The Gist
- Industry transformation. The Amazon effect has revolutionized retail and ecommerce, elevating customer expectations for speed, convenience and personalized experiences.
- Pressure on competitors. Amazon's dominance and high standards in ecommerce have intensified pressure on other retailers to adapt and innovate in customer service and logistics.
- Shaping customer service. The Amazon effect influences customer service norms, pushing brands to offer quick, personalized support and integrate customer data across channels.
The "Amazon effect" has become a defining phenomenon in retail and ecommerce, reshaping customer expectations and industry dynamics. Stemming from Amazon's unparalleled success, it refers to the impact that Amazon, which debuted in 1994, has had on online consumer shopping habits and expectations, as well as the pressure it has put on other retailers. This article will look at the Amazon effect and its impact on logistics, consumer expectations, online retailers and more.
What Is the Amazon Effect?
At its core, the Amazon effect is marked by a demand for speed, convenience and a personalized shopping experience. Consumer expectations have risen in response to the Amazon effect for over a decade, and the pandemic exponentially increased the impact it had. Consumers now expect swift deliveries, easy returns, and a vast array of product choices at their fingertips, all of which Amazon has mastered. With features such as one-click ordering, free two-day shipping for Prime members, and instant customer service callbacks, Amazon has set a high bar for ease of use. Customers have gotten used to free shipping to the point where they are frustrated when they shop elsewhere and must pay for shipping.
John Nash, CMO at Redpoint Global, a customer data management and engagement strategy provider, told CMSWire that the Amazon effect has had a profound impact not only on how consumers interact with brands, but also on marketers intent on providing consumers with a personalized, omnichannel customer experience (CX) that meets their expectations.
Amazon aims to be the most convenient, user-friendly, and affordable shopping experience. For example, Amazon Prime members get free two-day shipping on millions of items, meaning they can order something today and receive it at their doorstep in just two days, without paying extra shipping fees. This creates an expectation of fast, free delivery.
Amazon uses its size and scale to negotiate great deals from suppliers and passes those savings on to consumers. The site also gives customers access to reviews from other buyers to help them make informed purchase decisions. It uses its customer browsing and purchase history to provide personalized, relevant recommendations for other products customers may appreciate.
Nash said that thanks largely in part to Amazon, consumers now expect a brand to know their personal preferences across channels. “In retail, for example, knowing color, size, and style preferences are now the tip of the iceberg,” said Nash. “What’s the preferred delivery method, and where should the package be left? Does the customer use an online shopping cart as a way station of sorts? Has the customer opted-in for SMS notifications?” Customers now expect brands to know these details without having to repeat them.
Personalization has come to be an expected feature that ecommerce brands provide to customers today. A 2020 Harris Poll survey sponsored by Redpoint revealed that 63% of consumers said that personalization is now considered a standard service, and 42% defined personalization as a brand knowing they are the same customer across all touchpoints (in-store, email, online, mobile, social media, call center, etc.).
Amazon has shaped what consumers expect from the online shopping experience — unparalleled selection and convenience, fast free shipping, easy price comparisons, a personalized, user-friendly interface, and fast, friendly customer service. It's changed how people shop and has put pressure on all retailers to keep up with these high standards.
The Amazon effect isn’t always a positive thing. Jeff Rose, founder and CFP at Good Financial Cents, a wealth-building strategies blog, told CMSWire that people used to hunt around for specific brands, but now, they often just head straight to Amazon for whatever they need. "This move has made it super hard for smaller online shops to keep up, not to mention how it's hit regular stores because everyone's buying online more. During the pandemic, Amazon's profits tripled, and their sales jumped by 37%. They dominated e-commerce ad spending with a staggering 76% share. This isn't just success; it’s domination at a level that raises questions about market fairness and competition."
Related Article:Amazon's Latest AI Gives Customer Reviews a Highlight Reel
How Has the Amazon Effect Impacted Customer Expectations?
The pervasive influence of the Amazon effect has substantially transformed customer expectations, especially after getting used to shopping on Amazon during the pandemic due to social distancing, lockdowns and businesses closing. Amazon's success has redefined how consumers perceive and demand services from businesses. Notably, the emphasis on rapid and reliable deliveries, exemplified by services such as Amazon Prime, has elevated expectations for swift order fulfillment across the board.
The personalized shopping experiences facilitated by Amazon's AI-driven recommendation engine have set a precedent for customers expecting tailored suggestions in product offerings and content delivery. Mike Anderson, founder and CTO at Tealium, a customer data platform provider, told CMSWire that customers won’t settle for generic experiences, especially when engaging in multi-session purchases.
“For example, having an understanding if a customer is searching for certain items on your website repeatedly but not clicking on any search results — someone needs to investigate,” said Anderson. “If a customer is repeatedly trying expired coupon codes at the checkout, give them a coupon.” Anderson suggested that if brands see a conversion funnel drop off at the shipping selection screen and there's a debate internally at the company about having faster delivery times, they should share that information with the team so they can use data to influence the decision.
