Have you studied the Amazon.com home page lately? If you’re an online retailer you should. By my count it now contains 13 pieces of personalization, 13 ways in which Amazon is addressing me personally, and I don’t just mean “Hello, Stephen Cobb.”
The fact that Amazon.com happens to know my name is not nearly as important as the other things that Amazon.com knows about me, like what products I’ve looked at lately and what things I purchased in the past. But why is this important to other e-retailers? Because if you’re not controlling and customizing the experience that visitors get when they visit your web site–personalizing that experience based on what you know about them–then there’s a good chance Amazon.com will eventually get those visitors. And Amazon.com is very good at turning visitors into loyal Amazon customers.
In this blog post I will examine the implications of Amazon’s growth for other e-retailers and what they teach us about the best ways to protect and grow ecommerce operations today.
Anyone in online retailing who is not yet convinced that Amazon.com “wants it all” should check the numbers. By some calculations Amazon “is responsible for nearly a third of all U.S. ecommerce transactions” (RBC Capital analyst Stephen Ju, in a research note, via Barron’s).
And here are some numbers from Internet Retailer to consider. Last year Amazon.com clocked a staggering 29.5% growth in U.S. sales, compared to an average growth rate of 11.7% for the 500 largest e-retailers. That’s against a backdrop of just 1.4% growth for U.S. retailing in general. Today, Amazon.com is almost 2.5X larger than its nearest rival for top spot in the Internet Retailer (that would be Staples.com).
As Amazon.com marches on, controlling and customizing the visitor experience is its signature strategy, as evidenced by those 13 points of personalization I mentioned earlier. Fortunately, although size has its advantages, new developments in online marketing technology mean that same strategy can be employed to great effect by smaller retailers (one definition of “smaller retailers” being everyone but Amazon.com).
So why don’t more online retailers do more personalizing? Why isn’t the customizing of messaging and promotions to specific segments of targeted site traffic the standard practice? One reason has to be the widespread perception that personalizing is a huge undertaking, a daunting IT project that requires massive resources, a complete re-design of the web site, and a labor-intensive re-write of your back-end software.
That may have been the case in the past, but it doesn’t have to be that way any more. Recent advances in technology mean that lightweight, low-impact personalization can now be performed by, and under the control of, the marketing department. What a concept! The people who know online marketing get the technology they need to do the online marketing and the freedom to use them at will.
Let me repeat that because it can take a moment to sink in. Highly granular customizing of messaging and promotions to specific segments of targeted site traffic can now be sourced by, controlled by, directed, performed and managed by, Tada! The marketing department.
What about all of the data collection and storage required for personalization, and all of the processing required for its analysis and segmentation? That used to be an IT resource nightmare but it can now be handled without using any internal IT resources. Even the action of displaying creatives on your web pages can be off-loaded. Marketing no longer needs to beg the IT department for “yet another piece of code” or “just one more bit of tweaking.” Thanks to clever third party programming, marketing may not even need to tell the IT department it’s doing this personalization stuff, except maybe as a professional courtesy.
So, here’s how things stand now. Over at Amazon, they’ve built their business around a highly relevant, personalized experience with each customer. They’ve done this through countless millions of dollars invested in custom software. To anyone competing with Amazon, which in a sense means just about everyone, this can be daunting. Watching Amazon steal market share month after month at their expense.
On the other hand, online retailers now have more options available to them for creating a compelling, relevant, personalized experience for each customer. That experience spells increased conversion, order value and revenue growth. Done right, it also means a bigger share of the market, regardless of the size of your competitors.