First, you gotta know who you’re competing against. Can’t win if you don’t know how good the competition is.
And in this case, your competition is really, really good.
Slice Intelligence reported that 43% of all online retail sales in the US went through Amazon in 2016.
That's up from 33% in 2015 and 25% in 2012.
Amazon is more valuable than almost all the top brick-and-mortar retailers combined, according to Business Insider; if you add together the market caps of Walmart, Target, Best Buy and others the total amounts to $297.8 billion.
Amazon is worth $356 billion.
Amazon has a fleet of 45,000 robots across 20 fulfillment centers.
There’s a bidding war going on between 20 cities and states to be the home for Amazon’s HQ2.
Since 2000, Amazon has received $1.39 billion in tax subsidies from at least 129 cities, counties, and states.
You’re gonna be hard-pressed to compete directly against this E-tail behemoth.
But thanks to globalization and automation, small businesses around the world can carve out space for themselves and thrive in today’s economy even in the wake of Amazon’s dominance.
How Globalization Grows Your Business
Globalization is the opening of local and national markets to global markets - being able to sell to anyone around the world.
It’s also the interdependence between domestic markets and international markets - many countries would be far poorer were they not able to sell abroad.
Today, globalization is being driven by the internet. You can buy and sell physical and digital goods worldwide, making production, shipping, and customer service incredibly easy.
Small business owners are reaping most of the benefits of globalization.
Entry into the Global Market
A small business in Peoria, Illinois can now sell its products to consumers in Bangkok, Thailand. Before the internet, this would’ve been extremely costly and nearly impossible for the small business owner.
Now, it's commonplace, and small businesses are taking advantage of it.
According to the U.S. Small Business Administration:
“Small businesses play an important role internationally as they make up a steady 97 percent of all U.S. identified exporters. Since 2006, the value of exports coming from small businesses has grown from 28.9 percent to 33.6 percent, and the number of small business exporters is up 24.3 percent. Further, small business export value grew 35.5 percent faster than the large business share, and the number of small exporters outpaced large ones by 20.9 percent.”
This is outstanding news for small businesses worried about competing with giants like Amazon; access to the global market has leveled the playing field despite Amazon’s huge market share.
Ability to Hire Remote Staff
U.S. businesses can now hire freelancers from Singapore, virtual assistants from Sweden, and even remote staff on the payroll from South Africa.
Small businesses have access to resources that in the past were only accessible by large enterprises.
You don’t need to be constrained by geography to hire the best people for your organization anymore - allowing you to remain competitive, cut costs, and boost revenue at the same time.
Access to Amazon’s Customers
As Amazon grows and takes over whole businesses (more on that later), they provide many small businesses the ability to reach a massive audience and grow exponentially online.
According to Insureon and Manta, 68% of the 2,400 small business owners polled who sell products online say that Amazon has positively impacted their sales.
When asked if their revenue has increased as a result of selling products online:
- 43% say it has had a significant impact.
- 38% say their revenue has increased moderately.
- 19% say selling online only had a minimal impact on revenue.
Statista reported that as of the first quarter of 2018, 52 percent of paid units were sold by third-party sellers.
That means third-party sellers like small businesses sell more than Amazon itself.
So as of right now, competing with Amazon is simply a matter of using its platform to your advantage.
How Automation and AI Streamlines Your Business
AI is scary to most people, especially people working manual labor jobs - which is the type of work robots will probably be taking over first.
By 2030, 38% of jobs may be performed by robots, says PwC.
But that’s not necessarily bad news.
Sebastian Thurn, co-founder of Google X, said at the World Government Summit in Dubai:
"AI is a tool and what AI can do really, really well is getting rid of repetitive work," he said.
"So, if you are a worker, say a medical doctor or a lawyer who spends day in and day out doing the same thing, then having AI look over your shoulder and learn those skills from you, will make you a superhuman, a more powerful person.”
That also means AI will help you run your business more efficiently.
