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How would you rate your current omnichannel strategy?
In this case study, we explore Amazon's multifaceted omnichannel strategy, and highlight lessons any eCommerce store can apply.
If you'd like to skip the primer on what omnichannel strategy is and go straight to the Amazon examples, click here.
What is Omnichannel Strategy?
Unfortunately, the vocabulary around omnichannel is murky.
For clarity, this article uses the following definitions.
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.
Amazon's Omnichannel Strategy: Examples & More
Amazon’s stated mission is to be “Earth’s most customer-centric company”. Part of that is reaching customers where they are. For Amazon, that means expanding their channels, and creating a unified omnichannel experience.
They are an ideal case study in how to create an omnichannel strategy. There are two key principals to Amazon's omnichannel success.
First, Amazon focuses on the customer experience. They use data to create a personalized, responsive interactions, no matter which channels their customers are engaging them in.
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.
1. Amazon Prime and Data Unification
The first challenge for any omnichannel strategy is how to connect customer data across channels and devices. Typically, customer data such as behavior, previous purchases, demographics, product/category affinities, and more are siloed in each channel.
Amazon Prime is Amazon's solution to the customer data challenge.
Amazon Prime, simply put, is the single best incentive to create an account, and log in no matter which channel or device you are on.
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, the cornerstone of their omnichannel strategy
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.
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. The first action is to sign in, authenticate who you are, and continue to enrich your customer profile on Amazon.
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.
2. 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 Statista shows that the number of digital voice assistants are expected to grow to 8.4 billion by 2024.
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 tried to create a more direct relationship with customers with their Fire Phone. Unfortunately, Android and iOS had already locked them out of this market, and to this day that effort remains one of the worst performances in Amazon's history.
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 with the Echo, coupled with their new personal assistant technology, Alexa. Today, they still possess an overwhelming lead in market share, capturing more than 2.5x that of Google Nest and nearly 10x that of Apple's HomePod.
Amazon's smart speakers changed the competitive landscape, giving Amazon direct access to customers in a way similar to mobile devices.
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.
3. Leveraging channel dominance to build an ecosystem of products
Once you establish a channel, what should you do next? Your omnichannel strategy needs to extend beyond first contact. In Amazon's case, the Echo was a beachhead. It opened the door for Amazon to not only sell through voice, but create a whole new category of products to lead in.
The Echo speaker line was really an introduction to Alexa, a new way to engage with Amazon.
Amazon began expanding Alexa's capabilities in two ways. First, they allowed other hardware manufactures to use Alexa in their own products via skills. Second, Amazon invested itself in other form factors.
Today, Amazon sells everything from light bulbs to smart displays to smart plugs that all use Alexa as it's core differentiating factor.
Once Alexa becomes the default smart system in the house, it becomes much more likely that customer will add on more products to that system. Further, each added product adds functionality and benefit, making the whole Alexa system more valuable to the consumer.
And, best of all for Amazon, having Alexa a centerpiece of the home makes purchasing from Amazon even easier, multiplying the customer LTV from a customer purchasing an Alexa based system.
4. Focus on the customer experience
Our final example of Amazon's omnichannel strategy centers on Amazon Go and their continued focus on the customer experience.
Amazon has had their eyes set on the grocery category for a long time. In fact, as early as 2006 Amazon began selling groceries online. From an opportunity perspective, grocery is a massive $653 billion industry and growing rapidly.
However, this doesn't fully get at why Amazon wants to be at the center of grocery. The truth is, without providing grocery services to their members, they open the door for competitors to enter and compete with Amazon on every other category.
Now, after almost a decade, it looks like Amazon is ready to begin rolling out new store concepts and begin taking a piece of the grocery industry they have been aiming for.
Amazon Go stores focus on convenience. There is no checkout. As a consequence, there are no checkout lines. You simply us the Amazon Go app to enter the store, login with your Amazon login credentials, select the items you want, and walk out.
The theme of Amazon is the customer. Everything they do in their omnichannel strategy circles back to improving the customer experience.
Amazon Go stores follow a long line of technological feats used to make Amazon the most convenient choice, from 1 click checkout to same day delivery, to now using computer vision to remove checkouts from the store.
5. 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.
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.