Learning from Amazon’s obsession with customer experience
Australian retailers are preparing themselves for unprecedented disruption. Amazon’s arrival is imminent. And New Zealand may not be far behind.
The digital giant wields superior competitive advantage through its signature customer experience, coupled with a mission to be the world’s most customer-centric company.
The expected impact on retailers across the Tasman is captured in Credit Suisse’s analysis this week, which predicts Amazon is likely to cause price falls in many categories, affecting profitability and market share by 5% in the first five years.
The report suggests retailer, Myer, will be among the hardest hit with expected revenue falls of up to 4%, equalling $3.16 billion by 2022. Myer is closely followed by Harvey Norman, JB HiFi and Super Retail Group.
Superiority through experience
Amazon’s signature customer experiences are built on the back of innovations in technology, sophisticated algorithms, and new service offerings such as Echo and Prime, which know each customer’s preferences and behaviours.
The company has proven to be a brutal competitor. Amazon forgoes profits, endures slim margins, and relentlessly prioritises its customers. A closer look at the mega-retailer reveals an organisation with its foundations built on a higher purpose beyond maximising profits. From day one, Amazon’s purpose has been its customer. Founder, Jeff Bezos, describes this higher ideal as being ‘customer obsessed’.
“I would define Amazon by our big ideas and customer centricity – putting the customer at the center of everything we do.” – Jeff Bezos, Amazon founder and CEO
Bezos stated recently, “Our focus is on customer obsession rather than competitor obsession, eagerness to invent and pioneer, willingness to fail, the patience to think long-term, and the taking of professional pride in operational excellence.”
Driven by a clear purpose
A company’s purpose is its belief, defining the business’s role in society – galvanising and uniting the organisation’s culture in pursuit of its intention. Best-in-class retailers use purpose to guide their decision-making; aligning purpose with strategic decisions that influence the business’s values, policy, procedures and organisational behaviour.
Congruent with Amazon’s purpose is the company’s mission: ‘To be Earth’s most customer-centric company – building a place where people can come to find and discover anything they might want to buy online.’
Amazon’s strategy of data-driven, continuous innovation continues to push boundaries and deliver customer experiences that are personalised, seamless and differentiated. This is innovation that’s informed by the customer and led from the outside-in; cultivating a culture of customer-centricity to deliver customer value and remarkable experiences such as Amazon Dash for reordering and Amazon Go supermarkets with no checkouts.
Amazon’s first principle is to ‘Start with the customer and work backwards – work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.’
Principles like these signpost to the wider business a commitment to delivering its mission by aligning its purpose with business decision-making.
When corporate purpose is the foundation for a business’s strategic decisions and organisational behaviour, it fosters internal stakeholder engagement and contributes to building trust both inside the business and with customers.
In times of unprecedented transparency, a misaligned corporate purpose can be viewed with scepticism and perceived as superficial. Now more than ever, brand decisions and behaviours need to be authentic or they risk damaging reputation and performance.
Finding a customer-centered advantage
Today, many retail leaders have dramatically increased their focus on customer experience, understanding the role it plays in the current and future success of their businesses. In today’s retail world, companies are no longer in the driver’s seat when it comes to their relationships with consumers.
Customers hold the power now with technology affording them the opportunity to switch brands, research products and offers, and voice their opinions through social media. As a result, many retailers have come to realise that their best chance of long-term success is to make experience the new basis of competition.
And if they haven’t come to that conclusion yet, they really need to…and soon. In the wake of disruption in Australia, retailers here must begin to find a new competitive advantage.
“Today, winning brands owe their success not just to the quality and value of what they sell, but to the superiority of the journeys they create.” – David Edelman, McKinsey & Company
Making experience the heart of business strategy, Amazon has shown that service and customer experience really do matter and are critical to staying relevant to today’s technology-enabled, socially connected customers.
Bezos has also said in the past, “If there’s one reason we have done better than any of our peers over the last six years, it is because we have focused like a laser on customer experience.”
Amazon’s strength is that it aims to think like a customer and provide what they want, building loyalty in a crowded market.
Technology and data has radically changed consumer behaviour over the last decade, widening choice and shifting the balance of power between companies and customers. Amazon has operated at the heart of this and is helping reshape how people shop, both now and in the future.