Creating switching costs like Amazon does is like putting a fence around your customers. That fence keeps them as your customers but also makes it difficult for your competitors to even get to your customers.
I really think Amazon is great at doing this and it's one of the reasons they are getting so much repeat business. People can easily place orders with them and make returns so much so that people don't want to go through the process with another supplier. Amazon for many years borrowed money to stay in business. They could borrow money at a very low interest rate and had access to investments/loans that other unprofitable small businesses would never be able to obtain.
Just think about a few of these things Amazon offers:
• Hassle Free Returns
• Amazon Prime
• Almost Free Shipping on everything (with Prime)
• Access to music
• Access to videos/movies
• Amazing customer service - you can get your money back easily without even returning the product sometimes
• Whole Foods benefits
• Photo storage
• Free ebooks
• Washington Post
• And More Coming!
If you are a business trying to compete with Amazon, you have to create your own switching costs.
What are you doing?