E-retailers today are playing a dangerous game, and how well they play may well decide e-retailing's winners and losers.
The transparency retailers have into each others’ pricing is making repricing a daily, even hourly, activity for some, as e-retailers seek to offer the lowest price in an effort to draw consumers and win sales. That leaves some cutting their margins razor-thin or selling at a loss to gain customers. But customers are fickle; they shop around, and offering a low price once doesn’t mean a merchant will win a customer’s loyalty.
To wit: Every month, 80% of web traffic to Amazon.com Inc. is by returning customers, the highest returning-customer rate among Top 500 e-retailers. That’s hardly surprising. But the average returning customer rate for all other Top 500 merchants is 55%. That’s a lot of ground for merchants to cover if they think they can beat Amazon.
Amazon’s mix of selection, price and service is tough to top directly, but its e-commerce moves require everybody else to sharpen their strategies. Some top e-retailers are trying to outmaneuver Amazon on pricing (most notably of late is Sears Holdings Corp., according to industry data). But e-retailers more often pick which products are worth the fight, evaluating when to chase Amazon and when to back off, regroup and try to fight another way. You can read all about this quickly developing part of e-commerce in the story, “The Price is Right—Then it’s Not,” starting on page 20.
Also fighting to thrive in an increasingly crowded and competitive market are the 500 smaller and midsized retailers ranked in Internet Retailer’s newly published 2014 Second 500 Guide. The story “Growth Challenges” on page 30 shares how these retailers—with revenues ranging from a few hundred thousand to $21 million—are facing down challenges and distinguishing themselves from the competition. They may be North American e-retailing’s smaller players, but they often take the risks larger retailers avoid. And those risks result in some of the coolest innovations around—there are some really great ideas here; I encourage you to check it out.
I’d further like to direct you to the results of a survey we conducted earlier this summer to find out how keen North American merchants really are on global e-retailing. It turns out that while interest is pretty high, sales remain low. One key way merchants are testing global selling without making big investments is through established marketplaces operated by others. The results and accompanying story in which e-retailers share their experiences, starts on page 36.
While few e-retailers may be able to match Amazon’s success, there remains plenty of opportunity for retailers to compete successfully online in their own way. Go forth and conquer.
Allison Enright, Editor