Posts tagged: Amazon

A Convenient Truth

Easy buttonConvenience. We value it more than I think we sometimes realize. We’re willing to pay more for it, and we’re willing to sacrifice quality in exchange for it. So it stands to reason that delivering convenience for our customers can lead to a pretty profitable equation for retailers.

Consider the convenience effect of some of the more popular innovations in recent years:

  • Mobile phones. We love our mobile phones,  even though they’re more expensive and of significantly lesser sound quality and reliability than land lines. And now we browse the web on our tiny smartphone screens.
  • Digital music. While it’s getting better, the sound quality of digital music is not as good as CDs (and some people say CDs aren’t as good as LPs). And we happily listen to our iPods over poor sound quality earbuds because they’re a lot more convenient than bulky headphones.
  • Camera phones. Digital photography with nice SLR cameras is finally nearing the quality of film, but cameras on phones have a long way to go to get to that same level of quality. But it sure is easy to post photos on Facebook and Flickr from a camera phone.
  • Diet pills.  OK, these aren’t as widely adopted as the previous examples (yet), but they’re the easy way out for weight loss even though there are some less-than-pleasant side effects. (Hint, you don’t want to sit next to an Alli pill taker on a long flight.) Of course, if you’re not into pills maybe you can still avoid exercise and get some six-pack abs with the Vibro-Belt.

I would be remiss if I didn’t mention the immense convenience of e-commerce and the effect it’s had on retail. But we cannot rest on our laurels as the desire and demand for convenience knows no bounds.

The threshold for inconvenience continues to get ever lower. We often complain about how many clicks it takes to get to what we’re looking for on a web page. Think about that for a moment. The energy required to cause our index fingers to press a button too many times is irritating. Some might say it’s not the energy, it’s the time. OK, fair enough.  Then the “waste of time” threshold starts kicking in when we are forced to wait three to four seconds for a page to load. We’re busy! We haven’t got that kind of time to waste!

My favorite example of the power of convenience is the Kindle. Amazon managed to make the paper book seem inconvenient. If that doesn’t tell you that just about everything can be made easier, I don’t know what will. People (and I’m one of the them) are willing to drop hundreds of dollars for a book reading device that still doesn’t format as well as a paper book. But it’s so light and so much easier to hold in one hand than a hardcover book. You can lay it flat on the table. You can carry lots of books around easily, which is very nice for a traveler like me. And you can get books in an instant with the wireless connection, which is soooo much more convenient than plugging the device into a PC for a sync. I sometimes feel ridiculous saying things like that, but I’m not going back.  And I’m not alone; people write long blog posts professing their love of the convenience the Kindle brings.

But this post isn’t a social commentary. It’s about recognizing an opportunity to make money.

So, how can we focus our businesses on the convenience opportunity? Here are three places to start:

  1. Start with website usability
    We should start with our sites because they are the low hanging fruit. The promise of convenience with e-commerce is high, but all too often we put obstacles in our customers’ way, many of which I’ve written about previously. Where are we causing customers more clicks than necessary? Why are we requiring all those clicks? Is it a lack of planning on our part, or are we putting our immediate priorities ahead of our customers’ needs? Have we overwhelmed our customers with choice? How can we make narrowing our selection easier and quicker? And let’s not forget site performance. How fast are those pages loading?
  2. Re-examine the store experience
    We need to continue to think about how our in-store experiences can be easier and more convenient for our customers to shop. Paco Underhill provided some great tips in his book,  Why We Buy. We can also look to a cross-channel strategy to allow technology to provide some conveniences. How can we bring customer reviews and recommendations into the store? Is “buy online pickup in-store” a desirable convenience to offer? How about accepting payment via mobile phone or PayPal in our stores?
  3. Consider our customers’ lives – what could make those lives more convenient?
    What’s life like for our customers? If she is a busy mother of young children, can we do more to help her easily put together some nice outfits for the kids (or herself) to free up time for answering emails, paying bills, or maybe, just maybe, giving her time to relax in the bath? Does it make sense to give our customers the ability to automatically replenish certain items at certain intervals? If we think hard, we can probably find ways to improve certain tasks that don’t currently seem difficult. If the book can be made more convenient, there are no limits.

