Amazon is hunting for you this holiday season

The holidays are hunting season for Amazon, and they’ve got your business in their sights. Over the years, Amazon has consistently proven to be extremely adept at
maximizing their competitive advantages and creating innovations to
shore up their disadvantages. And the holiday season is the time they most leverage their advantages to grab more market share.

But here’s the thing: many of Amazon’s advantages are shared by e-commerce operations of all
types, but Amazon seems to be quicker to recognize and capitalize on
those advantages than everyone else.

This morning, I pulled up the Amazon home page and was greeted by yet
another letter from Jeff Bezos announcing Amazon’s latest brilliant
innovation. This time, it’s “Frustration Free Packaging” – just in time
for the holiday season when those of us who are parents still haven’t healed the scars from last year’s unbelievable frustration with trying to release our kids’ new toys from wicked constraints that would have defied Houdini (all while the kids are jumping up and down with excitement to play with the new toys).

The secure packaging we’ve been fighting with is designed for physical stores to allow for attractive displays while at the the same time preventing theft. You can see all gory details in this patent filing for toy packaging. But the need for that type of packing in an e-commerce warehouse is moot. So, why not push manufacturers for “e-commerce packaging” that is designed to protect items in shipping but allows for easy removal from the package? Amazon’s size probably gives them an advantage in pushing for this type of action from manufacturers, but many of today’s biggest multi-channel retailers certainly have massive pull with manufacturers and probably could have pulled this type of thing off either individually or collectively — had they thought of it.

And, of course, Amazon has been the trailblazer for many of today’s e-commerce innovations, including customer reviews, affiliate programs and recommendations. So, you might say, let them bear the costs of the innovations and we’ll just capitalize on them after Amazon has proven the way.

While that strategy may work sometimes, it’s fraught with risk because Amazon doesn’t often relinquish market share once they’ve gained it (particularly if they hook customers into Amazon Prime), and they tend to gain that market share during the holiday season. Check out their quarterly results in the “North American Media” category over the last 22 quarters in comparison to Barnes and Noble and Borders:

You can see it’s the fourth quarter where they gain market share. They don’t gain much in the other three quarters, but they certainly hold on to a lot of the share they gained the prior holiday season.

So, what can the rest of us do about it?

For starters, we might want to put innovation on the front burner. Yes, there are costs and risks associated with innovation. But the costs of doing nothing or simply following the crowd might be greater. And successful innovations don’t always have to be earth-shatteringly new, whiz bang technology. They simply need to solve problems better than current solutions.

I believe the most successful innovations have at least one of the following characteristics:

  1. They create convenience for consumers
    We love convenience, and we’ll sacrifice quality and spend more money to get it. I’ve talked about this previously in my post “Predicting the Future of Retail.”
  2. They create efficiencies for businesses
    Efficiencies allow us to make more money faster, and we love that. Given the unusual shapes some toy packaging can take, I wouldn’t be the least bit surprised if Amazon’s Frustration Free Packaging is also alleviating frustrations in their warehouse and giving Amazon added efficiency in the supply chain.

It’s important to carefully examine our businesses to truly understand where we have advantages and disadvantages. As is the case with packaging, these advantages might not always be immediately obvious. We really need to dig deep to understand the problems our customers and businesses are facing and then carefully look for ways to solve those problems by leveraging our inherent strengths. In this process, we need to listen hard to our customers to understand their needs. Steve Jobs once famously said, “You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.” He’s right. Customers often can’t give us the specific solution, but if we listen properly they can describe their problems well enough to give us the basis for developing effective solutions.

Innovation usually takes time and money. What can we do this holiday season?

There are lots of little things we can do to improve the experience for customers who come to our sites this holiday season.

  1. Truly look at our sites from our customers’ perspective.
    Go to Google and click on one of your search terms. Is the experience what a customer should expect? Try taking a different path on your site to a product than you normally do. How is the experience?
  2. Get more product front and center
    Physical stores pack the front of store and end caps with gift ideas. How well does your site parallel this sort of technique?
  3. Review your error messages
    A poorly written error message is a shameful way to lose a sale. Go through your site and intentionally generate errors. Put yourself in your customers’ seat. Are those error messages clear and easy-to-understand?

While it may be too late to implement huge changes for this holiday season, it’s certainly not too late to pay attention to customers’ needs and start thinking about what can be done for next holiday season. We can carefully consider our advantages and think about how we could better leverage them next year. And we can carefully consider our disadvantages and think about how we can better mitigate them next year. I’m confident Amazon’s already actively considering their next moves.

What do you think? What tips do you have for retailers for this holiday season? What types of innovations do you see coming?



2 Comments

  • By Chris Eagle, November 18, 2009 @ 2:08 pm

    Great article. There are a lot of factors that result in the graph you show, but I think most of us would agree that Amazon is one of the most successful innovators in recent time.
    However, I would argue that your statement “Amazon seems to be quicker to recognize and capitalize on those advantages than everyone else.” is not entirely accurate. We remember all of the great Amazon innovations, but tend to forget all of the unsuccessful ones, and it’s a safe bet that Amazon tries 2-3 non-successes for every great innovation. I think a more accurate version of your statement would be “Amazon seems to be more willing to try new stuff and then recognize and capitalize on the ones that work than everyone else.”
    It may seem like a nit, but I think the difference is really important. Most companies can see when an initiative is working and try to milk that initiative. The big difference is that innovative companies find ways to try more things.

  • By Kevin Ertell, November 18, 2009 @ 5:24 pm

    Thanks for your comments, Chris. I completely agree with your point about Amazon’s innovation culture and willingness to try new things. True innovators recognize that not everything works out as intended. Sometimes you get failure and sometimes you succeed in a way you didn’t expect. There are lots of good Thomas Edison quotes on this topic, and a couple of my favorites are:
    “I have not failed. I’ve just found 10,000 ways that won’t work.”
    and
    “Just because something doesn’t do what you planned it to do doesn’t mean it’s useless.”
    Companies with innovative cultures have the courage to stand behind statements like those, and Amazon seems to be one of them. To truly come up with great innovations we have to be willing to think hard and we have to have enough will power to fail repeatedly. Tough to do, but the payoff can be fantastic. Thanks again for your thoughts.

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Retail: Shaken Not Stirred by Kevin Ertell


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