This article was first published in Business Insider.
Disruptive commerce founders want to revolutionize what we buy, how we buy, or who we buy from. But commerce is a notoriously competitive space with unique hurdles. Standing large against that backdrop is Amazon.
It’s safe to say that Amazon is the Goliath in the arena. Spurred by the pandemic, US online sales grew +30% year-over-year and the biggest beneficiary was Amazon. By the end of 2020, close to $4 out of every $10 spent online by the US consumer went to Amazon.
And yet, opportunities to capture consumer attention still exist. One only has to look toward Shopify’s $170 billion market cap and its strategy to arm the Davids entering the field.
In this David vs Goliath situation, where and how can startups compete to win?
As a starting point, here are five observations on what it takes to significantly improve your chance of winning in an Amazon-first world.
1. Know your customer and what matters to them
This seems so silly and basic at first, but you’d be surprised. Oftentimes, we get mired in feature sets and forget to answer the critical starting question, “Who is our customer, what do they want, and what’s critically lacking for them today?”
Where I see startups frequently go amiss: Tackling perceived pain points that aren’t critical for their customer.
How do you know it’s critical? Customers open up their wallets. Better yet, they sing your endless praises, driving significant revenue through word-of-mouth.
2. Provide unique inventory that can’t be found on Amazon
Etsy provides handcrafted, artisanal goods. The RealReal provides authenticated resale luxury. Dapper Lab’s NBA Top Shot (a Venrock portfolio company) sells unique moments in sports history.
What do they all have in common? They sell products that can’t be found on Amazon. If your inventory can easily be found on Amazon, what’s your competitive edge?
This is an area where founder creativity never ceases to amaze me. Five years ago, most of us wouldn’t have imagined paying for Cameo’s celebrity shout outs, or for Dapper Lab’s NBA digital collectibles. With the rise of creator-led experiences and newly emerging metaverses, we’re seeing a whole new set of discrete, digital-first goods that can’t be indexed and served up by Amazon’s existing taxonomy and marketplace.
3. Support repeatable purchase behavior
If you have a large captive audience (eg Facebook, Instagram) with multiple monetization streams, you can afford to focus on novelty, impulse items where purchase frequency is low. But if you’re a commerce-focused startup, it’s imperative that you’re driving stickiness as evidenced by repeat purchase behavior. We’re looking for customers who are willing to commit, not one-night stands.
Dollar Shave Club (a Venrock portfolio company) sells razors that are needed with such regularity that customers are willing to sign up for a subscription. Wish may feature novelty goods, but they also sell household goods that need regular replenishment. For the sneaker aficionados on StockX, collecting is an ongoing passion that requires replenishment of new finds.
The key is to support a pattern of repeat behavior that already exists in the offline world.
4. Leverage data to inform a continuously improving, personalized experience
We’re still in the early innings of personalization. The old days of guessing your customers’ preferences a year out are over. But compare the personalization of your TikTok feed to the personalization of your Amazon feed. One is clearly superior.
Just remember, it’s as simple and as hard as delivering the right product at the right time at the right price.
5. Harness technology to support newly emerging consumer preferences
I get the most excited when I see the intersection of two things — new technology or applications thereof with newly emerging consumer preferences. Here are two examples:
One, the emergence of iPhone enabled services just a click away from your couch. At the same time, we work more than ever before, putting an ever increasing premium on convenience. You put the two together, and you get the on-demand economy.
Two, the increasing sophistication of fertility treatments afforded parents-to-be with expanded options for growing their families. At the same time, women are having children later in life than before, due to a number of factors including career expectations, economic stability, and changing cultural norms. This represented an opportunity and unmet need across women’s health and fertility.
We’ll look back on 2020 and 2021 as a messy cauldron of new realities and ideas, many of which feel overwhelming at the moment, but I predict will birth a groundswell of marked innovation. It’s in this messiness that new opportunities abound.
If you’re a founder that’s passionate about re-imaging the future of commerce, I’d love to hear from you! You can reach me at email@example.com
David vs Goliath: 5 Strategies for Commerce Startups to Succeed in an Amazon World was first published in Substack.