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What is the Amazon Effect? How does it affect your business?

31 Jan, 2023 | Uncategorized

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It may be hard to believe, but Amazon was only launched in 1994, a little under 30 years ago. In the intervening years, the company has redefined retail, changing the way most people buy products, and domineering the ecommerce space. The company is even making moves into brick-and-mortar, changing the way shoppers buy there as well.

Other online marketplaces and retailers have followed Amazon’s lead (though, to be fair, eBay -initially called  AuctionWeb – was set up in 1995), but the company named after the world’s biggest rainforest has remained at the top, generating a stunning $469.8 billion in 2021 and taking 37.8% of the online market share – nearly 32% more than its closest competitor Walmart.

Given this, Amazon’s influence on ecommerce – and retail in general – has been immense. It led the way by making online shopping popular, and it has influenced the business model ever since. This leadership has not only been acknowledged, it’s been given a name: The Amazon Effect.


What exactly is The Amazon Effect?

Amazon is and always has been a disruptor, a major disruptor. It has completely changed shoppers’ habits and expectations, and it has revolutionized the whole retail business. That’s The Amazon Effect.

Amazon’s disruptions can be seen in the following ways:

How Amazon’s business model has affected shoppers:

  • Instead of traveling to brick-and-mortar stores or the mall, shoppers can now get their purchases from the comfort of their home armchairs with a simple click on the online site; their packages are then directly delivered to their doors.
  • With so many online sites to choose from now, it’s easy to shop around and find deals.
  • As ecommerce has grown, Amazon has set the standard for faster and faster turnarounds; shoppers now expect their packages in two days without having to pay for postage.
  • Because of Amazon, shoppers get a lot more service than they used to. In addition to faster deliveries, they can decide where they want to collect their purchases and can easily make returns and exchanges.

How Amazon’s business model has affected retailers:

  • First and foremost, more retailers are going online to sell their products, either putting their goods on marketplaces like Amazon or setting up their own sites.
  • Online marketplaces have elevated mom-and-pop stores and given visibility to garage-based businesses.
  • Virtual selling spaces have worldwide reach, and the increased business they have created has impacted supply chains.
  • Amazon started a pricing transparency that everyone else has had to follow. Since Amazon started this practice, other retailers, online and offline, have had to display the cost of each item they’re selling also. This has created competition that’s brought everything down to the lowest possible price. This transparency has also resulted in price uniformity – most retailers charge the same amount for a particular item.
  • Some retailers try to stand out by offering specialized services like personalized shopping. One supermarket in Holland has even started offering a slow checkout, an accommodation created for lonely seniors to have a chat and a cup of coffee.
  • Hybrid shopping models are becoming more and more common. These allow shoppers who buy online from a brand’s site to pick their items up personally at that company’s  brick-and-mortar store almost immediately; they can also use these physical locations for returns.
  • A newer development in the retail space is for online marketplaces to open physical locations themselves. Amazon Go is a good example. With 28 of these stores in the US, they’re an effort to attract those remaining shoppers who like to see and feel items before buying them.


How can a retail business survive the Amazon Effect?

There’s no getting around the fact that Amazon’s business model has changed the retail landscape forever. The company’s dominance in the space also means that it’s better for all other sellers to embrace this new world order rather than fight it.

Here are suggestions to get your sales company up to speed:

Step 1: Know what your customers are looking for.

You have to know what your customers want and how they behave, how they interact with your site or interface with your physical store. The way to do that is by collecting data on these areas. Data can be collected through questionnaires, AI, and your consumers’ buying/browsing history. A/B testing is another way to go. This, essentially, gives respondents a randomized choice of options to select from, and then uses statistical analysis to draw conclusions.

The point of all this data is to find out what kind of experience your buyers want. Do they want you to offer them a cup of coffee as they walk in your store, or do they just want clear directions to the items they’re looking for?  When you know the  answer to these questions, you can make the necessary changes to attract customers – new and old.

Step 2: Use up-to-date technology

Modern automated systems like point of sale (POS) and inventory management software (IMS) streamline your business operations and, in turn, give your customers a smooth, simplified shopping experience.

Apart from these, here’s a list of a few other technologies you can leverage:

  • Contactless payment,
  • Payment options,
  • Sales analytics,
  • Artificial intelligence (AI),
  • Internet of things (IoT) devices,
  • Cashier-less stores,
  • Tracking inventory through QR codes and barcodes,
  • Buy online pickup in-store (BOPIS), and
  • Omnichannel outlets.

Physical stores should also complement their outlets with a website. It’s something else that Amazon has led shoppers to expect. Shoppers now like the idea of checking something out in person and buying it online, or vice versa.

Cin7 Core’s inventory management software has crucial software that integrates online and offline, and it automates your inventory as well.

Step 3: Upgrade your in-store experience

As already hinted at earlier in this blog, in order to compete in this new environment and attract customers, those of you who have brick-and-mortar stores are advised to give your shoppers an experience, an encounter they can interact with and react to.

Malls, for instance, are putting in exhibitions and other interactive displays to bring shoppers back. Here are a few examples of the innovations some chain stores have incorporated in their physical locations to engage those who walk in:

This beauty product-carrying chain of stores has trained its sales staff to be experts in the brands they sell. This way, instead of just ringing up sales, the beauty advisors, as they’re called, can actually assist and give knowledgeable advice and recommendations.

Before Covid, this skateboarding-inspired shoe and clothing store had a 30,000 sq. ft. space in London that offered a cinema, café, live music venue, and an art gallery. One floor also housed a mini ramp, concrete ramp, and a street course for skateboarding.


To summarize

While the history of retail has shown that success stories come and go (think Sears), there’s no getting away from the fact Amazon has forever changed the way retail operates. It’s up to each retailer to decide how they want to update and create the experiences shoppers now expect, but one thing’s for sure: automating is essential for all.

Our Cin7 Core is a good bet for this. Check us out. Click here to schedule a 20-minute call with one of our experts today.

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