One of the most interesting interviews I’ve conducted over the past few years was with Dave Morgan, CEO/founder of Simulmedia. He suggested that some of the world’s most vaunted CPG firms (e.g., Procter & Gamble, Unilever, General Mills, etc.) aren’t actually good at marketing (see article here). What fascinates me about Morgan is how he is comfortable challenging the status quo; he has a unique perspective and is willing to challenge accepted beliefs in an effort to help businesses succeed.
I recently caught up with Morgan and asked him what was provoking thought at the moment. We started talking about Amazon and how despite numerous strengths, they are not impenetrable. Below, Morgan shares a key Amazon vulnerability and identifies ways that retailers can compete and win.
Kimberly A. Whitler: During COVID-19, Amazon seems to have strengthened their market position. Are there any vulnerabilities in their model?
Dave Morgan: If you go back into time and look at catalog merchants, or even if you went back further to the traveling salesperson, a lot of companies and a lot of brands focused on the quality of the product. The goal was to communicate product quality advantages and to help the consumer discriminate. One of the issues that is happening today is that consumers are not aware that there may be problems with the supply chain at Amazon because of their focus on ease of discovery, ease of purchase, and speed of delivery. Amazon is comprised of a marketplace of independent “stores,” making it nearly impossible for Amazon to verify claims, product quality, or even product authenticity. Consequently, there are issues regarding counterfeit goods and other problems in the supply chain. A lot of the goods that consumers may be getting will look, taste, and feel like the products they had before; yet, they aren’t. And many end up breaking down or failing far sooner than what the consumer would expect from a particular branded product.
Whitler: How can competitors leverage this insight to create advantage?
Morgan: I’ll share three different ways retailers in particular can compete.
1. Authenticity as a Differentiator. Moving forward, a differentiated benefit is going to be the authenticity of the good. We are going to have to see some really well thought out and sustained marketing campaigns from companies, especially in fashion and consumer goods, that are going to focus more on product authenticity. For example, coming out of the COVID-19 pandemic, I think we are going to see people buying less products, specifically in fast fashion. There will be fewer products and a higher expectation of durability and quality, in which Amazon might not do well.
2. Superior Customer Service: Businesses need to find a way to be competitive. It’s either going to be on price or product innovation or customer service and it can’t be all three. For example, if I were Walmart, I would immediately take advantage of this time to start shrinking my inventory footprint down in order to prioritize consumer loyalty. The smaller inventory will lead to a better set of goods with a higher degree of service delivery. Walmart cannot afford to be an Amazon with a slightly closer brick and mortar opportunity because Amazon is moving so fast to be able to take real estate. Rather, Walmart should focus more on not just price, but customer service. They’ve started doing this by redefining “convenience”. Amazon focused on shipping convenience but now Walmart has added a number of additional options to buy and return.
3. Product Innovation: Some of Amazon’s competitors should focus on product innovation. For example, consider Nordstrom. I think it is going to be difficult for them to compete with others, like Amazon, who have a much bigger platform. Instead, I would focus on developing more unique products. Nordstrom has an advantage in having a higher-end customer that gives them more margin if they are able to bring more unique and exclusive products into the market. Exclusive product with guaranteed quality will help push them away from Amazon.
A special thanks to Sarah Young, a rising second year at the University of Virginia (’23) and Research Assistant for the past year. She helped conduct the interview, transcribe the interview, and identify the focus for the article.
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