Why Consumers Pick Amazon, and What You Can Do About It

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If you’re not first, you’re last. The old saying may sound harsh, but it’s especially true for retailers who are struggling to preserve their marketshare against Amazon. Today, 61% of Americans start their product searches on Amazon, making it the number one shopping destination. But why? If you think it’s as simple as a free shipping offer, you’re wrong. We surveyed 100 Amazon users and found three key insights for retailers.

1. Consumers pick Amazon because they have a better product selection

While free shipping is great, 31% of respondents pick Amazon because it is a “one stop shop.” Consumers know they can see almost every possible purchase option in one place, and they can narrow down the list of choices by scrolling through the product reviews (the second reason people choose Amazon over other retailers).

But there’s good news. On Wednesday, Google and Walmart announced that they are teaming up on Google Express, a site where shoppers can buy products from a combination of retailers in a single transaction. With the partnership, Walmart will add one million SKUs. Additionally, all retailers opting into “Purchases on Google” will now be eligible for Google Express, giving shoppers access to an even greater selection of products and creating a bigger shopping destination. Google is also dropping their $95 Prime-like annual membership fee, instead allowing shoppers to take advantage of discounted and free shipping offered by the retailers they are purchasing from. In the future, consumers will be able to use their voice activated Home devices to order (or reorder) goods from their favorite retailers via Express.

While it won’t level the playing field with Amazon, it’s certainly a step in the right direction. Google and Walmart have already stated they are not trying to build a “me too” solution, rather they are laying the infrastructure for how consumers will shop in the future. If Google can create a place that gives consumers a plethora of choices and an easy, affordable way to buy, they can help retailers chip away at Amazon’s ecommerce market share.

2. People pay for Prime memberships to get free shipping

Three out of every four survey respondents said they bought a Prime membership to get free shipping on their purchases. They also want it fast, with 67% saying they signed up because of Amazon’s affordable (or free!) same day, one day, and two day shipping options. This shouldn’t come as a surprise, and if you want to remain competitive online, this has to be a part of your strategy.

Retailers who sell products that are not exclusive to their brand are most at risk. If you’re on par—or even slightly above—your competitor’s price, a free shipping offer will increase your chances of winning the sale. Make sure to test reduced and free shipping offers in your ad copy and extensions as these incentives may earn you more clicks over others options. Retailers who have a brick and mortar presence have a unique advantage. By using ads to direct local shoppers to pick up online purchases in nearby storefronts, consumers can get their goods in real time. Retailers can also save money on shipping costs by using local stores as mini fulfillment centers. Local delivery services can get products into the hands of customers faster at a lower total cost.

3. Consumers buy electronics, home goods, and books on Amazon

We asked survey respondents which categories they buy from the most. Nearly three out of four (73%) of them said they buy electronics, followed by home goods (65%) and books (56%). Retailers in these categories will have a harder time competing with the giant because margins—particularly for consumer electronics—can be low. Consumers who make purchases in the first two categories tend to spend more time doing research before making a purchase, which is why it’s so important for a retailer to have a presence throughout this buying process. Additionally, retailers should make sure their ad management platform uses comprehensive data like keywords, product, commerce, and pricing data to make sure they’re running the most efficient ad program possible.

So what products do consumers purchase the least on Amazon? Only 21% of respondents said they buy food and grocery, and even fewer (14%) buy automotive-related items. Just as Amazon made a major power move this year in its bid for Whole Foods, we anticipate they’ll try new ways to increase purchases in all categories offered.

Looking Ahead

It’s no secret that Amazon has created a convenient and efficient shopping experience that’s difficult to match, but by developing a deep understanding of how your customers find you, and why they choose you, you can focus your resources on the areas that will have the greatest impact. This may mean making merchandising changes, offering customers an incentive for more product reviews, improving the mobile experience, offering free shipping, investing in new 3rd party data sources, or trying new ad types. By putting the customer’s interest first, you’ll never end up last.

About the data:

• 100 respondents
• 54% aged 25-34, 19% aged 35-44, 16% aged 18-24, 11% aged 45-54, 5% aged 55-64%
• 51% male, 49% female
• HHI: 36% $25k-$49k/yr, 28% $50k-$74k/yr, 18% $0-$24k/yr, 11% $75k-$99k/yr, 7% $100k+/yr
• 51% Suburban, 27% Urban, 22% Rural
• 59% has no kids, 41% has kids
  

In conclusion, retailers who want to compete with Amazon need to focus on offering a wide product selection, affordable and fast shipping, and excellent customer service. Retailers should also pay attention to the categories in which Amazon dominates, such as electronics, home goods, and books, and find ways to differentiate themselves in these areas. With the recent partnership between Google and Walmart, retailers have a chance to expand into retail media networks and offer consumers an even greater selection of products.

Are you interested in leaning into retail media networks like Amazon? Subscribe to our blog and reach out to us today.

Andrea McFarling