Amazon Can't Beat Smart Small Businesses
It's almost taken as a given that small businesses are hurt by Amazon. That when the E-commerce giant moves into a space, your small operation is doomed. This is a shockingly short-sighted and incorrect view of what makes a mom and pop small business special, and needs to be retired right along with every other notion about competition and what makes a business succeed.
It starts with your brand.
If you ask the average business owner what their brand is, they have no idea. If they do give you an answer, they'll usually give you such trivial information as their slogan or their origin story or their industry. Some will try to sound savvier and give you their mission statement. They'll regale you with tales of how they only source the most organic, local, vegan and seasonal toilet seats possible. If you want a comfortable butt, they're your store. They want to save the rainforests, breed pandas, and end climate change. The problem is that they're usually doing this at the expense of their brand.
Take for example Panera, a perfect example of a company that's focused on all the wrong things. For years they made delicious soups, salads, and sandwiches. When they first appeared in New York, they opened up a bunch of locations in suburban areas loaded with foot traffic and were booming the entire time. One of the locations near me was so busy that on any given day you rolled the dice. If your plans were for a Panera lunch you'd better have a backup plan because you may not get in the door.
Panera's brand was comfort food that was delicious, satisfying, and connected to the things you loved as a child. Warm apple pie scents greeted you as you walked in along with the smell of fresh coffee. A bakery stocked with pastries and breads that made your head spin could give you whiplash trying to take it all in. Sandwiches were simple with things you recognized and loved, the soups were ones you always knew and loved, and the salads? Classics. Somewhere along the line, Panera lost sight of their audience and their brand and pushed into "healthy" and "clean." They took things off the menu that were favorites, changed recipes, and added a bunch of hipster food that, while tasty, was not what people were going to Panera for. The barrage of Asian-inspired noodle bowls, mediocre vegetarian wraps, and sandwiches with combinations dreamed up in a fever dream by some underpaid avocado-toast connoisseur had as many misses as it did hits, and while I can't call anecdotes evidence, I can tell you that foot traffic in the locations I went to was on a steady decline. This morning, driving to my office, I noticed that a location near my office no longer had the signage up. It was closed.
Analysts have noted that their numbers over the last few years were not great including the average ticket per customer and the repeat traffic per location. Customers may have been coming, but they weren't spending as much, and they weren't returning.
It's easy to blame the closure on COVID. It's 2020. Everything is COVID's fault. All the terrible decisions in states like New York are blamed on COVID, not the politicians making them. But, much like the COVID blame, the Panera blame rests squarely on Panera: they lost sight of their brand.
With the Panera story in mind, we have to understand what a brand actually is before we can understand how it works for a business.
Let's take my own brand, for instance.
Handmade by Vincent Ferrari is the company name. It carries no meaning on its own other than that the things you buy are made by Vincent Ferrari, whoever the hell that is. No one knows who I am, right? Right. So what's my brand, then, if no one knows who I am? Simple. My "brand" is that I make custom things for people.
"But that's not catchy!" you're screaming at your screen. You're right. It's not. But it's understandable, and it's encapsulated in my slogan, "Custom for Everyone."
A brand is your unique proposition of value. Nothing more, nothing less.
My unique proposition of value is that I will make you a beautiful thing that suits your desire to have the thing, while giving you the pride in the fact that your thing is unique. I do it for everyone, meaning it's my goal to commoditize the world of custom things. I can deliver you, the average consumer, something beautiful, and custom that you can reasonably afford.
Do you know why I don't fear Amazon?
Because Amazon can't hurt a brand-aware business.
Amazon cannot hurt my business. It's that simple. I can charge what I want for a cutting board, and someone can find a cheaper one on Amazon, but they'd still likely buy one from me. Why? Because Amazon does not match my unique proposition of value. Amazon can offer a faster delivery time for a lower price, sure, but I'm not competing with Amazon on either of those terms.
Where I'm beating the pants off Amazon is that I'm offering a higher quality product that's custom made, to your specifications and not mine, and sent right to your door. I know what my brand is, and I'm not competing with Amazon on theirs. Their unique value proposition is their speed and price. I'm not trying to be faster or cheaper. I'm trying to be better and custom.
Amazon cannot run me out of business because they cannot offer my product.
What if I sell things that are already commoditized?
Now we get into the interesting discussion: what happens when you and Amazon sell the same product?
The implication has been clear for years: if Amazon sells your product, they will sell more of it than you. I won't burn thousands of words saying it isn't true, but I will point out that if that's what you're focusing on, you're focusing on the wrong thing.
In 2008 I needed to buy a car stereo. I went to 3 Best Buy locations, none of which were able to help me. Since my window of time was short, I couldn't just leave it and come back. A local mom and pop shop was able to do the work, and did so in a few hours on the day I brought them the car. They were more expensive, had a smaller selection, and were slow(ish) but they took care of me. When Best Buy couldn't, they did. This store wasn't about beating Best Buy on anything but the level of service they could provide.
And believe it or not, people do respond to that. If people are buying things from your business only based on price (like a $0.99 store, for example) and your only value proposition is price, then you can expect to lose all of your business if someone comes in and undercuts you on price. If, however, your unique value proposition includes things like the quality of your work, your customer service, and your attentiveness to the customer, that's a much harder thing to drive a wedge between. A happy customer will pay more for your product if they're happy, and it'll be very hard to drag them away from you by saving them a few cents.
The anti-Amazon argument is fatally flawed, and fatalistic.
If you were to listen to the mainstream business media, once Amazon moves into your sector you're doomed. If you sell books, Amazon will beat you. Computer parts? Amazon will beat you. Pet food? Amazon will beat you, but the arguments all assume that customers only shop on price, and will deny the instant gratification of buying something in a store to save a few dollars. Some will, to be clear, but that's not the tidal wave.
The uncomfortable truth is if Amazon can take away your business to the point where you can't continue, you did a terrible job running your business, and an even more terrible job establishing your unique proposition of value to your customers. Amazon doesn't mean doom to you and your business, it means that you need to be better at communicating the who, why, and what of your company.
Get to work.