Amazon is by far the leader in e-commerce. Their growth continues at an extraordinary pace. And they continue to expand their products, services and capabilities. In short, they keep expanding their advantage and making it difficult for others to compete with them. You need a blue ocean strategy!
But if you’re in the ecommerce space, that’s your reality. Amazon is the biggest shark in the room. So how does one compete against such an overwhelming opponent?
One option is to consider creating your own Blue Ocean strategy! If you can define a dramatically different space for your dealings, you might be able to keep this shark and others at bay (at least for a period of time).
The Amazon Flywheel strategy
Amazon is implementing its flywheel strategy with great success. The original concept was that lower prices would allow for a better customer experience. This would result in more traffic, which in turn would result in lower costs. And this would allow for even lower prices, and so on and on and on in a virtuous cycle. Do any of these factors affect the driver’s continued acceleration around the flywheel.
Amazon uses this approach in everything they do. Every product group they add, every service they offer and every skill they offer increases the speed of the flywheel.
This is incredibly important to understand. This competitor is getting bigger, stronger, faster and continues to create very differentiated value.
All of this makes it increasingly difficult to compete with Amazon in the same space. And even if you can keep up today you have to work to keep your advantage because they are right behind you trying to pass you.
Red Oceans vs. Blue Oceans
Amazon is so dominant that you can’t go head-to-head (certainly not for very long). Most companies will never have the size and scale and advanced capabilities that Amazon has. At best you can replicate some of what they have and what they offer.
So how do you compete?
You need to define a completely different competitive space and basis for selling in the e-commerce channel. And you must avoid competing head-to-head in any way you can. In short, you must create your own blue ocean strategy.
In 2005, W.Chan Kim and Renee Maubourgne published a book entitled Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant.
The metaphor defined in the book is that many companies compete with their competitors in blood-red oceans. These companies offer similar products or services without standing out from the crowd. As a result, these products and services are often commercialized and competitors compete on the basis of, for example, lower prices. All sharks fight in the same blood red ocean.
The basic premise of the Blue Ocean Strategy is that instead of continuing to compete in the Red Ocean, you should try to find new areas to sell your goods and services. In a Blue Ocean, because of the uniqueness of your offering, you are able to serve your customers in an uncontested space (at least for now). That means you’re swimming in a Blue Ocean, largely devoid of competitors battling in the commercialized Red Ocean space.
Elements of a blue ocean strategy
Amazon is constantly striving to develop and implement blue ocean strategies. Strategies like the Kindle e-reading solution, drone delivery, cloud-based computing, Amazon Prime or One Hour Delivery are all examples of how Amazon is creating an undisputed space (i.e. Blue Oceans) where it’s far removed from everything its Competitors can, can compete.
So if you’re in the ecommerce space, how can you create your own blue ocean strategy?
First of all, you have to realize that Amazon doesn’t own all the ideas and winning strategies. Every day new companies and new services are emerging with approaches that were previously unknown.
Second, it is necessary to understand that there are many elements in e-commerce that are now clearly red ocean competitive factors. You must provide a great customer experience. There needs to be an easy, fast online ordering and checkout process. You must have fast delivery. And you must allow hassle-free returns. These factors must be present, but they are not a source of competitive differentiation. These are Red Ocean realities.
Your Blue Ocean strategy must result in unique products or ranges that a customer cannot get anywhere else. And your blue ocean strategy must offer unique services and capabilities.
This may include products you design, unique features, use of online and physical stores in some way, use of the Internet of Things (IoT) or the ability of some creative systems. Or maybe your strategy involves supply chain disintermediation.
Whatever your blue ocean strategy, it’s important to realize that time is your enemy. Your competitors will eventually invade this space and turn it into another red ocean. You must constantly reinvent yourself and your business to keep swimming in the blue ocean.
Creating a blue ocean strategy
Many years ago I used the Blue Ocean Strategy concepts to launch a new business proposition in a company. It was very powerful and very exciting. We knew we wanted to create a highly unique new service offering, but we had no idea what that new offering would look like.
We’ve assembled a team of the best and brightest in the business. Nothing was taboo. There was no preconceived notion of what was or was not possible. And there was no idea what the solution had to be.
We also received fantastic managerial support and access to any resources we could possibly need. The big vision here was that we had the opportunity to create something that could redefine the future of the company.
I hired a Blue Ocean trained facilitator to walk us through the process. I highly recommend this approach. It might seem easy to read the book and then think that you can just start using the techniques it contains. But I believe you will find that a strong facilitator will accelerate your progress and strengthen your strategy.
In addition to this, you also need to ensure that you also have clear executive sponsorship and buy-in. If the company has come to the self-awareness that a new strategy is necessary, then you are well on your way there.
The first step is to realize that you are in a red ocean. Ecommerce is a vicious, stressful, highly competitive and congested channel. And there’s a very dominant, all-consuming shark in this red ocean with you.
If you can create your own blue ocean strategy in e-commerce, you will dramatically increase your chances of success. What is it about your business or elements of your business that you can use or reinvent to create your Blue Ocean?
Avoid commercialization. Realize that tomorrow’s blue ocean is next week’s red ocean. You have to keep moving and innovate.
Send us your comments and let us know if you have any Red Ocean or Blue Ocean stories you’d like to share!