Sometimes I think we get so caught up in our metrics and the particulars of our businesses that we forget about our customers’ needs. After all, retail is really a service business. Customer convenience can and should be a key part of our value proposition. When we find ways to make our customers’ lives easier (even by just a little bit) we are providing services and products our customers will be willing to buy — and at prices that are nice for our bottom lines.

What do you think? Is customer convenience the right strategic target for us? What ideas have you implemented to improve convenience?


You ARE a technology company

In this day and age, pretty much every company is heavily dependent on technology to operate. But if you have an e-commerce operation (or really any sort of transaction website), you are a consumer technology company. The sooner we recognize and accept this fact, the sooner we can get on with leveraging it to our competitive advantage.

We often talk about focusing on our “core businesses” at the expense of everything else. At a conference I attended last week, I heard a number of speakers and attendees reference Amazon as a “technology company” as sort of a dismissal. They were basically saying, “Yes, Amazon has lots of great features and functionality and people rate their experience highly, but they’re a technology company. We’re retailers. We can’t compete on that level with them.” This type of statement draws the obvious retort: “So, then, on what level do you plan to compete?”

While Amazon does generate some revenue from selling technology services, the vast majority of their revenue comes from retailing products. Their financial statements look pretty much the same as most retailers (except they have much bigger numbers and growth rates). But Amazon and other pure play online retailers are not burdened with the type of legacy thinking that exists in a lot of multichannel retailers. They understand full well the value of creating a quality online experience, and they understand that technology is part of their core business.

Competing with Amazon is clearly very difficult for a variety of reasons (price being high on the list), but how many business elements can we abdicate to them before our very survival is at stake? Shifting our mindsets regarding our sites is one key way to claw back into the game.

Our websites are consumer software applications, in many ways like Microsoft Word or Quicken. And this means that online our business is technology.

People use our website applications to accomplish tasks like buying our products, learning more about our products or getting inspiration. Their perceptions about the quality of our applications can absolutely make the difference in whether or not they complete their tasks and whether or not they return to use our applications again.

And their perceptions of our brand can also be influenced by the quality of our site experiences. A study by ForeSee Results on the Internet Retailer Top 100 sites found that people who were satisfied with the online experience of a retailer were 44% more likely to purchase offline. That indicates significant value in making sure the website is a quality software experience.

Our websites are also an opportunity to differentiate from our competitors, particularly if we’re not selling proprietary products. If consumers can buy the same North Face jacket or Nikon camera from a variety of different retailers online, the quality of the online experience will be a contributing factor in the decision.

Let’s do what it takes to include the quality of our site experience in our value proposition.

Here are 3 ways to get started towards becoming a consumer technology company:

  1. Organization
    We will likely need to make organizational structure changes to support a consumer technology focus. I previously made a case for changes in E-commerce IT organization that goes into more detail, but suffice to say the technology strategy and the business strategy need to be not only aligned, but integrated.

    Furthermore, we need think about different types of roles. Software companies have product — not project — managers and product teams who are dedicated to building customer focused product strategies and life cycles. A quick check on the Amazon careers page reveals many product management positions. Do you have product management positions in your organization?

    Check out a typical set of responsibilities from Amazon’s Baby Registry product management gig and note the mix of business and technology functions and responsibilities:

    • Research and identify opportunities for Amazon to further distinguish our Baby Registry offering.
    • Define a long-term product roadmap, including technical, business development and marketing initiatives.
    • Develop new strategic partnerships ad drive day-to-day partner relationships.
    • Conduct business and financial analysis, including forecasting, monitoring, and reporting.
    • Define requirements, and drive customer experience projects and work with all relevant cross-functional areas and our technology teams to guarantee smooth, efficient implementation.
    • Manage bottlenecks, provide escalation management, anticipate and make trade-offs, balance the business needs versus technical constraints, and maximize business benefit while building great customer experiences
    • Work cross-functionally with designers, software development engineers, salespeople, product managers, and other internal partners.
  2. Budget/Investment
    How might our current budgets change if we considered ourselves  technology companies? Maybe not at all, but we should nonetheless re-examine our customer investment strategy in such a light. At the very least, we might consider revamping our budget processes to accommodate a fast moving, highly innovative competitive marketplace where the features and functionality of our website “product” are key parts of our business strategy and our ability to differentiate from our competitors.
  3. In house or outsource?
    Often we decide to outsource technology (and other elements of our businesses) because they are not “core” to our business and other people can do a better and more cost effective job. How does our thinking on outsourcing change if we consider ourselves technology companies? We might still legitimately consider outsourcing or licensing third party software, as many software companies do. However, we might also consider building up true competencies in at least some areas of software design and development because of the need to differentiate and deliver quality branded experiences for our customers.

