E-Commerce

How to Beat Amazon

thomann.Musikhaus Thomann
Hans Thomann's company offers a popular 3-year guarantee on its products.
  • Why it matters

    Why it matters

    To compete with online retail giants like Amazon, smaller companies must find new ways to attract customers.

  • Facts

    Facts

    German retailers are becoming more savvy to the advantages and demands of online retail.

    The most successful online businesses are small specialists with high customer service values.

    Free returns take top priority for customers, according to an ECC survey seen by Handelsblatt.

  • Audio

    Audio

  • Pdf

Amazon is a horror to its competitors. Over and over again, the online retailer sets new standards of customer service by reducing delivery times and prices.

A recent study by Cologne-based retail market research firm ECC showed just how strongly the U.S. giant dominates the market.

The survey, seen exclusively by Handelsblatt, shows that among the 7,800 survey participants, Amazon enjoys 100 percent brand recognition, and that more than 97 percent had already shopped there. As a result, a stunning 38 percent of e-commerce turnover in Germany is through Amazon.

But the survey also shows that a well-designed online shop can not only compete with Amazon, but even beat it at its own game in certain specialist sectors.

“In the hard-fought online retail sector, companies have to pay particular attention to their customers.”

Mirko Warschun, Retail consultant at A.T. Kearney

“The fight for the customer is still possible even in the Amazon age,” says Kai Hudetz, manager of IFH, the retail research and consulting firm that oversees the ECC.

“There are still opportunities for smaller traders,” he says. “Amazon is hard to beat but also drives competitors to innovate.”

That’s how one small business managed to take the top slot in the ECC study: music retailer Musikhaus Thomann. Based in Treppendorf, a Bavarian village with fewer than 200 residents, the company sells  instruments and musical paraphernalia.

Thomann has set itself apart by cultivating a remarkably high level of customer satisfaction, thus leaving bigger players Douglas and Amazon in second and third places in the survey. And that’s no flash in the pan. In the five years that the study of customer responses to 77 online retailers has been conducted, this is the third time that Thomann has taken top honors.

At the core of Thomann’s success is the company’s unconditional focus on their customers. The company offers a three-year guarantee on all products, and also prides itself on service. Some 89 percent of the ECC’s survey respondents praised the customer consultations available with the company’s hotline.

“To us, service doesn’t mean smiling sales-staff, but smiling customers,” said Hans Thomann, who is now the second generation in the family business which employs 1,200 people.

The result is that 89.6 percent of customers would recommend Thomann to others – the highest rating of all the online shops surveyed.

“In the hard-fought online retail sector, companies have to pay particular attention to their customers,” said Mirko Warschun, partner and retail expert at consulting firm A.T. Kearney.

“Success doesn’t just depend on price, but on service as well,” he said.

A study by A.T. Kearney shows that grouping products together and presenting them along certain themes leads customers to spontaneous secondary purchases, another success factor in e-commerce. Mr. Warschun says that by doing this, turnover can be increased by 15 percent.

As an example, emerging furniture seller Westwing varies its catalogue on a seasonal basis. In the ECC study, Westwing managed to achieve first place in the category furniture and home wares – ahead of big competitors like IKEA or Dänisches Bettenlager, the German shopfront for Danish bedding and furniture suppliers JYSK.

The year’s rising star was the cosmetics chain Douglas, which last year didn’t feature in the top ten but is now reaping the rewards of an intelligent digitization strategy over the last few years.

 

Online Shopping-Jan 27 2016

 

“Douglas scores with its modern appearance. It’s technically very well done,” said Mr. Hudetz of the IFH. “And they put a lot of importance on content and customer advice.”

The company’s seamless connection between e-commerce and real-world shop fronts also sets an example for others in the market.

“The online shop is a virtual extension of the shop counter for us,” said Douglas president and chief executive Henning Kreke. “And customers make good use of that.”

Douglas has also heavily invested in the perfect interface for smartphones and tablets. Mr. Hudetz said that is particularly useful for bringing in younger customers.

“The smartphone generation is much more critical and demanding,” he said.

Shipping and delivery have a decisive influence on customer satisfaction. When the delivery doesn’t go smoothly, the chances that the customer will come back to you are slim. At the same time, Mr. Hudetz said, same-day delivery is only important to a tiny fraction of customers.

“With shipping, reliability and flexibility are more important than speed,” he said.

Above all, customers prize easy returns. Nearly 90 percent of respondents said this is an important or very important criterion for their choice of an online seller. Every second customer also wants to be able to return articles bought online at a real-world retail shopfront, though that’s a service many retailers aren’t yet ready to offer.

Although e-commerce has been relatively slow to go mainstream in Germany, the idea is now grabbing the imagination of some communities in a way that hasn’t been seen elsewhere.

The pilot project “Mönchengladbach on eBay” has just completed a three month test phase. The project is a joint initiative of the Mönchengladbach Business Development Council and the local technical college. It gives local retailers the chance to offer their products via a special platform within the eBay framework, with the goal of strengthening the city’s retail sector through online trade.

The pilot has been a huge success. Some 70 retailers put more than 32,000 articles up for sale online and turned that into more than €1 million ($1.1 million) in turnover.

Joachim Gottschalk, owner of local audio-visual and appliance retailer Gottschalk Electronic, said the online platform gave the business access to a much larger customer base.

“That’s given us a display window that we previously didn’t have,” Mr. Gottschalk said.

What surprised almost all the participants was the international reach which the project gave them. Products were sold and delivered to 53 different countries, with destinations as far away as Guadeloupe and New Zealand.

Mönchengladbach is not alone in discovering this brave new world.

Wuppertal was one of the pioneers. In 2014, the city founded the online market place “Online City Wuppertal” in partnership with the start-up Atalanda. Although many of these projects are battling with a lack of reach, a survey by the IFH found that 85 percent of respondents who are aware of a local online marketplace in their region make use of it.

Florian Kolf leads a team of reporters covering the retail, consumer goods, luxury and fashion markets. To contact the author: kolf@handelsblatt.com

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