Amazon took all the friction out of retail, and then some. It used to be that if you wanted to buy something, you had to get up from your chair, walk out your door, go find it, buy it, and then bring it back home. These days, you don’t even have to stand up, and the thing you want will be at your door a day or two later.
Pretty much everyone who sells anything online is chasing Amazon’s tail in one way or another, the result of which is that the time we used to spend finding and acquiring the material things we want or need is now ours to do with as we wish.
That’s profound. But it’s also set an impossibly high standard for most small businesses.
When I started my fast fashion furniture startup, The Inside, I had to abide by the ground rules set by Amazon, which literally changed the rules of consumption for most of humanity. If you want to succeed in retail these days, your only course of action is to figure out something that Amazon can’t do that you can do in a more frictionless, designed, aspirational, and brand-worthy way. That’s what CEO Niraj Shah did with online retailer Wayfair: he figured out frictionless in a big enough category—furniture—that it actually mattered.
Don’t get me wrong: there has never been a time quite like today for small companies to challenge established monopolies. But here’s the flip side of that argument: just as yesterday’s incumbents have suddenly found themselves vulnerable to attacks from below, there are already new incumbents standing in the path of almost any company seeking to grow these days. And they are much more powerful than the incumbents of yesterday.
Big tech: Friend or foe?
If you want to advertise today, you best be figuring out what to do with regard to the new incumbents. Pretty much all digital marketing takes place on Amazon, Facebook, Instagram, or Google AdWords. Consumer brands used to spend their money in People magazine. That’s no longer the case. In 2019, Google’s share of digital ads was 31 percent, Facebook’s 21 percent, and Amazon’s 4.2 percent.
But it doesn’t matter what a company wants to do, whether that’s opening a coffee shop, trying to invent a new cancer drug, or consulting for big corporations on sustainability. Everyone has to ask themselves, “What is my strategy regarding these companies? Are they friend, foe, or neither?”
Let’s talk about Amazon in particular. Because in my business, they are an everyday concern and every single decision we make vis-à-vis competing and/or cooperating with Amazon will have a major influence on how we grow.
A binary split has emerged in online retail that makes the future look more straightforward than it has in years: Amazon owns anything basic, so if you want to own anything, it can’t be basic. It doesn’t matter what you make, whether it’s fashion, furniture, homewares, electronics, shoes, or camping gear. If people are inclined to Google a product and do price comparisons, Amazon is almost always going to offer the lowest price. And unless you have some serious value-add to offer, Amazon will eventually come for you.
They are a behemoth. Anyone who tries to compete with them directly is a fool. They’ve also got us by the throats: As of January, an estimated 112 million Americans were members of its Prime program. As the company keeps adding perks to membership, the roster keeps growing. Total prime memberships have not slipped in a single quarter since 2014.
Whatever it is you’re selling, every single consumer business has to spend a large chunk of their time building moats against Amazon. That threat notwithstanding, there has been an explosion of new microbrands on the Internet, and The Inside intends to break out of that pack.
But we can’t sit still. Before we know it, the Seattle juggernaut is going to be drop-shipping anything basic to our houses on a drone. In 2017, Amazon accounted for 70 percent of US e-commerce growth and nearly 35 percent of overall retail growth. And all of it at a lower cost than anyone else. You can’t compete, but because of Amazon, all companies now require a relentless focus on the need for speed.
It used to be that the only people who cared about speed of delivery were pizza companies and pizza buyers. Today, if you can’t get it where they want it, when they want it, you probably won’t make the sale.
There is hope: only 5 percent of Prime subscribers report that Amazon is the only place they shop online. (It’s sort of amazing that 5 percent of them do, but that’s another story.)
So let me repeat something I just said: The most important piece of advice I can offer fledgling entrepreneurs about this topic is so straightforward that it seems obvious, but that hasn’t stopped a remarkable number of people—including me—from failing to do so: Do Not Underestimate Amazon.
How do you start a business competing against a company that doesn’t need to make money on the sale? How do you innovate in a world where your competitor doesn’t need to make money on the sale? I didn’t face that challenge with my first startup, DwellStudio, all the way back in 2000. I sold Dwell to Wayfair in 2013, but it wasn’t exactly clear to me at Wayfair, either, because I was on the winning side of that equation. And while I now have a startup that is doing things that neither of those two can do, at the end of the day, we’re all selling furniture.
If you can’t beat them, use them
Now that I’ve told you that, I’m going to tell you that you also need to figure out how you’re going to work with them—and Facebook and Google. Because if you don’t, you’re doomed. As a direct-to-consumer retailer, we are practically obligated to leverage Facebook and Google for customer acquisition.
At The Inside, we advertise on both platforms to reach our audience. They control digital advertising. And you can’t just wing it anymore; you need specialists. We hired a search engine optimization, or SEO, specialist, on a consulting basis to handle all the intricacies of the digital advertising universe. And it made a huge difference in our business. Organic search traffic on the site was up 143 percent for the year through May, while May sales were up 90 percent over April, which, in turn, were up 85 percent over March.
To those of us who were already in the workforce when these new positions were invented, it’s still sometimes difficult to accept the necessity of them. Ten years ago, we all started hearing about “social media coordinators.” And most of us thought, That’s not a real job. Well, I’ve got news for you: it most certainly is.
The fact that jobs like social media coordinator and SEO specialist didn’t exist 10 years ago is one of the reasons I wrote a new book, Frictionless, with my coauthor Duff McDonald. In my industry, both jobs are hybrids that we couldn’t even have conceived of a few years back—designers served with a side of technology savvy or data analytics. In other words, a left brain/right brain kind of person. Mark my words: that is exactly the kind of combination that every single employer will be searching for in the future—people capable of creative and collaborative problem-solving, who can move frictionlessly from their right brain to their left. If your kids have that inclination, you should help them develop it, as they will need it.
Even if you don’t want to advertise on Facebook or Instagram or Pinterest, you have to be on Google. You can choose to not do these other things and try to grow organically, but it will be really slow. If you want to reach venture scale, you will be on all of them.
Do we sell on Amazon? We do not. At this point in time, their technology is not sophisticated enough to support the customization that we offer our customers. Not only that, we’re in the direct-to-consumer business, and we’re not sitting on enough margin to cut Amazon in on the sale. Amazon works when you have both retail and wholesale, and you sell to both channels. At The Inside, we pass all of our savings onto the consumer.
Do we advertise on Amazon? We do not. But we probably will, eventually. The last I heard, two-thirds of people begin their product searches on Amazon. And those customers have what you call high intent. At this point, it makes more sense for us to put our advertising dollars on Facebook and Google and take a wait-and-see approach with Amazon. Two out of three ain’t bad.
Long-term, I know I need to figure out a way to participate in Amazon Prime’s ecosystem. It’s one of the most elegant business models I’ve ever seen—they don’t have customer acquisition costs! But I’m not going to be able to do that until I gain such efficiencies of scale that I might be able to share some of my profits with them. In the meantime, we will continue to use them as our office supply closet and hope they don’t swallow us whole before we realize what’s happening.
Christiane Lemieux is a design entrepreneur, author, and regular contributor to Architectural Digest. Duff McDonald is a journalist and author of several books.
From the book FRICTIONLESS: Why the Future of Everything Will Be Fast, Fluid, and Made Just for You by Christiane Lemieux and Duff McDonald. Copyright © 2020 by Christiane Lemieux and Duff McDonald. Published on June 23, 2020 by Harper Business, an imprint of HarperCollins Publishers. Reprinted by permission.
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