By Jenn Markey
Competing with Amazon, or Walmart® or any every-day-low-price (EDLP) retailer on price has long been extremely challenging for smaller, independent retailers. But choosing to battle on assortment, strategically offering and promoting highly targeted products to a particular group, and differentiating on service, experience and convenience – including localization – is proving to be a reliable, profitable, and sustainable strategy. How can retailers know what products to focus on within a category? Surprisingly, Amazon reviews are now a good place to start.
The impact of user generated content
From Instagram® photos to product reviews, user-generated content has become an integral part of the shopper path to purchase. A recent study by Olapic found that 76 percent of consumers believe the content that average people share is more honest than brand-based advertising. For retailers, the key to leveraging user-generated content is keeping it real.
Amazon’s rule change shakes up the game
Not surprisingly then, in October 2016, Amazon eliminated the acceptance of new incentivized reviews on its site. This policy change has significantly impacted the relative perceived popularity of different products and brands on Amazon.com.
The impact for consumers looking for real advice on their next purchase is obvious, but this move also holds tremendous potential for retailers operating outside Amazon’s marketplace who are looking for shopper demand signals and preferences to realize better merchandising strategies.
This is because Amazon’s policy change makes these reviews a much more objective and accurate indicator of demand, including what’s trending up and down, especially at high volumes. But how do you get a large number of reviews without incentivizing reviewers?
The evolving role of marketplaces
As Amazon already knows, their marketplace is the source of all sorts of useful business information. They have been using their marketplace for years to determine price points on popular products and to figure out their own assortment strategy. As a result, Amazon’s marketplace is a fascinating place to learn about consumer behavior and competitor activity. Over 96% of Amazon.com’s endless product shelf comes from its marketplace, which acts as a test laboratory of sorts for Amazon.
What to do with Amazon’s marketplace reviews
The good news for other retailers is that this review policy change no longer restricts these shopper demand signals to Amazon. This valuable insight is now available to anyone with the power (in-house or through a third-party service) to aggregate and analyze review data from Amazon.com.
For example, in a 360pi analysis of vacuum cleaners, Shark® vacuums were receiving approximately double the number of positive reviews on Amazon as competitors Bissell® and Hoover® before the October 2016 policy change. Once Amazon banned the acceptance of new incentivized reviews, Shark® immediately became just marginally more ‘popular’ than its two competitors. Layering that insight with past sales data – quantity sold, turnover time, etc. – means any retailer selling vacuums can now make more informed purchasing decisions, based on a more predictive and demand-driven model of merchandising than the traditional reactionary model.
Make marketplace data your data
As a retailer looking to compete with some of the most price aggressive names in the business today, it is not going to work in your favor to compete on price long term. To survive in the modern environment, retailers need to take a page out of Amazon’s book and leverage the power of retail and shopper big-data to execute better merchandising strategies. So take a look at what Amazon’s marketplace sellers are doing, but just as importantly, investigate and learn what their marketplace buyers are quite literally saying to you. It can be the key to competing through better assortments and ensuring you’re offering the products your consumers want most.
Jenn Markey is the vice president of marketing at 360pi (360pi.com). Jenn is a key member of 360pi’s leadership team, providing market development expertise to support the company’s focus on enterprise retailers and brands. Jenn is a recognized retail industry thought leader and has been widely quoted in Forbes, CNBC, and numerous trade publications.