What Amazon Teaches us About OmniChannel Strategy in 2019

How would you rate your current omnichannel strategy

Unfortunately, many eCommerce stores are struggling to understand what factors go into an effective omnichannel retailing approach. 

In this article, we define what omnichannel strategy is (along with the key components necessary to make it succeed). Then, we explore how Amazon is succeeding in their omnichannel approach. Each section we pull specific actions you can  take to compete in 2019.

Note: This post has been updated on April 10th, 2019 . 

What is Omnichannel Strategy? 

Unfortunately, the vocabulary around omnichannel is murky.

For clarity, this article uses the following definitions.

  • Channel: Any medium where a brand can interact with a customer. Simply put, a channel facilitates a customer touchpoint. It can include physical touchpoints, such as a pop-up store, or digital touchpoints such as a mobile application, website, chat, or social platform. 
  • Multichannel Retailing/Strategy: Using multiple channels to sell merchandise through. The goal of multichannel strategy is to identify which channels to invest in. Channels are approached independently.
  • Omnichannel: Customer phenomenon where all sales and marketing channels are looked at as one entity.
  • Omnichannel Strategy: Optimizing key metrics (such as sales) by creating seamless shopping experiences across all channels. Omnichannel strategies take into account all retailing activities involved in successfully selling through channels simultaneously.

Omnichannel strategies assume customers move between channels.

They may research online and buy offline. They might begin a shopping session on your site, and complete it in-app while waiting in line.

The reality is, you customers will switch channels. An omnichannel strategy focuses on creating the best experience when they do.

What Amazon Can Teach Us About Omnichannel Strategy

Amazon’s stated mission is to be “Earth’s most customer-centric company”.

​They've adapted brilliantly to incorporate channels as they become relevant, and are an ideal case study in how to create an omnichannel strategy.

It's true that Amazon has vastly more resources than nearly any other company today. However, we can still pull lessons on how they approach multipole channels.

What we see are two key focuses:

First, Amazon focuses on the customer experience. They use data to create a personalized, responsive interaction across all every channel.

Second, they focus on integrating their channels in the backend. This goes beyond inventory and central fulfillment. It includes connecting customer data, and fulfilling customer's wants in whichever channel they prefer.

Amazon Prime and Data Unification

Data unification is a significant challenge in omnichannel.  You must be able to collect and connect data. Common data types include customer behavior, purchases, and demographic data.

You need to collect this data across devices.

Like most brands, Amazon unifies data via accounts. However, what makes Amazon different, is the magnitude account creation is incentivized via Prime Memberships.

Unite Customer Data Across Channels: Barilliance is built to track, store, and leverage customer data across channels. Request a demo here. 

How Amazon Prime Creates a Single Customer View

Amazon is a master at bundling.  

At the center of the Amazon ecosystem (at least on the B2C side) lies Amazon Prime. 

On the surface, Amazon Prime is an analogue to membership discount stores like Costco or Sam's Club. Invest in the membership and you get benefits.

The primary reason to invest in Amazon Prime is the promise of free (and increasingly fast) shipping.

Prime is pure convenience. It eliminates the biggest reason for cart abandonment (shipping costs), and creates a lock-in effect. To Prime members, Amazon is the first, and often only, destination when shopping.

Today, there are 95 million Amazon Prime members. This is despite the continued price increases, first to $99/year in in 2014 and now up to $119/year in 2018. 

To drive Amazon Prime membership, Amazon has layered additional benefits. In 2019, the list of benefits extends well beyond shipping. 

You can see the full list of Prime Membership benefits here, but below is a quick sampling. 

  • Free Prime Video Subscription: Unlimited streaming and access to movies and T.V. series. 
  • Various Discounts: Spanning premium streaming services such as HBO or Starz to Whole Foods Supermarket discounts.
  • Free Prime Music Subscription: Free access and streaming to a library of the 2 million most popular songs. 
  • Prime Wardrobe: Allows you to try on items you buy online before committing to purchase. 

And on and on and on. 

Amazon piles benefits onto Prime Membership because data unification is fundamental to a successful omnichannel strategy. It underpins Amazon's ability to understand customer preferences, fuels their vaunted recommendations, and creates a seamless experience across devices. 

Simply look at the first screen you are presented on Amazon's mobile app. 

How to Apply Data Unification

Your store probably already supports some form of account creation. The challenge is that for most stores, accounts are viewed as an annoyance. 

