Image via Wikipedia
People naturally tend to gravitate towards the underdog. This can be seen from the way all the underdog movies from Hollywood seem to do well as soon as they are released. There is this currently small but growing trend amongst the online shoppers where they are pulling for the underdog retailers over and above the giant retailers who they believe to be bullies. This is true for any ecommerce industry on the internet including everything from online jewelry to online storefronts for grocery items.
Harold Pollack, a doctorate holding professor based in the city of Chicago was a person who used to spend around a thousand American dollars on Amazon every year. However, recently Dr. Pollack decided to switch from big retailers to online retailers for every product he decides to buy on the internet. The result of this switch by Dr. Pollack is that he now has a conscience free of all guilt. According to Dr. Pollack, he does not approve of the way that the giant online retailers behave and does not want to support their behavior with his ‘consumer dollars’.
The battle of giant retailers and small local storefront that took place in almost every city of America only a few years ago has now graduated onto the internet world. Just like you regretted that the mom and pop shop round the corner was run out of business by the grand Walmarts of this world, the same seems to be happening to the independent retailers on the internet. While Walmart still plays the role of the giant retail bully in the online world, other contributors include the largest online retailer Amazon and Target.
These online retail giants pick on their independent online brethren in terms of everything from online jewelry to electronic items. The techniques used by these giants are alarmingly discounted prices, free shipping and easy to use applications. These business practices are only sustainable on the basis of economies of scale which means that the independent retailer cannot keep up with them.
The proof of the domination of the giant retailers over the independent retailers is evident from various statistics. For example, during the holiday season big online retailers saw a revenue growth of 19 percent on a year on year basis. In contrast, their smaller independent brethren only managed around a little more than a third of what they recorded. The smaller retailers recorded a jump of around 7 percent during the holiday season on a year on year basis.
However, the independent retailers may be small but they still have a lot of fight left in them. They are fighting back with their own specific tactics. For example, you will find many online jewelry storefronts not having price comparisons or offering freebies that anonymous websites cannot. In addition to this, the really smart entrepreneurs have also started trying to play on the sympathies of customers who have mindsets similar to Dr. Pollack. The independent retailers are encouraging such customers to think of them as the online variants of the mom and pop shop at the corner.
The phenomenon was explained by Michael Walden who is a professor at North Carolina State University. Michael Walden, who has expertise in regional economics, states that people are trying to support local stores with the difference that local is not local anymore. His reasoning behind his statement is that people have a general distrust for giant economic entities that represent monopolization of everything to them.
Another small online store owner Lacy Simons says that she has personally noticed customers trying to cement their determination to shop local. Lacy Simons is the owner of Hello Hello Books which is located in Maine but has an ecommerce website as well. She also said that as smaller retailers cannot go too far in trying to compete with big retailers, their primary hope lies in the development of an emotional or personal connection with their customers. This connection, to an extent, is also expected to counter the lower prices being offered by the big retailers.
During the recent holiday season, the simmering problem gap between the small retailers and the supersites came to a boil as the former raked in the majority of money spent in the holiday season. For instance, in the month of November and December, the 25 biggest online retailers earned around 70 percent of all the ecommerce money spent. This is an improvement from the last year. The improvement is to the tune of 3 percentage.
Owing to the fact that Amazon has been on the forefront of the aggressive marketing tactics, it has managed to also rake in a lot of criticism from different quarters of society. A good example is the fact that Amazon.com offered significant discounts on all its holiday products during the holiday season. This is only made possible by the fact that Amazon could pool the profits from its other businesses such as cloud computing. In addition to considerable discounts, Amazon also offered free overnight shipping for a slew of its products and advertised its price checking app through linked discounts. Despite the fact that Amazon states that it is catering to its customers, it has even received criticism from the political arena. Senator Olympia Snowe from Maine called it an “attack on Main Street businesses”.
Sucharita Mulpuru, an ecommerce analyst at Forrester Research, seems to agree with the senator in that she stated that such tactics from Amazon is just another contribution to its own reputation of being an online bully. As consumers themselves are smart enough to spot such tactics and their effects on the smaller businesses, many of them have decided that they will stop supporting such supersites. However, Michael Walden in response states that while the intention is valid the economics often do not support it that much.
The Chief Executive of Powell’s Books in Portland, Oregon, Emily Powell, when asked about the phenomenon, stated that people are attracted to them because they want to support independent retailers and feel better about it. However, she also stated that it is only possible to use guilt to attract a buyer for so long, especially looking at the recessionary economic environment that is now prevalent.
Fortunately, there are other strategies that independent retailers can use to attract customers as well. A few stores try to carry items that are hard to find anywhere else on the internet. For example, Powell’s Books tries to leverage its subscription service wherein it offers an additional product with a new book. This could be anything from a related book to even candy. The idea is to create a personalized touch that cannot be matched by big corporate entities which depend on systems more than people.
While this is one tactic, there is one which is completely opposite to this one. Some stores decide to not carry any items that are available at the websites of the online retail giants. A good example of this is the baby store Giggle. According to the founder of the store, Ali Wing, her store cannot compete with Amazon when it just decides to drop prices of certain products out of the blue on any day. Her reaction to not being able to compete is simply to drop the products in question. She says that this way she keeps her brand from getting damaged with the reputation that Giggle is an expensive store.
Another strategy is to give products a different name. This is the strategy that Lori Andre is following with respect to her store Lori’s Shoes. She has asked her vendors to just give the shoes she carries different model names and different labels. This can prevent shoppers from comparing prices of her products with other stores. While this strategy is never approved of by the customers it is still worth considering for small retailers for all products whether they are shoes, baby products or online jewelry.
There are certain other solutions from various independent retailers as well. The most innovative of these is an online marketplace for small retailers, which was established by Lesley Tweedie who partially owns Roscoe Village Bikes. The online marketplace known as the Little Independent according to Ms. Lesley has received decent responses from people who value ethics and want a different shopping experience. As Ms. Lesley saw many people in her store trying to compare prices through their Smartphone apps, she decided to also start a ‘buy it where you try it’ campaign on social media networking sites such as Facebook and Twitter.
Amazon, from the other end of the arena, explains that it is actually helping smaller online businesses to stay afloat through its own Amazon Marketplace program. It says that this program gives small business owners access to Amazon’s large customer base, its technology and even its marketing strategies. Needless to say, these smaller businesses are expected to pay a percentage of their revenue to Amazon in return.
Peter Faricy, the General Manager of Amazon Seller Services, states that for a lot of small to medium scale businesses, these facilities are not something that they can provide for themselves. He further specified that seller products were even included by Amazon on their general promotions programs such as Price Check.
While the sentiment should be appreciated, certain smaller business owners still say that Amazon’s pricing system cannot be matched by any small business. The prime example of the kind of damage that these supersites do to smaller online businesses is Mike Stewart who used to own Feather & Fly, a sporting goods store in Tennessee. Mr. Stewart saw his customers being pulled away by online supersites so he decided to sell his products online as well. However, when he came up against the prices being offered by such supersites, he decided to just shut up shop. His parting words were simply, “we did have good customer loyalty here but the internet is a killer”.