E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
Smaller e-retailers detail how they compete in an Amazon world.
In the David and Goliath world of e-commerce, smaller web merchants can feel daunted going against Amazon.com Inc., No. 1 in the Internet Retailer Top 500 Guide. But carrying unique products, cultivating supplier relationships and offering top customer service can help to ensure success, online retail executives said this week at the eTail conference in Palm Springs, CA.
U.S. Auto Parts Network CEO Shane Evangelist defined the problem. "What do you do as a seller of commodity-based products when you face Amazon?" he said. Because consumers can easily search for auto parts and prices using a search engine and get results from a handful of e-retailers selling identical products, the decision often comes down to price. And on that front Amazon often wins the day, Evangelist said.
He said U.S. Auto Parts, No. 59 in Internet Retailer's Top 500 Guide attacks this problem in three ways. First, it offers a line of private-label products. "Amazon is really good at taking a SKU number, putting it in a search result and pricing it lower," he said. By owning the product line and not selling it on Amazon, U.S. Auto Parts controls the pricing and margin of its private-label products.
He also said U.S. Auto Parts builds relationships with parts suppliers to make sure the retailer receives product ahead of Amazon. The last part of the e-retailer's approach is to find products Amazon and other competitors aren't selling. "Go where they are not," Evangelist said. "Go analyze what competitors aren't selling and go get it."
Brad Wolansky, who recently left his position as CEO of The Golf Warehouse, said customer service can enable e-retailers to differentiate themselves from competitors. Unlike U.S. Auto Parts, private label and deep discounting aren’t options for the e-retailer, a unit of Redcats USA, which is No. 33 in the Top 500 Guide.
"People want to buy the brands they see when they're watching golf on Sunday afternoon," Wolansky said. But brand manufacturers often set strict rules that prevent retailers from selling their products at a discount. As a result, most e-retailers sell products at the retail prices set by the manufacturers. The e-retailer now focuses on making customer service the best it can be because, Wolansky said, that turns a one-time customer into a repeat customer. "If we can bring them back and make them a repeat customer and then turn them into raving fans for us, that is going to be the differentiator between us and the next folks," he said.
Flower and gift e-retailer FTD.com's competitive advantage comes from carrying products that no one else does, said Michael Burgess, executive vice president of FTD.com's consumer division. FTD Group Inc. is No. 71 in the Top 500 Guide. Over the last few years, the e-retailer focused on developing exclusive lines and brand partnerships, he said. For example, FTD.com now sells branded lines of plants and flowers through partnerships with Better Homes & Gardens magazine and Vera Wang. It also sells brand-name gift arrangements with Godiva chocolates and Starbucks coffee.