The Amazon effect

Amazon keeps changing people’s expectations, and it’s not all about free fast shipping anymore. Shoppers are now most dissatisfied with the return and refund handling of non-Amazon retailers.

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📝 Intro

The “Amazon effect” is a term used to describe the massive change in customer expectations in retail, and especially ecommerce, driven by Amazon’s customer-centric approach.

For example, Amazon’s same-day delivery and 30-day return policy are known to have led to “customer impatience”.

Other retailers have struggled to keep up, and their customers are dissatisfied when their experience doesn’t match their new expectations set by Amazon.

So what are the areas in which there's the biggest and strongest expectation gap? Where should you focus your efforts to avoid customer dissatisfaction?

Contrary to common belief, it’s not all about fast and free shipping anymore.

Let’s take a look.

P.S.: A September 2020 study found that, when you are a young retailer, selling on Amazon and then ‘bleeding away’ returning customers to your own website is a profitable strategy (see the practical tip here: Amazon sales will grow your website sales too)

Previous tip: Don’t retarget shoppers too early (All tips here)

Focus on easy and smooth product returns to close the gap with Amazon’s experience

Impacted metrics: Customer satisfaction
Channels: Ecommerce
For: B2C
Research date: June 2021

📈 Recommendation

Shoppers automatically benchmark you against Amazon, and they’re typically dissatisfied by the comparison.

To close the gap, focus first on improving your product returns (for exchanges and refunds). Make them easy, fast, and problem-free. This is the area in which customers are most dissatisfied with non-Amazon ecommerce retailers.

Then, shift your attention to improving your price promotions and your customer service quality.

🎓 Effects

  • People use Amazon as a benchmark for their shopping expectations, whether they explicitly say it (e.g. “Amazon would have already refunded me”) or not (e.g. “You are too slow”). This happens not only when they shop online, but also offline in stores.

  • An analysis of 2,962 Facebook comments about Italy’s three largest electronic retailers found that compared to Amazon, customers were most dissatisfied with (from strongest to least):

    • Exchanging products (e.g. wrong sizes)

    • In-store staff assistance (“I will buy it on Amazon so I do not waste 10 hours waiting for one of your sales assistants”*)

    • Returns (“​​With Amazon's return service, I do not even bother going to see the products in person”)

    • Refunds (“Amazon would have already credited you with the total order amount”)

    • Price and promotions (“You could get it one week ago on Amazon for 50€”)

    • Customer service (“Ahahahah I cannot help laughing ...they do not know Amazon customer service... forget it…”)

    • Shipping (“Get better with shipping ... otherwise Amazon beats you 1–0”)

  • Contrary to common beliefs, non-Amazon customers in this study did not seem very dissatisfied with the online user experience, product availability, and shipping.

*Quotes in Italic are excerpts from actual comments analyzed in the research

(Sentiment analysis, by area, of customer dissatisfaction between three major Italian electronic retailers and Amazon - Click to zoom in)

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🧠 Why it works

  • Amazon’s strategy is to outcompete other ecommerce retailers through better service.

  • Over the years, it has succeeded in increasing our expectations.

  • We then use these high expectations to benchmark the service we receive from other retailers, whether they are online or offline.

✋ Limitations

  • The study focuses on electronic retailers (e.g. TVs, video games) in Italy. This makes it riskier to generalize to other product areas and, to a lesser extent, retail environments different from Italy’s (e.g. Walmart and Best Buy in the US).

  • The data analyzed is a snapshot from a relatively short time span (2016 - 2018). This prevents us from understanding how fast expectations change and whether certain areas over others have become more or less important over time as other retailers catch up with Amazon (e.g. by offering free fast shipping).

🏢 Companies using this

  • Slowly, over several years since Amazon Prime launched in 2005, most major retailers have now caught up with Amazon and offer fast and free shipping. Even Etsy, a platform for small retailers, started strongly encouraging its sellers to step up their shipping quality.

  • When it comes to ease and speed of returns, most retailers are yet to catch up. Fashion retailers (e.g. Zara) seem to be leading the pack in catching up. They largely do so by connecting their online and offline experience and making in-store returns seamless.

⚡ Steps to implement

  • Review how satisfied your customers are with the quality and ease of your returns, exchanges, and refunds. You can ask this as part of a regular feedback mechanism, survey a one-off sample of customers, or check online comments and reviews about you.

  • If you are lacking in this area, there are several ways you can improve. For example:

    • Offer free return shipping

    • Include a pre-printed return label in your shipping

    • Use shipping packaging that is easy to reuse for a return

    • Partner with a few different logistic providers to maximize your geographic coverage (e.g. post offices, provide logistic companies)

    • Process refunds within a maximum of 14 days, even better if you can cut that down to a handful of days or even hours

    • To simplify operations, you can experiment with not accepting exchanges and simply offering speedy refunds (and ask customers to place a new order)

  • If you already offer a high standard when it comes to returns, shift your attention to doing better in terms of prices and promotions (e.g. create your own ‘Prime day’) and customer service (e.g. response times, resolution rates, satisfaction with the experience).

🔍 Study type

Market observation (analysis of 2,962 Facebook comments about the top 3 electronic retailers in Italy [Mediaworld, Trony, Unieuro] and 4,259 Amazon reviews for equivalent products). Italy

📖 Research

Vollero, A., Sardanelli, D., & Siano, A. (June 2021). Exploring the role of the Amazon effect on customer expectations: An analysis of user‐generated content in consumer electronics retailing. Journal of Consumer Behaviour.

[Link to paper]

🏫 Affiliations

University of Salerno and Sapienza University of Rome. Italy

Remember: Because of the groundbreaking nature of this research, it could be disproven in the future (although this is rare). It also may not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.

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