Amazon's power continues to grow by leaps and bounds, and even brands that had shunned the online retail giant, like Nike, are deciding that they can't afford not to sell through Amazon channels.

For retailers not named Amazon, the company's unrelenting march towards retail dominance is no doubt discouraging. But every Goliath has its David and Amazon is not impervious to competition. 

Here are four weakness Amazon has that other retailers might be able to take advantage of.

1. Fake reviews

Despite its best efforts, Amazon has a fake reviews problem. According to a newly published BuzzFeed report, “a vast web of Amazon review fraud lives online, and it's designed to evade the company’s efforts to thwart it.”

Amazon claims that fake reviews, the majority of which are designed to help unsavory third-party sellers boost their Amazon rankings and sales, make up a “tiny” portion of all reviews, but an analysis of reviews conducted by an independent Amazon review checking platform ReviewMeta found that nearly 10% had “unnatural” characteristics.

Fake reviews pose a threat to Amazon's business. After all, if customers come to distrust reviews, it could eventually dent sales and force Amazon to make big changes to its marketplace.

How retailers can exploit this weakness

While fake reviews can be difficult for any retailer to detect, for obvious reasons Amazon is a target unlike any other. The challenge faced by retailers not named Amazon is that in some cases products they sell might not have enough reviews.

There are ways retailers can encourage more reviews and they can also craft content that helps customers make purchasing decisions. This content could include reviews and ratings pulled from third parties, such as magazines, as well as detailed evaluations created by staff experts.

2. The rise of no-name brands

In Q4 2017, Amazon marketplace sellers accounted for over half of the retail giant's unit sales. What's more, in all of 2017, global sellers generated 25% of these third-party marketplace sales, an increase of 50% year-over-year.

Many of those sellers are companies, primarily from China, that are manufacturing products under their own brands. In many cases, these products look similar to branded products in their categories, but are a fraction of the cost.

While price-conscious consumers are less likely to care about brand, and in some cases having an unknown brand could even be an advantage, the quality of some of the products manufactured by these no-name brands has been called into question. 

In fact, in the electronics category, for example, customers have even been put in harm's way. In 2015, security researchers identified 30 cheap tablets sold on Amazon that came pre-installed with malware. Based on their estimates, over 17,000 of these tablets were sold to Amazon customers in 150 countries.

How retailers can exploit this weakness

Retailers that sell products made by well-known brands, and those that don't have third-party sellers, should look for opportunities to play up the brands they sell and highlight product attributes that directly and indirectly speak to quality.

3. Counterfeits

For years, Amazon's marketplace has come under fire for being a hotbed of counterfeit activity. As with fake reviews, Amazon has attempted to address this problem. It created a Brand Registry to help protect brands and says that “brands in Brand Registry on average are finding and reporting 99% fewer suspected infringements than before the launch of Brand Registry.” 

But given the number of third-party sellers in Amazon's marketplace, the retailer's sales volume and the hefty profits that counterfeiters can make, it's no surprise that counterfeit products are still available on Amazon.

In fact, according to a recent Guardian investigation, Amazon “is rife with potentially dangerous counterfeits and other knockoff goods”, including used items that are being sold to customers as new. The Guardian even found that some counterfeits were delivered to customers through Amazon's Fulfilled by Amazon program, which allows third-party sellers to store their goods at Amazon warehouses and have Amazon handle order fulfillment.

How retailers can exploit this weakness

Here too retailers should look for opportunities to highlight the quality of their offerings. Where applicable, they should also consider promoting the fact that they are authorized sellers for specific brands.

In certain markets, such as luxury, offering additional safety measures can be especially helpful. For example, TheRealReal, a luxury consignment platform, aggressively sells customers on the fact that it authenticates the products it offers for sale in its marketplace.

“We employ 50+ brand authenticators, gemologists, horologists and art curators. They inspect thousands of items each day, so you can be sure every item is 100% authentic,” TheRealReal tells customers on its website. The company even provides bios for some members of its team of authentication experts.

4. The growing popularity of experiential retail

Amazon is all about efficiency. It has spent billions of dollars perfecting the art of allowing customers to click a button and have a product delivered as quickly as possible to their homes. This efficient customer experience is hard to beat, but it's not the only kind of experience that consumers are seeking.

Increasingly, retailers are embracing experiential retail models that are more about fun than efficiency. Case in point: Macy's just acquired Story, which operates a small experiential retail space in Manhattan, and appointed Story's founder and CEO to be its new brand experience officer.

story on instagram

While Amazon is increasingly active offline, where it too seeks to innovate the customer experience, its offline experiments are more efficiency-focused and there's no indication that it has an interest in, or the culture to, successfully create the kind of offline and hybrid offline-online experiences that many younger shoppers seem to crave.

How retailers can exploit this weaknesses

Retailers obviously need to ensure that they make it easy for customers to make purchases and have their orders delivered quickly without incident but they should also explore whether there are opportunities to employ experiential models that are unlike ones Amazon is likely to employ.

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Patricio Robles

Published 9 May, 2018 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (1)

Pete Austin

Pete Austin, Founder and Author at Fresh Relevance

Amazon's returns process can be a nightmare too, if you're looking for competitive weaknesses.

I bought a printer and some toner this year, sold direct by its well-known Japanese brand, fulfilled by Amazon UK. The printer arrived missing some components; the brand did not stock spares; and I had to arrange to return the printer myself - including finding a carrier and opening an account with them, then Amazon refunded me afterwards. I never got around to returning the toner within Amazon's deadline and ended up throwing it away, so I was £80 out of pocket. I normally like Amazon, but this was dreadful.

3 months ago

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