your establishment will find the customer that can appreciate the long-term value you and your team provide. While direct to consumer companies calculate their approach to the market in terms of ‘lifetime customer value’, this term has not been in the common jargon and calculations of enough retailers. This is the real economics for success and should be a consideration for every consumer who walks through the door.

 

References

  1. Google/Ipsos, U.S., “Shopping Tracker,” Online survey, n=2703 adults 18+ who shopped in the past two days, response based on top 3 box 7-point scale, April–June 2018.
  2. Google/Ipsos, U.S., “Shopping Tracker,” Online survey, n=3,613 online Americans 13+ who shopped in the past two days, Oct.–Dec. 2017.

Note: The views and opinions expressed here are those of the author(s) and contributor(s) and do not necessarily reflect those of the publisher and editors of WholeFoods Magazine.

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Scott Steinford, Founder, Trust Transparency Center
Scott Steinford has built a career of leading, learning and mentoring. Through immersion in many aspects of the supplement and pharmaceutical industry Scott has worked to redefine and improve business practices within the healthcare industry with an emphasis on transparency. His experience ranges from entry level to CEO and positions include organizations representing ingredient supplier, ingredient manufacturer, retail brand, private equity, M&A due diligence expert and trade organizations. Scott has a Pre-Law Bachelor’s Degree from the University of Texas at Arlington and a Master’s of Science Degree in Law from Champlain College. Scott currently is Executive Director for the CoQ10 Association and President of the Natural Algae Astaxanthin Association (NAXA) and Managing Partner of Trust Transparency Center; a boutique consulting organization dedicated to assisting companies seeking to improve both their internal and external trust transparency. Scott’s prior experience includes CEO of Doctor’s Best and maintained a pivotal role with a variety of ingredient manufacturers including Eisai, Kaneka and was a founder of ZMC-USA.

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