As the biggest name in U.S. e-commerce, Amazon tends to set the curve for customer expectations.
The company first introduced buyers to one-click purchasing in 1999. At the time the concept was seen as extreme and totally off the wall. It wasn’t long before that became simple customer expectation. In more recent years, Alexa cleared the way for voice-enabled commerce. And in April Amazon made another push by announcing free one-day shipping for Prime customers.
No longer will Prime users be limited to one-day shipping as an option on select items. Now, buyers can have their items overnight, regardless of their purchase.
At its core, this move by the company to shorten delivery times is positive. It will ensure happier customers and more streamlined fulfillment. However, that doesn’t mean there will be no negative ramifications, especially for the company’s competitors.
Amazon is massive. They have the infrastructure to offer such a service, but few competitors can say the same. Everyone needs to keep pace with the expectations set by Amazon, but the simple reality is that not everyone can.
There are some merchants in a position to fight back. Walmart, for example, is introducing a competitive measure to offer free one-day shipping of orders totaling $35 or more. And Target just made a similar announcement about same-day shipping (for a nominal fee).
Amazon’s move will appeal to the roughly 100 million Prime subscribers in the U.S. Add to that the fact that there’s no dollar threshold for orders, and there’s no contest.
Walmart’s counter promotion, however, would be very appealing to customers who don’t have Prime, and who don’t plan to sign up any time soon.
It’s not just the companies making these moves who feel the ramifications, though. The back-and-forth between e-commerce giants like Amazon and Walmart has a profound impact on the market at large, making it harder for smaller merchants to compete. It alters customer expectations; just as buyers started to see free, two- to three-day shipping as standard, they may soon see one-day shipping that way.
About 40% of buyers expect goods to be delivered for free within two days of a purchase, according to the National Retail Federation, which notes that about 30% of consumers have abandoned an order when realizing free, two-day shipping was not an option. This pressure may even entice merchants to exercise less due diligence, leading to merchant errors and more successful fraud attacks slipping through.
It’s admittedly a hard position for merchants. Merchants try to strike a balance between fraud mitigation, best practices and the customer experience. Sellers want to minimize friction, which is a reasonable response. The key is to identify which friction points help and which hurt.
Most merchants are already familiar with “negative” friction, or broken site navigation, forced account registration, limited payment methods at checkout, and other points that create unnecessary barriers between buyers and sellers. However, some instances of friction can be positive, as they put reasonable checks in place to prevent errors and oversights, as well as weed-out fraud.
In this environment, merchants must ask “does this friction point serve a purpose?” If no, then it’s best to eliminate it wherever identified. If yes, then leave it.
Positive friction can include optional accounts, for example. Customer accounts are useful for verification and order tracking. However, merchants should not force buyers to make an account.
The latest version of 3-D Secure technology is another example. 3-D Secure 2.0 technology works like an online PIN, like the original 3-D Secure, but the new version improves on the original service.
Other “positive friction” examples are more complex passwords, order verification before completion and CVV verification.
By maintaining positive friction points and best practices, while eliminating negative friction, merchants can make it possible to streamline operations, adapt more easily to new customer expectations and compete at a higher level.
