Amazon continues to dominate the U.S. retail landscape, with EMARKETERpredicting the retailer will capture approximately 40% of the US retail market in 2024. Meanwhile, Temu continues to rise in popularity. In fact, Temu’s app is consistently one of the most-downloaded iPhone apps in the U.S. App Store, driven largely by offering super low prices on a wide range of products. These giants present formidable competition. For online retailers, it can seem nearly impossible to compete on price alone. However, cracks are beginning to show in the armor of these brands, offering opportunities for smart retailers to differentiate themselves.

While small to mid-sized retail brands don’t have the resources or brand recognition to steal market share from the likes of Amazon, Temu, Target or Walmart, they can leverage strategies that will set them apart and help them increase customer loyalty, including:

One of the most effective ways for retailers to differentiate themselves is by delivering an exceptional customer experience. While Amazon and Temu may offer convenience and low prices, they often fall short when it comes to personalized service and customer care:

• Personalization and engagement - Personalization can be a powerful driver of both customer behavior and loyalty. McKinsey notes that implementing personalization can reduce a company’s customer acquisition costs by half, lift revenues from 5 to 15%, and increase marketing ROI by 10 to 30%. McKinsey observes that customers appreciate when brands provide relevant recommendations the customer wouldn’t have thought of on their own and, when the products/services recommended are complementary to items they already bought or browsed. For example, Nordstrom, a mid-sized retailer, has used personalization effectively across both its online and in-store experiences to grow sales and drive more customer loyalty. By offering personalized shopping experiences both online and through in-store stylists, Nordstrom has consistently grown sales in spite of intense competition.
  
  
• Superior customer service - In addition to personalization, online merchants can deliver excellent customer service, offering prompt and attentive support that contrasts with the often impersonal, slow, and hard-to-get responses from larger platforms. Temu, for instance, has been criticized for its poor customer service, with many consumers reporting difficulties in resolving issues or getting timely responses. By offering superior customer service, retailers can turn what is often a weakness of larger competitors into a key strength. Using Nordstrom as an example again, they are known for their customer service-oriented corporate culture, which sets them apart in the retail industry. They treat every transaction as an opportunity to build a relationship with that customer, and are investing in the digital tools to power these relationships at scale.

Amazon struggles with counterfeit products on its platform, with some estimates reporting 10-60% of products sold are counterfeit. This provides an opening for online retailers to emphasize their commitment to quality and authenticity.

Post-sales service is another area where online merchants can stand out, including efficient and hassle-free returns, easy last-mile fulfillment, and ongoing customer support. A positive post-sales experience not only helps retain customers but also encourages positive word-of-mouth, invaluable for smaller retailers:

• Hassle-free returns - One of the biggest pain points for consumers shopping on platforms like Temu is returning products which can be cumbersome, requiring the customer to meet strict deadlines for shipping products back to the company and taking a long time to deliver refunds. Issues with product quality and inaccurate descriptions are also common complaints. To differentiate themselves, smaller retailers can offer a straightforward and customer-friendly return policy with clearly defined terms including the return window, expectations for the returned product’s condition, and the refund process.
  
  
• Follow-up and customer communication - Staying in touch with customers after a purchase can also build a brand’s reputation. This post-purchase communication could include follow-up emails to ensure customer happiness and remind them of support available, or simply to thank them for their business and offer a discount or a free shipping incentive for their next purchase. Post-purchase communications also offer an opportunity to showcase hyper-personalization: by making recommendations for complementary products or offering “life hacks” on how to best use the purchased product.

Consumers are increasingly becoming aware of the ethical practices of the companies they support. Issues like counterfeit products, data privacy, labor conditions in the supply chain, and the brand’s environmental impact are becoming more important to many consumers and factoring into in purchasing decisions as a result:

While competing with giants like Amazon, Walmart, and Temu may seem daunting, brands have opportunities to differentiate themselves through exceptional customer experience, robust post-sales service, and ethical business practices. By focusing on these areas, online retailers can build loyal customer bases that value quality, trust, and a personalized shopping experience over price alone. In a crowded and competitive market, these differentiators can make a difference in driving customer preference.

• Counterfeit products and quality concerns - Amazon struggles with counterfeit products on its platform, with some estimates reporting 10-60% of products sold are counterfeit. The company has made efforts to address this issue, spending $1.2 billion and hiring 15,000 workers for their anti-counterfeit effort in 2023, ultimately seizing 7 million counterfeit items. Still, the prevalence of counterfeits has led to a decline in consumer trust. This provides an opening for online retailers to emphasize their commitment to quality and authenticity.
  
  
• Ethical sourcing and sustainability - Consumers are increasingly looking to support brands that align with their values which provides retailers committed to ethical sourcing and sustainability a competitive edge. According to a 2023 report by Nielsen, responsible sourcing is the most important sustainability claim to 45% of consumers. Retailers that can demonstrate a commitment to sustainable practices, whether through sourcing, packaging, or operations, can attract this growing segment of consumers.
  
  
• Transparent business practices - Transparency is another opportunity for differentiation. This includes being open about pricing, sourcing, labor practices, and business practices, as well as ensuring that data collection and privacy policies are clear and consumer friendly. Temu has faced scrutiny over its data collection practices, and other retailers can use this as an opportunity to position themselves as more trustworthy and transparent alternatives.