How the Amazon Prime’s Mindset Hurts Small Businesses
- Shipping overload. Understand that commercial shipping is overloaded, and delays are more common now than ever.
- Be on the lookout. The desire for instant gratification that two-day delivery has created can set sometimes impossible customer expectations.
- Small business reminder. Remember that Amazon Prime is the exception, not the rule, and the small business approach is likely different.
Picture this … it’s late at night, and you can’t sleep. You pick up your phone, maybe browse a few apps but get bored quickly. You see the Amazon app begging you to step into that magical wonderland of limitless items, and click on it, feeling perhaps a little guilty or taboo about it.
You start scrolling deals, which leads you to searching for other related items, sparking ideas about things you need to do in your home (one of my favorites). You start adding stuff to your cart, head spinning with excitement that they have everything you “need” for whatever it is your brain has created. You check out and go to sleep happy, knowing that within the next two days, it will all be at your doorstep.
Now, let’s say you order from another ecommerce site — a small business or another big box store that carries the specialty item you’re looking for, or has a more attractive price (the latter is a big one). You purchase the item(s) and see that a) there’s a shipping charge and/or b) it will take five to six days for the package to arrive unless you purchase faster shipping. You debate whether you should buy this item, frustrated that it’s the same as everywhere else and/or it’s going to take too long to arrive when you want it “now.” You sigh as you click “complete purchase” because you know it’s needed, then stalk the tracking ID until it shows up, not thrilled with having to wait and unsure if you’ll order from this store again.
Whether we identify with these scenarios or not, we can all agree that Amazon Prime shipping, in most cases, is faster than virtually every other ecommerce or brick-and-mortar store in existence. It’s a lovely thing for individual consumers, but not for the businesses that can’t compete with this increasingly impatient consumer mindset Amazon inadvertently created (if you’ve seen the original Willy Wonka movie, you know there are a whole lot of Veruca Salts these days).
Here are three examples of how this has been inadvertently harming businesses’ customer experiences, and if you’re in such a dilemma, what small things you can do to combat it.
‘I Just Ordered, Where Is It?’ Instant Gratification Ruins the Customer Experience for Everyone
From 8 a.m. to 11 p.m., Mike Hinton, owner of Axion Industries (an ecommerce auto parts store), is glued to his phone and his computer, working hard to ensure all of his customers are getting the car parts they need (author’s note: I should know. I am engaged to him and live with him). He’s answering product questions from customers, closing sales, negotiating deals with vendors, ordering more stock, shipping out parts and other sales-related activity — all pretty common for a small business in his industry.
However, he’s noticed that over the last few years, he’s spending more time answering the same shipping question over again from seemingly anxious, sometimes emotional customers, “I just ordered a few minutes ago, when will my part(s) arrive?”
“On average, I spend about an hour a day responding to customers that just ordered a few minutes to a few hours ago, asking when their order will arrive,” said Mike. “While our shipping policy is clearly stated on our website, along with other notifications on specialty parts and how they ship, it just doesn’t matter. If Amazon gives an estimated delivery date up front, it’s expected that all other consumer-based businesses should do that as well. The challenge is that we are all relying on commercial shipping companies to process our shipments and provide those dates for us.”
When asking Mike about how customers treat him and his employees when they don’t hear they are getting their freshly made order delivered within one-to-two days, he said, “It really depends on the customer. Some get a bit aggressive when they don’t get the answer they want, but there’s nothing we can do about it once their order is in the hands of a shipping company.”
How to Combat the Instant Gratification Phase
I’m a big fan of covering your rear-end in situations like this, which means the standard shipping policies, pop-up notifications during the order process, etc., are all available on your site (even though we know they are rarely read). In the case of what Mike is challenged with, he is doing what he can and in fact, going above and beyond to respond to these kinds of queries where most never would. It’s a case where automatic email and messenger responses with shipping-related information should take a front seat, along with light AI support if needed. I am also a big fan of video shorts that give you the “quick and dirty” on common questions.
Related Article: 3 Customer Experience Lessons Brands Can Learn From Amazon
‘I Have to Pay for What?’ Prime Membership Free Shipping ‘Mind Trick’ Is Ruining the Customer Experience
The scenarios at the top of this article have become common for most of us — I’m guilty as well. A price looks really attractive for a product you found outside of Amazon — almost too good to be true — and then on the checkout page, you’re hit with the shipping fee. You know it’s now the same price as what Amazon and/or other retailers are charging (without considering your annual Prime Membership fee and what that goes toward) but it’s the principle of it — it seems “unfair” and “dishonest” the product was made to seem cheaper and, therefore, you may think twice about ordering from there again.
But is it really their fault?
As I’ve told many people before: you are paying for the convenience of not having to make that item yourself. Therefore, you’re paying for the cost of materials, production, distribution, shipment, import taxes (where applicable), state and local excise taxes (where applicable), employee costs, marketing costs and building-related costs (where applicable). How a business factors in shipping is the variable that creates the kind of customer experience “mind trick” we all inadvertently fall for.
Here are three common scenarios, using a fictitious company to illustrate:
- Industry price, free shipping: The “ABC” company sells a golf driver for $400, putting it on-par with the industry standard. It offers free shipping, which makes this sale attractive. On ABC’s end, it will make about $15 to $20 in profit, since shipping is something it covers. When you think of what it takes to run a business, this isn’t much profit at all and in fact, can slowly erode at a company over time. Yes, their customers love them for the free shipping, but they sometimes complain about the time it takes to get responses to inquiries. This is because the company is trying to do more with less resources.
