Amazon has created an online shopping empire that has forever changed how the world shops and does business. People no longer go to the store to make a purchase. If they happen to shop in a brick and mortar retail establishment, they have likely researched in advance and have made a choice based on a need Amazon was unable to fulfill.

Amazon has given individuals the opportunity to receive immediate gratification when shopping online without leaving their couch or paying shipping fees.

What is the Amazon Effect on Retail Sales?

The Amazon Effect on traditional retail is staggering. Since the rise of Amazon, individuals have experienced the value of ordering products online and receiving them quickly with low to no shipping costs. While it may have started with Amazon, the explosion of e-commerce has spread to almost every type of retailer, from Walmart and Target to grocery stores, such as Whole Foods Market and Trader Joes.

Shoppers have learned they can shop for almost anything they want without ever getting out of their pajamas and dealing with traffic. As a result, brick and mortar establishments have seen a steady decline in on-location sales, causing many malls and physical stores to close. Stores, such as Sears and JC Penney have a decent online following, but find little to no need for a traditional store. But even e-commerce businesses have had trouble keeping up with the customer demands caused by Amazon's growth. These demands include:

• Larger online product offerings.

• Ship-to-store options.

• Lower overall pricing and price increase on items.

• Easier return policies.

• Increased use of “doorbuster sales” to get customers in the door.

• Loyalty Programs for deeper discounts.

What is the Amazon Effect on Shipping?

Shipping is a large part of the online shopping experience. At the beginning of the boom of eCommerce and Amazon, people expected to pay a premium for the convenience of utilizing an online retailer. However, as more and more people left the traditional retail stores and turned to online shopping, Amazon began enticing people to spend more by offering free shipping when a person spent over a certain dollar amount. Those that wanted free shipping at all times purchased a membership, much like they did for warehouse clubs, such as BJ’s and Costco. As a result, they were able to obtain free two-day shipping from any seller on Amazon that was part of the Prime Membership option. This caused two different problems for smaller e-commerce establishments:

1. The pressure to provide free shipping despite carrier prices rising each year

2. The pressure to not only provide free or inexpensive shipping, but also fast shipping. 

This meant that other retail stores needed to be able to compete and offer some form of free shipping to maintain an online presence and retain customers. As a matter of fact, statistics show that even in 2018, the biggest reason people abandon carts online is because of shipping costs. People will gladly spend a few dollars more to obtain free shipping. In addition, they may opt for a “ship to store” option. One solution retailers can offer customers is the option to pick up their purchase at a designated area in the company’s brick and mortar store to avoid shipping fees.

What is the Amazon Effect on Customer Experiences?

The Amazon effect does not end with convenience and reduced shipping fees. The overall shopping experience has been forced to change due to the rise of Amazon. While convenience, such as the ability to utilize a mobile device to shop anywhere, is part of this experience, the reality is Amazon offers some of the most sought-after customer service in the industry. Amazon is known to treat customers with the utmost respect. They offer:

• 24/7 customer service.

• An easy return policy.

• Ability to dispute charges.

• Replies to complaints and praise in a timely manner.

These qualities and more make it desirable to shop with Amazon. To compete, many members of the retail market have been forced to increase their customer service efforts. Also, Amazon offers the ability to ask a question about a product and receive a response to make it a more interactive experience. Other online retails have been forced to offer this kind of service to allow people to make informed decisions about their purchases.

The one area in which physical retailers fair better than any online retailer is the ability to feel and try a product before making a purchase. However, Amazon understands that a product online may not appear as it looks in reality. Therefore, they have allowed people to make returns easily to accommodate this problem.

Read more on how to offer better customer service for increased customer retention in our white paper: The Secrets of eCommerce Customer Retention.

What Does This Mean For You?

The Amazon effect has changed the future of retail. Amazing online experiences and free shipping have become how many people expect to shop. Online retailers who are not following in Amazon’s footsteps are often short-lived, closing their online doors within a year or two. In order to accommodate free shipping expectations without additional loss to the retailer, many e-commerce sites are using shipping insurance to protect shipments.

Cabrella offers amazing shipping insurance that utilizes business intelligence to help track packages and actively protect a retailer’s investment. Whether a store will offer free shipping with membership, free shipping on orders over a certain amount, or use a third party to offer free shipping, shipping insurance is the only way to make sure the retailer does not lose more money if a product is lost or stolen during the process.

Cabrella's shipping insurance has more comprehensive coverage at a fraction of the price of common carrier's insurance (up to 90% less in some cases). Click the button below to receive a quote from one of our insurance professionals to see how much Cabrella can save you!