Overview: Market Watch, the Wall Street insider websites reports that Amazon’s yearly revenues were $232.89 billion last year. Think about that Amazon’s 2018 revenues for just a minute. GM, one of the foundation companies in the world with its 20,000 dealerships had 2018 revenues of $147 billion. Walmart, with its 4,769 stores had revenues of $499 billion.
So Amazon with NO stores and much lower costs sits at 44% greater than GM and just under 40% of Walmart. If we dig a little deeper we realize that since its founding 25 years ago Amazon has discovered an entirely new business model. Jeff Bezos caught the proverbial “perfect wave” in 1994 or just 25 years ago. Keep in mind the first IBM PC was in 1981 (38 years ago) and the Internet was launched in 1991 (28 years ago).
To understand what Bezos has done with Amazon just take a look at Ford, Tesla, and Chrysler.
Impressive but a very static picture. There is a BUT, and its a big BUTT.
Amazon is growing its revenue and operating margins in double digits. Few companies are on the growth trajectory as Amazon is.
The fact is that Amazon is one of, if not THE most successful companies in the world. Its future is secure as it expands with Whole Foods, its technology services division, Amazon Web Services (AWS), its space program, its 3,326 satellites, its 3,000 GO stores, its 15,000 additional grocery stores, its delivery services, and its brilliant team.
What makes Amazon so good is its disciplined focus on shoppers.
Amazon knows how shoppers have changed and it continues to adapt to those changes.
Here’s how Amazon grows its customer-centric business:
- Amazon #1 focus is building its customer list. Local businesses think it is too much effort.
- Jeff Bezos is a disciplined leader who follows a strict routine with stringent requirements for team members at every level. Local business owners do not.
- Amazon has a set routine that it follows to reach out, engage, and market to customers. Local businesses DO NOT.
- Amazon rewards its 105 million Prime Member Customer List with special deals on what is now the biggest online shopping two-days – Prime Days. Prime Days are bigger that Black Friday and Cyber Monday.
One of the biggest reasons local businesses are under threat is that they do NOT recognize what Amazon understands in terms of shopper changes. Let’s dig in local businesses common behaviors:
- Local businesses think it is too much effort to build their customer lists.
- Local business owners are like firemen responding to the emergency bells ringing every hour. They are NOT disciplined leaders.
- Local businesses jump from one “silver bullet” to the next. There is no discipline to how they reach out, engage and market to local shoppers.
Have you figured out the answer to THE QUESTION: “What is the marketing strategy driving Amazon’s success?”
THE ANSWER: Amazon’s success is built entirely around growing its 105 million customer list. The best article I read on Amazon’s marketing strategy comes from the local business website My Local Bee. In their blog there is a post which details Amazon’s Secret Strategy is to build the world’s largest bird feeder“
The article lays out the impact of Amazon’s strategy on local communities,
“In every local community when enough local businesses fail, a tipping point occurs – the community falls apart because tax revenues fall; there are no jobs; local governments don’t have money for basic community services; and Main Street becomes desolation row. Suddenly, seeing Amazon boxes on all those porches doesn’t seem like such a good idea.”
Local Businesses are dying one customer at a time.
Everyone’s heard the saying, ““Death by a thousand cuts.”
Death by a thousand cuts is a figure of speech that refers to a failure that occurs as a result of many small problems. Death by a thousand cuts could refer to the termination of a proposed deal as a result of several small issues rather than one major one. This term could also apply to a product or idea that is destroyed by too many minor changes.
This is what is happening to local businesses as they fail to address how Amazon is taking away their customers one at a time. Take a moment and think about the total number of customers any local business has. For the restaurant down the street it could be a few thousand, for the hardware store a few thousand more, but for the local dress shop it could be in the hundreds. It doesn’t matter what the business is – Amazon is going after its customers.
Here’s how you know this is true. 54% of all online searches begin on Amazon. This is an amazing statistic. Those shoppers, who used to be loyal to local businesses, are now having shopping affairs with Amazon. Shoppers are having affairs with Amazon because they are BORED by how local businesses treat them.
Amazon is a local shopping kudzu.
Amazon takes over like kudzu. Kudzu is an invasive species that grows faster and climbs all over indigenous trees and bushes. Slowly, it suffocates the trees and bushes it has climbed all over.
To fail to understand what Amazon is doing is planting kudzu in your yard or local park. Year by year it spreads. Amazon is NOT going away. Amazon is kudzu for ALL local businesses. Amazon is going after every type of businesses: mattresses, autos, pharmacies, food, and the list goes on and on.
Learning to fight back against Amazon should be the number one focus of every local business.
The My Local Bee article goes on,
“Here’s the Amazon strategy in one sentence – “if you build a bird feeder for shoppers, then you don’t have to spend on advertising to bring them back.”
Amazon and Bezos KNOW that bird feeders are the most important tool in marketing today because they are in sync with shoppers who are walking around with their cellphones 24/7. Here is an mind boggling statistic about Amazon – it is estimated that 66% or 197 million US shoppers visit Amazon EVERY MONTH.
Will local businesses wake up?
Amazon has direct communication with 197 million US shoppers EVERY MONTH. This means 66% of US shoppers communicate with Amazon every month. Local businesses have not put together what it means for Amazon to have 105 million strong customer list, 54% of all online shopping searches, and 197 million shoppers visiting Amazon each month. In some ways it is too painful to wake up to the Amazon cancer.
Amazon is showing local businesses how to fight back!
However, once a local business knows what Amazon is doing then it is possible to do something about fighting back. There are three rules that every local business can implement today.
The Three NEW RULES of Local Business Success
- Copy Amazon. Every local business #1 focus needs to copy Amazon and build its customer list. The ONLY reason customers will sign up for direct communication with a local business is because they are going to get something GREAT. Amazon gives free shipping to people who sign up to their Prime program. Free Shipping is GREAT.
- Fight Amazon Every Day. A local business fights Amazon by creating one Amazon Beating Deal every day. It then communicates that deal to the people on its customer list.
- Communicate excitement. Everybody wants information if, and ONLY IF, it is about a GREAT DEAL, exciting or highly informative.
Understanding these three rules helps us to understand the core differences between Amazon and local businesses and why, if local businesses do not implement these three rules they will fail.
One Final Thought
Amazon, the tech giants, and the retail chains have a choke hold on local businesses and local communities. They are NOT going away. Fight back is not about attacking them but learning how to improve the local shopper experience.