In fact, account creation is cited as the second most reason for cart abandonment

Consider how you can create incentives for your customer base to create and actively use their accounts. You can copy Amazon's playbook directly by focusing on convenience, shipping, or direct benefits such as Prime Video. 

Additionally, you should use technology such as Barilliance to automatically track and unify customer data across devices. Features like our Triggered Email Booster ensures you are capturing data even if they don't sign in. 

Lastly, you need to use this data in a meaningful way.

The reason our clients convert 73.25% more on returning customers is because they are able to create personalized recommendations and messages, tailored to their past behaviors and purchases. 

Amazon Echo and Channel Expansion

Omnichannel assumes customers cross channels fluidly in the same transaction. 

The challenge is establishing (and building upon) a direct relationship with customers in each channel.  Amazon aggressively tackles various channels in a variety of ways, and the Echo is an excellent case study on how to establish a dominant presence in a sales channel. 

How Amazon's Echo Extends Omnichannel Strategy into Voice

Voice is solidifying itself as an important channel for commerce. ComScore predicts that 50% of all Google searches will be conducted by voice by 2020. 

And, voice is increasingly being used to complete purchases. 

In February of 2018, OC&C Strategy reported that roughly $2 billion in sales were made over voice. However, that number is predicted to balloon to $40 billion in sales by 2020.

Before the Echo, Amazon was effectively locked out of the voice market. Consumers accessed voice through their mobile devices, and to a much lesser extent on other devices like desktop or wearables. 

It represented a major threat - even to Amazon, to not have direct access to customers.

Their solution? Create another device customers would use regularly that bypasses mobile. 

Amazon invented the "smart speaker" market in 2015. Today, they still possess an overwhelming market share of 70%. Some predict the market is growing as fast as 50% per year, with 50 million households already participating.

The smart speaker category changed the competive landscape of voice in a year. It gave Amazon direct access to customers who owned an Echo.

Today, consumers can easily ask Alexa to purchase any number of products, from toilet paper to headphones. Additionally, it acts as another channel for a number of Amazon owned services, including Audible and Amazon Music.

How to Apply Channel Expansion

The key lesson is establishing a direct touchpoint with customers. The good news is you don't have to create a whole new product category to do so. 

What new channels and touchpoints can you create with customers? Is it a direct, ongoing relationship? Can you continually educate, and motivate new and past customers.

One fantastic example is Lego. Their Youtube channel has gained 6M+ subscribers, with videos regularly receiving 500,000 - 1M views. Each video promotes the lego universe, or celebrates a new product coming out. It's one of the best examples of retention marketing I've seen. 

Improving Brick and Mortar Experience with Online Data

ECommerce makes collecting data easy.

Amazon leverages collected data in a number of ways, including how they think about traditional brick and mortar stores.

Expanding Into Physical Locations

Amazon is much more than amazon.com.

Currently, they operate 512 physical stores with  plans to open many, many more.

The truth is, the future of retail is multi-channel. Consumers do not shop exclusively online. Nor do they only shop in-store. They do both. And a successful omnichannel strategy focused on the customer experience and convenience needs to have a firm footing in both worlds. 

“Amazon is fully aware that they have to be much bigger in consumables and that omnichannel is what’s going to work in consumables.” - Wolfe Research

A successful omnichannel strategy connects offline and online channels. Below is one example of how Amazon does it.

​Leveraging Online Data In-Store: Introducing Amazon 4-Star

My favorite example of how Amazon leverages online data for physical use is their 4-Star concept.

The store is a physical extension of Amazon.com, using unique displays based entirely on customer data.

According to Amazon, “We’ve designed our stores around our customers - what they’re buying and what they’re loving. We’ve used customer ratings, reviews, and sales data from the hundreds of millions of products online to curate our store with features like 'Most-Wished-For' and 'Frequently Bought Together'."

While the concept continues to evolve, they currently use three types of customer data.

  • Reviews - The whole store is premised on items sold on Amazon.com with 4 stars and above rating.
  • Sales Data -Sales data is used to identify top selling items, and helps keep inventory turnover high.
  • Customer Data - Lastly, customer data such as Most Wished For items are identified and displayed.

​Next Steps...

The next step is to commit to creating the best customer experience for today's omnichannel shopper. 

Next, you need to select the right technology partner. Ideally, they can both create personalized touch points and connect data across both offline and online channels.

We've put together an in-depth guide on how to select a personalization partner here.

If you're interested to see how Barilliance can help your brand, you can request a demo here.