- Higher price, free shipping: The ABC company sells a golf driver for $415, which is higher than the industry standard, but it offers “free shipping.” Instantly, the company makes $35 to $40 in profit because shipping was actually baked into the price. This allows them to maintain a higher inventory of goods and spread the work out to more people. Customers may question or complain about the slightly higher the price, but they still see “free shipping” as a perk. They also see faster response times to inquiries and overall better service.
- Lower price, shipping fees not included: The ABC company sells a golf driver for $392, which is lower than the industry standard. It offers shipping options, all of which will be at-cost to customers. If they are charged $20 in shipping fees, that brings the total to $412 — a reasonable price that keeps ABC’s profits stable and customers in more control of when they want the driver to arrive. While this is the soundest logic, ABC gets the most customer complaints with this pricing strategy, even though the company provides excellent customer service. Customers feel as though they are being “misled” into paying “more.”
While scenario one seems the best for consumers, it’s also the worst in the long run.
“I know competitors of mine are struggling to make profit because they are following scenario one,” said Mike. “It’s hard to remain competitive in this industry without going down this path of offering competitive prices while not charging shipping — especially on large items. Unfortunately, it’s caused many companies to have to let staff go and reorg themselves to get on a better path and, therefore, their overall customer service has sharply declined.”
How to Combat Pricing Mind Tricks
It’s all in the messaging and how you approach your pricing strategy. Many get around the issue of “free shipping” by offering it after a certain amount is spent (before taxes), as well as limiting your geography of where free shipping should be allowed. Why? Because multiple items in an order means a bundled shipment, which means slightly cheaper shipping costs from the shipping carrier, and shipping to other countries can be quite costly.
Also, take a look at your marketing and sales plan, along with any discount codes you supply. Chances are, there’s room to make changes, i.e., not being too generous with your discount codes, changing them often so they aren’t illegally used, etc.
Related Article: The Customer Experience Secret Amazon Doesn’t Want You to Know About
‘Amazon Lets Me Return Things for Free as-Is.’ How Convenient Returns, Without Penalty, ‘Ruins’ the Customer Experience
Axion Industries’ website clearly states its return policy. Because the products are car parts, many of them cannot be returned, and those that can be have a 10-to-20% restocking fee. Why?
“Consumer-based businesses get charged up to 3% from credit card companies for returns — this is in addition to the percentage we get charged on the front end for the initial transaction, as well as the fact that it has to be shipped back,” said Mike. “This can be a big hit to a business when it happens, so in our industry, we typically charge a restocking fee.”
When asked how customers respond to it, Mike said, “A lot of them get upset because they don’t understand how we don’t just say ‘OK’ and refund their card immediately when we haven’t received the part back to ensure it wasn’t used or damaged in any way. More often than not, they will comment about the practice being unfair because ‘Amazon doesn’t do this,’ which is when I realized who I’m really competing against.”
So, how does this “ruin” the customer experience? If you said, “by charging a fee,” that wouldn’t necessarily be wrong. However not doing so creates a chain of issues that are now becoming widespread.
According to the University of Washington’s article on Oct. 17, 2022, titled, “How Many Amazon Packages Get Delivered Each Year?”, only 22% of Amazon’s orders are shipped through other carriers, which makes returns much easier to handle, since the logistics are in place (even through partners) to handle it. Now, virtually every other consumer-based business doesn’t have this luxury, which means they are relying on overloaded commercial shipping carriers to get an item back to you. Usually, a return takes two-to-three weeks to complete, depending on how many returns a company gets in a day. This results in what customers perceive as a poor experience because it’s taking too long to get their money back.
Interestingly, when a business charges a restocking fee and the customer knows it up front, they spend more time making wiser purchasing decisions, along with spending more time contemplating a purchase return before initiating it, resulting in a higher level of satisfaction.
“Oftentimes, customers will end up not returning the item they wanted to because they don’t want to see less money come back to them. It’s an interesting decision, but one that happens a lot,” said Mike. “If this is the case, we sometimes hand out future-purchase discount codes or other perks to ensure that they keep coming back. I also make sure that with large purchases, my customers are ordering the right things they need to prevent a return in the future.”
How to Combat Looser Return Policies
Mike has the right idea with handing out a special discount code on the next order, as well as throwing in a couple of free perks here and there if necessary. But the biggest way he’s helped keep returns to a minimum is to spend time with his customers up front. When you spend time educating them on what they want to purchase, it lessens the chance for a return later. Don’t have the staff for that? Have a separate section for FAQs about your product(s), perhaps some short videos explaining what these products are, what they are meant for, how to use them, etc.
In addition, make sure that your returns policy is clear, not just in your “Shipping and Returns” section, but also in a pop-up on special items that may not be able to be returned or will carry a fee if they are. Finally, if possible, provide language that states customers have X amount of time to cancel their orders without penalty — usually just a couple of hours.
Let’s Break This Amazon Prime Customer Experience Precedent
In almost all of my CMSWire articles, I discuss the “human” element in all of this and invite everyone to look at things differently than they usually do. In this case, be mindful of the above and treat those you are interacting with with kindness as they are most likely doing their best. Realize that commercial shipping is completely overloaded due to lack of package processors, delivery drivers and extreme weather events — delays are more common now than ever.
Understand that small businesses will be more “old school” in how they approach pricing, shipping and returns because profit margins are lower. And, above all else, remember Amazon Prime is the exception, not the rule.
Learn how you can join our contributor community.