Simultaneously, the user-friendly interface of the Amazon platform has become a benchmark for a seamless online shopping experience, influencing the desire for intuitive interfaces from other businesses. The commitment to transparency, evident in detailed product information, customer reviews, and transparent pricing, has heightened expectations for accessible and honest communication.
Additionally, the Amazon effect has reshaped perceptions of post-purchase experiences, with customers now seeking easy return processes and responsive customer service. Amazon has trained customers to prioritize and expect free shipping, a fact reflected in Radial’s 2023 Peak Consumer Survey, which indicated that 58% of shoppers expect brands to cover return shipping costs.
Andy Friedland, CRO at retail tech company Swiftly, told CMSWire that Amazon has made billions of dollars of investment in warehouses, automation, and robotics all in an effort to bring products to customers as fast as possible. “Amazon has the most aggressive price-matching algorithm of any company which has driven transparency in pricing for many sectors.” Friedland said that overall, the broader retail landscape has pressure to offer a great brick-and-mortar experience or customers will continue to shift to online.
“You are seeing many other companies (Walmart, Target) slowly catch up with Amazon’s ecommerce experience while leveraging their brick-and-mortar footprint to have a nice omnichannel advantage that Amazon has struggled to achieve,” said Friedland, who emphasized that going forward, the same core values Amazon chases will determine the winners: price, convenience and selection.
Related Article:How Amazon Prime Created a Bad Customer Experience for Everyone Else
What Has Its Impact Been on Customer Service?
The expectations that Amazon has created for convenience, speed and service have placed immense pressure on all companies to re-evaluate their customer service strategies. Customers today demand quick, personalized responses to inquiries and issues — and brands are struggling to keep up.
Amazon’s customer service is second to none. They offer chatbots for instant customer inquiries, along with the option to chat with a customer service agent. Additionally, customers can request an instant call back, and within three seconds of requesting such a call, the customer’s phone is ringing. Customers can return products with no shipping costs, and if a product cannot be returned, Amazon enables them to sell the product on Amazon to other customers, with no fees involved.
Specifically, the Amazon effect has heightened standards for response time — customers expect problems to be resolved almost instantaneously. In 2020, SuperOffice teamed with Jeff Toister to survey 3,200 consumers about customer service response time. The survey revealed that 46% of customers expect brands to respond within four hours, and 12% expect a response within 15 minutes. Customer service expectations have risen dramatically. Brands are now forced to invest heavily in 24/7 call centers and chatbots.
Customers get annoyed having to repeat issues across channels. While brands are striving to be ever-present to answer questions, they are realizing that excellence in customer service requires more than just responsiveness. Companies need to integrate data across channels to understand customers' full histories, anticipate needs and resolve problems swiftly.
How Have Brands Adjusted to Deal With Customer Expectations?
In response to the impact of the Amazon effect on customer expectations, brands across various industries have undergone strategic adjustments to meet the evolving demands of customers. The need for speed and efficiency in deliveries, epitomized by Amazon's swift services, has driven brands to optimize their supply chains and invest in logistics technologies.
Michael Podolsky, co-founder and CEO at PissedConsumer, an online reviews and complaints platform, told CMSWire that retailers have adapted by prioritizing efficient logistics and customer-centric policies. "The speed of delivery and seamless service has become a standard,” said Podolsky. “For online retailers and vendors, it means investing in robust supply chains and technology to meet these expectations. Marketers, too, have evolved strategies to emphasize convenience and reliability, the two factors that can win customer loyalty."
Personalization, a hallmark of Amazon's success, has led brands to implement recommendation engines that leverage AI and machine learning to understand customer preferences and deliver tailored experiences, from product recommendations to targeted marketing strategies.
The emphasis on a seamless user experience on Amazon's platform has prompted brands to revamp their online interfaces, focusing on user-friendly designs and intuitive navigation. Transparency in product information and pricing, championed by Amazon, has become a priority for brands seeking to build trust and meet consumer expectations for openness.
To address the demand for easy returns and responsive customer service, brands have refined their post-purchase processes and invested in customer support technologies. Diversifying product offerings to compete with Amazon's extensive selection has been a common strategy, with brands expanding their portfolios to cater to a broader range of customer needs. Additionally, focusing on narrow markets and offering niche products that Amazon does not carry has been another successful strategy for many businesses, especially for smaller brands.
Technological integration, including the adoption of AI, NLP and ML, has become a prevalent approach for brands looking to enhance customer experiences and stay competitive in the post-Amazon effect landscape. These adjustments underscore a broader shift in the industry toward customer-centric strategies, aligning with the lessons learned from Amazon's customer-focused approach.
Final Thoughts
The influence of the Amazon effect has transformed the retail ecommerce playing field, elevating customer expectations and redefining industry norms. While matching Amazon's standards poses immense challenges, brands are actively adapting — from supply chain optimizations to AI integration — to meet the evolving demands. Ultimately, Amazon has catalyzed a customer-centric revolution, reminding businesses that placing consumers at the core is vital for success.
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