The old adage “the rich get richer” will apparently be true in the US retail market this holiday shopping season.

According to a new study conducted on behalf of installment payment provider Splitit, nearly 40% of holiday shoppers intend to make the majority of their purchases through large online retailers like Amazon. While the 40% figure might give smaller competitors room for hope, the situation is actually
more grim when one considers that small neighborhood shops were the second most popular option with the consumers polled, with 25% of them stating an intent to shop locally.

So how can smaller online retailers compete? According to the study, free shipping and installment plans for purchases can help smaller retailers lure dollars from shoppers who might otherwise purchase from Amazon et. al.

Specifically, approximately half (46%) of those surveyed indicated that free shipping would encourage them to spend. Unfortunately, free shipping’s appeal might not be as powerful this year as Amazon announced that it will offer free shipping to all customers with no minimum order size regardless of
whether or not they are Amazon Prime members. As such, retailers offering free shipping would seemingly be maintaining parity with Amazon, not establishing a potential competitive advantage.

To establish such an advantage, retailers might want to consider payment offerings that allow shoppers to pay for their purchases over time. Buy now, pay later could be especially helpful for courting younger shoppers.

Forty percent of millennials polled indicated said they were concerned about exceeding their holiday shopping budgets this year. In fact, 35% indicated that they would spend less than $100 this holiday season, a stark contrast to consumers overall as 70% of all those surveyed indicated they’d spend more than this amount and 30% planned to spend over $500.

Splitit, as well as companies like Klarna and Affirm, allow customers to pay for their purchases over time. Splitit allows shoppers to split the cost of their purchases into multiple payments using their existing credit cards, while Klarna and Affirm extend credit to qualified buyers.

Eliminating the need for shoppers to pay for their purchases at the time of sale can have a significant impact on conversion rates and average order size. For example, shopping app Wish says that use of Klarna increased its average order value by 20% and conversion rate by 25%, producing a 40% boost in sales
overall. And GlassesUsa, a prescription eyewear retailer, attributes to its use of Splitit a reduction in cart abandonment of 10% and a 15% increase in average order value for high-order value carts.

Amazon offers installment payment plans, but only for certain products, such as select electronic gadgets, giving other retailers an opportunity to stand out.

The good news is that despite Amazon’s seemingly indomitable position in online retail, Amazon does have vulnerabilities that savvy retailers can potentially exploit. For example, Amazon has experienced issues with counterfeit products, and there are now hordes of no-name brands on offer through Amazon’s marketplace, some of which might be selling products of lower quality.

In addition, innovative retailers are finding ways to thrive by creating new kinds of experiences that delight shoppers in ways that Amazon can’t because of its size.

Of course, retailers that want to survive and thrive in an Amazon world can’t realistically wait until just before the holidays to start differentiating themselves from Amazon. To win during the holiday shopping season, smaller retailers will need to have positioned themselves well beforehand, and those
that haven’t will need to get busy first thing in the new year if they are to compete successfully a year from now in 2019.