Amazon is commoditising your products!
By: Andrea Virrey
Tags: Amazon, Amazon Echo, Startup, Alexa, AI

Amazon. A buzz word that’s been floating around for quite some time now, which eventually drifted its way into the product marketing space. I know we are all aware of the rise of “commoditisation” — the increasing homogeneity across products and higher price sensitivity of consumers. But what we’re also seeing is that Amazon has been quite a culprit of exacerbating this phenomenon.

Undertaking a brief research of this, I found that the rise of Amazon’s “Alexa”, has been promoting it aggressively. You can conveniently ask her for a generic product where she provides you with a range of alternatives. You can then compare and choose the best available price. It is from this that we’re noticing people pay little to no attention to the brand of which they purchase from. Now, the question at the top of our tongues must be: how should I respond to this Amazon effect? What does this mean for my brand?

Alexa is now your daily driver

I’ve ventured on to research this, and here’s what I’ve found:

1. Find hidden needs

The once widely held view that a consumer derives value from the uniqueness of a product, has been greatly overshadowed by commoditisation. This may stunt any efforts to differentiate a product in a market that is becoming price focused. However, a significant way to make your product stand out is to identify a need that is not known, even to the customer. This leads onto not only identifying value gaps in the market, but creating them yourself.

A prime example of this is the MP3 Walkman. Before it, we had the “Stereobelt”- a portable cassette player with headphones. Whilst it did meet the needs of consumers wanting portable music, Sony Corp. co-founder Masaru Ibuka, took this further and asked his designers for something more compact and travel-friendly. This paved the way for the Sony “Soundabout” which later became the “MP3 Walkman” The idea behind it was to completely revolutionise technology and “mobility”- something that consumers needed, but was not met by any other alternative. Although the Walkman itself is being outshone by smart phones now, it did establish the early foundation for mobile technologies, and caused a hike in music consumption. It is a leading example of going further into a customer’s needs.

Ultimately, in spite of the presence of e-commerce aggregators, there is no dearth of new companies finding new business models and brand positioning to win the market. Take companies like Warby Parker, Bonobo, Dollar Shave Club, Harry’s, Tom Shoes and many more. All of them have launched exclusive to e-commerce aggregators and build big businesses at that. What have we learnt from them? Customers reward companies that are unique, still. If you can realise the potential of ‘hidden’ jobs that go above customer expectations, it may be a significant point of differentiation- particularly for a generic product.

2. Expand your line of thinking- shift from the product to the whole process:

Much focus is on the product itself. But the process before delivering the product to its end user could be proven to be just as important. Let’s take on the example of IKEA. IKEA is known for its low-cost, functional and environmentally-friendly products- things that are proven to be quite valuable to a consumer. However, what makes their products so disruptive? It lies in the fact that IKEA is able to eliminate the transportation costs that consumers dread, especially when moving into a new home.

In order for consumers to not have to pay for a moving van, or take multiple trips to the furniture store, IKEA provides take-home-and-assemble kits which put the assembly process in the hands of the consumer. This not only reduces transportation costs and improves the mobility of furniture parts, but it gives the consumer the experience of personalising their own furniture. IKEA successfully capitalises on these ideas, by keeping in mind not just the product but the process that a consumer undergoes when purchasing a product.

This line of thinking is at the basis of process innovation- an implementation of new and radical methods of production or delivery. A highly disruptive production and/or delivery method does not only mean potentially lowering your total costs, but may bring customer delight to your customer. This provides a highly competitive edge, in the presence of e-commerce aggregators.

3. Don’t forget about the niche

Finally, we have niche marketing- a channelling of marketing efforts towards a highly defined segment of the total market. We may often believe that targeting arenas with high traffic is an effective way to generate sales. In this market, you are able to target a need that is not being met by generic products produced by mainstream firms. More importantly, you ultimately face less competition.

We take for example the catering industry. Within it, is a niche market for catering specifically to senior citizens. A study by the American Association of Retired Persons (AARP) estimated that about 90% of retirees prefer to continue to live at home rather than retirement villages. This has opened up the idea of food delivery services to those who are housebound or unable to drive. It has also provided opportunities for expansion from catering, to home care services such as cleaning, gardening, meal preparation, and more.

Such a strategy is more of a dodge method; for firms escaping the wave of commoditisation. In saying this however, this strategy is ideal for firms with highly specialised services, and more importantly, deep customer relationships. The niche market is much more limited, and hence, much riskier- especially for small businesses who are just starting out.

To take this further, we have found that companies that rely only on online aggregators miss the opportunity to really develop a direct personal connect with their consumer (since that’s what the aggregator does for you). In the long run, this is not a very good idea. Recently, restaurants in the UK started creating their own tech platforms, since giving away commissions and data to the likes of Just Eat is not making great business sense. (Read this article) This trend will soon catch up in many other industries.

In sum, there’s a great opportunity to build a brand and stand out even today. The opportunity is to get away from commoditisation and take control. The other option is only an unsustainable price war.