Amazon, Walmart, Target, Costco, and other large retailers have competitive advantages over small ecommerce or brick-and-click businesses, making it difficult to compete on identical products. But this does not mean that small businesses cannot be profitable and successful.
Competing with ecommerce behemoths like Amazon is a popular topic in the retail community. Practical Ecommerce receives countless press releases and pitch emails describing how a new platform, new tool, or new technique will allow small ecommerce businesses to compete with Amazon and the like.
Some of the pitch letters we receive imagine that Amazon, Walmart, and similar companies are small business killers, crushing mom-and-pop shops with extra low prices and superior logistics. They imply that these companies have unfairly usurped retail and the only way to attack and slay these monsters is to use the solution the letter is promoting.
In truth, many, if not most, small retail businesses online or off don’t really need to compete with Amazon or Walmart. They probably should not even try.
Large Retailers Have a Competitive Advantage
If your small-or-medium sized ecommerce business is selling a product identical to one that Amazon carries, Amazon likely has several competitive advantages over your business. This is especially true if you are “selling” in the traditional retail sense.
Because Amazon is both a retailer and a marketplace, you can buy items there directly from Amazon or from a third-party retailer, and, thus, see examples of these competitive advantages.
On December 1, 2016, four merchants on the Amazon marketplace were selling six packs of black, Adidas men’s athletic crew socks for shoe sizes six to 12. These merchants included Amazon, Botach Tactical, ShoeMall, and Soccer Firm.
Amazon offered the lowest price for the socks at $14.89. The highest price was $18. While these retail prices do not tell us what Amazon or any of these merchants pay (wholesale) for these socks, Amazon presumably believes that it can meet its sales and profit goals selling this package of socks for much less than its smaller competitors. This ability to offer a lower price is a competitive advantage.
Amazon is making two free shipping offers. Amazon Prime members will simply get free shipping. Other Amazon customers will get free shipping with a total order of $49 or more.
While two of the other sellers are also making free shipping offers, Amazon’s is better. Prime members who ordered on December 1 would likely receive the socks by no later than December 5 and some Prime customers could receive the socks by December 2 or 3. The earliest expected delivery date for the socks from other sellers was December 7.
Amazon has a much larger and more developed fulfillment infrastructure. The company is built to rapidly pack and ship orders. There are few occasions when a small retailer will be able to ship more efficiently and inexpensively than Amazon.
Sell Different or Protected Products
Given these advantages, it can be very difficult to compete with Amazon, Walmart, and other large retailers on identical products.
Rather than trying to sell directly against Amazon, small-and-mid-sized retailers may want to either sell different products not typically found on Amazon and similar sites or sell products that are, in a sense, protected with manufacturer approved pricing — MAP.
For example, if you wanted to purchase Topman White Cactus Badge Tube Socks, you would need to buy them from Topman. You cannot find them on the Amazon site or on the Walmart site. Thus, Topman does not have to compete with Amazon directly.
Certainly, there is competition in the sense that both retailers are selling socks, but there are differences in the products offered. Topman does not need a lower price for its socks since Amazon is not offering an identical product. Topman does not have to compete against Amazon’s logistics because it is not selling an identical product.
Similarly, an online store that sells custom t-shirts does not have to compete directly with Amazon or Walmart. While all three — the t-shirt retailer, Amazon, and Walmart — will compete in the sense that all sell t-shirts, they do not compete for a particular shirt. For example, the Double X Colorful Offset Men’s T-shirt shown in the picture below is not available from Walmart.
Sell Products in a Different Way
You can also sell products differently than Amazon or Walmart.
BarkBox is a subscription service offering a monthly selection of curated dogs treats and toys. Each month, BarkBox customers receive a themed collection of items for their beloved pet.
In a given month, there will be between four and six items in the BarkBox. Some of these items will be unique to BarkBox. But many are items you can buy from large retailers like Amazon. For example, recent BarkBox shipments have included Sojos brand dog treats, which one can buy from Amazon.
Nonetheless, BarkBox is not really competing with Amazon, because it sells differently than Amazon. While it is true that both sell identical products — Sojos treats, for example — what BarkBox subscribers are buying is fundamentally an experience, not a product.
GORUCK sells rucksacks, gym bags, fitness gear, and apparel. In general, shoppers can buy similar items from Amazon, but GORUCK doesn’t really compete with Amazon. In fact, GORUCK has, in part, built its business around customer relationships. The company hosts military style training events.
GORUCK customers have personal relationships with the company. They have, oftentimes, been to GORUCK events and met GORUCK instructors. When they buy a rucksack they are not comparing specs or shipping estimates. They are, instead, buying from a trusted advisor and expert in the field.
The ecommerce industry likes to talk about competing with Amazon and other large retailers. Some would even demonize them for using their competitive advantages like price and logistics. But these companies are really just using their strengths to serve customers.
Small-and-mid-sized retailers can also play to their strengths. They can find success and profit without trying to outsell a larger, better-equipped competitor.