Here are a few specific ways AI will positively impact your business:
- Reduces Human Error
According to ZDNet, many laboratories are hoping to “hire” robots to perform the highly error-prone tasks of handling liquids.
That’s just one example of how robots will be used to reduce human error and work more precisely.
The bottom line, according to Robotics Business Review is:
The global market for robotic process automation (RPA) will grow to $2.46 billion by 2022, according to Markets and Markets. Research and Markets are more bullish, predicting $5 billion by 2022.
Many companies are evaluating automation to reduce the burden of tedious tasks on employees, but humans are still necessary for higher-value missions.
RPA can also be useful for workflow management and applying business knowledge.
- Improves Workplace Safety
According to GE, “robots are poised to toil at some of the dirtiest jobs in the world. Take sewer reconnaissance, for instance. Remote-controlled devices can crawl down manholes, navigate sewers, and investigate clogged sewer pipes.”
Because robots are superior at doing repetitive and dangerous work, they’re going to be used in many industries that require that type of work to be done.
Not only that, but they can be used to do things humans simply can’t, like deep space exploration.
Overall, the use of robots will allow humans to do safer work and avoid doing dangerous jobs.
- Remains Affordable to Use
With all the benefits of AI and robotics automating tasks in your business, you might be afraid of the price tag for such machines.
Luckily, many small businesses can now afford them.
As Bloomberg notes:
“Technological advances have made industrial robots more compact and kinder. Collaborative models, members of a new generation called cobots, have sensors to prevent them from harming real-life colleagues. They’re also easier to set up and cheaper -- the price can be as little as $25,000.”
And as more businesses adopt these technologies, the cheaper they’ll become.
How Amazon is still Growing its Empire
Despite small businesses gaining advantages through global markets and AI, Amazon is still growing its empire by either buying its competition or simply outcompeting them.
thThis is known as e Amazon effect.
Amazon.com was started by Jeff Bezos in 1994 in his garage in Bellevue, Washington on an investment of $40,000 and has grown to a net worth of $107.9 billion today.
Amazon’s astronomical growth has made Jeff Bezos the single richest person in the world.
All this to say that during Amazon’s meteoric rise, it snatched up one competitor after another.
Here’s a short list of the industries being decimated by Amazon:
Business Insider reported:
“Amazon is taking an increasing share of the US apparel market”, according to Morgan Stanley.
"Internet retailers (led by Amazon) have added $27.8 billion to their apparel revenue since 2005, while dept stores have lost $29.6 billion," analysts at the bank wrote in a note on Thursday. "This share loss appears at risk of accelerating given 1) Amazon's bigger push into fashion, and 2) consumer willingness/acceptance to shop fashion through Amazon.
Some would say that Amazon is “eating the retail world.”
One of their victims being Macy’s.
If other retailers can’t invent and innovate like Amazon, they’ll soon be gobbled up too.
Amazon started as the first online bookseller and now sells more books than any other outlet, so you know traditional booksellers are in serious trouble.
Admittedly, bookstores like Borders signed their own death warrant, but they partly went under because of Amazon.
From 2001 to 2008, Borders sold its books exclusively through Amazon.com. So just as the internet was starting to boom, Amazon exploded its online presence while Borders barely established their own.
And now Barnes and Noble is taking a turn for the worst.
At this rate, the only bookstores left will be Amazon’s and some small neighborhood stores with low overhead.
Amazon upset the grocery world after buying Whole Foods for $13.7 billion.
But Amazon isn’t just buying established grocery stores and changing them to fit their purposes, they’re also rolling out their own stores.
Amazon Go is the new checkout-less grocery store that could revolutionize how we shop. After opening its first store in Seattle, they’re already opening more stores in Seattle and Los Angeles.
If Amazon’s technology catches on, it’s only a matter of time before they run more grocery stores out of business or Amazon’s competitors adopt the new technology themselves.
How to Compete with Amazon and Other Giants with These 6 Strategies
As we already pointed out, all is not lost in the age of Amazon.
There are many things small businesses can do to protect themselves from the Amazon Effect and grow in today’s economy.
Here are 6 ways you can compete with Amazon:
1. Narrow Your Niche and Make People Passionate about Your Business
Amazon is in the “everything” business. It does it all. That means you can’t do it all. And you don’t need to in order to compete with Amazon.
As Netflix’s CEO Reed Hastings said in an interview with Recode:
“We’re not trying to meet all needs. So, Amazon’s business strategy is super broad. Meet all needs. I mean, the stuff that will be in Prime in five or ten years will be amazing, right? And so we can’t try to be that - we’ll never be as good as them at what they’re trying to be. What we can be is the emotional connection brand, like HBO or Netflix. So, think of it as they’re trying to be Walmart, we’re trying to be Starbucks. So, super focused on one thing that people are very passionate about.”
Find the thing that people love about your business, shrink your product offerings to only those that match what people love about your business, and exploit that passion relentlessly if you want to have a seat at the table alongside Amazon.
2. Sell Local Products
When 1,000 people were asked if they prefer to buy local, 68% of them responded yes. 59% even said they would pay more for locally made products if they had to.
What caused these decisions?
According to the report:
“Consumers cited quality as their most important determining factor when choosing to buy locally made products. 69% of respondents said that they think they can get access to more high-quality goods if they buy local items. In addition, 84% think that buying local can help the economy. And 73% think that buying local can help the environment.”
This is excellent news for you.
The more your products are sourced locally and sold locally, the higher your chances of capturing higher market share.
3. Sell Through Alternative Marketplaces
Amazon has helped many small businesses sell more than they otherwise would have.
However, Amazon has a nasty habit of ripping off top-selling products and selling their own branded variation of it at a lower price.
For that reason, it’s best to diversify your “marketplace portfolio” so to speak.
There are at least 13 major alternatives to selling on Amazon, such as Etsy, eBay, and Alibaba.
The more you build a customer base on a variety of marketplaces, the less control any one marketplace has over your business.
4. Promise Instant Gratification
Consumers are addicted to free shipping, 2-day shipping, and 1-day shipping.
If you’re a brick-and-mortar operation, you should highlight one of your major competitive advantages:
0-day shipping. Customers can walk out of the store with your product instantly.
Make this point a key part of your marketing campaign in your local community. Speed and convenience are powerful motivators.
5. Provide the Best Customer Service
Amazon is too big to provide excellent customer service.
But the smaller you are, the more engaged you can be with your customers - which fosters a loyal customer base.
As Neil Patel points out:
“One of the best ways to compete with Amazon is to provide something that they can’t. They can’t provide personalized, one-on-one service to human beings like you can.”
To improve your customer service, ask customers for feedback on their experiences. Make it easy for customers to reach managers. And hire people who truly care about giving customers a great experience.
6. Create Unforgettable Experiences that Consumers Can’t Get Anywhere Else
The “experience economy” was coined by B. Joseph Pine II and James H. Gilmore in their seminal article, Welcome to the Experience Economy.
The argument goes like this: as products become commoditized, consumers incrementally raise their expectations until they demand “staged experiences.”
Walmart, Chili’s, and CVS offer predictable experiences. No one is snapchatting or instagramming their experience at these places.
On the other hand, boutique shops, hole-in-the-wall restaurants, and popup bars fill the feeds of Snapchat and Instagram every day.
As an example, businesses like TopGolf provide an immersive golfing experience in addition to offering great food and drink.
The future of small business success is in being different, unique, and experiential.
Need Help Competing with Amazon?
You’re not alone.
A lot of small businesses we talk to would love to implement the tips we just laid out here but can’t because of a lack of capital.
Knowledge is good, but money can put it into action.
If you’re looking to expand your business to make it easier to compete with Amazon, you’re in the right place.