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Recognizing and accepting the fact that developing an e-commerce operation puts us in the consumer technology business is an important first step to successfully competing in the online marketplace. Once we’ve achieved the consumer technology mindset, we’ve got to take steps to create an organizational structure that executes like a consumer technology company. Without such steps, we will fall further and further behind the companies who are leveraging their technology focus to create the positive customer engagement cycles I discussed in my previous post.

What do you think? Do you think being in e-commerce means you’re in the in consumer technology business? How is your company organized?

Photo credit: Sebastian Bergmann


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?



Predicting the Future of Retail

The world is changing incredibly fast — maybe faster than ever — primarily due to rapid technology innovations. If our business models don’t keep pace, we’ll quickly be left behind. Since I believe that defending the status quo is what kills companies, thriving and surviving requires somewhat accurately predicting the future. So I thought I’d take a few moments to predict the three advances I think will most affect retail in the next 15 years.

I’ll start with an easy one:

1. Just about everyone will be connected at high speeds at all times

Heck, we’re almost there now. Technologies like WiMax and its successors will be incredibly prevalent in 2024. Furthermore, screen size will no longer be an issue. Innovative technologies like OLED will allow for large foldable and rollable screens that can be neatly tucked into devices the size of ballpoint pens. But it won’t just be mobile devices that are connected. Our cars, our clothes, our sunglasses, our appliances and just about everything else will be connected. Everyone will have exactly the information they need at any given time immediately accessible at any point in time.

2. Video communications advances will make today’s office spaces almost extinct

This one is where I’ve met with the most dissent when I’ve discussed it with people. I think we’ll all have wall-sized screens in our homes that allow us to have life-sized video conversations with people, and that technology will allow us to telecommute in massive numbers. So many people will telecommute that offices as we know them today will no longer make sense. Our co-workers will be spread throughout the globe, yet our communications with them will come close to the same quality we have today with someone in the same office.

The normal argument I hear against this prediction is that nothing can take the place of the types of in-person conversations we have today. That may be true, but maybe we don’t need that level of quality for the vast majority of our office conversations. We’ve proven over and over throughout the years that we’ll trade quality for convenience. In communications alone, we’ve traded phone conversations for what used to be in-person conversations. We’ve also more recently traded the higher sound quality and reliability of land line phones for the lesser sound quality and lesser reliability of mobile phones. Texting has replaced email for many, and even instant messaging has frequently substituted for in-person conversations. I’ve seen people IM each other even though they’re sitting in directly adjacent cubicles where they could have easily just spoken in normal voice.

I’ve used current versions of video conferencing that are pretty impressive. I once attended a meeting at Google’s Ann Arbor office where we met with people in Google’s Mountain View office via video conference. After a couple of minutes adjustment, I felt like we were in the same room. We were even drawing on the white boards for each other.

This particular technological advance will also be driven by environmental concerns and continuously rising prices of fuel. The “world is flat” phenomenon may also be a significant contributing factor as companies will be able to leverage their use of these technologies to hire the best talent available regardless of physical location.

3. Supply chain advances will make same-day delivery commonplace

One of the most often cited advantages of physical retail over e-commerce is the immediate gratification available at a local store. This advantage will not hold for long. I can just about guarantee someone at Amazon is currently trying to find a way to deliver most of their goods to almost anyone in the same day. They’re actually already doing it for some items in some cities today. And they’re not alone. The auto parts retailers have long been able to deliver parts to commercial garages within an hour. In fact, I can imagine the types of distribution networks built by auto parts stores becoming a model for many retailers. Supply chain professionals are some of the most amazing people I’ve ever met.
They are constantly finding new efficiencies in their processes, and I have no doubt they will be able to solve the issues associated with same day delivery.

Do these predictions sound crazy?

If so, think back 15 years to 1994. Hardly anyone had mobile phones or emails. Amazon didn’t exist, nor for all practical purposes did e-commerce. Those of us who connected to the internet did so on dial-up modems at 56k speeds. We’ve come a long way in the last 15 years, and I don’t see any sign of us slowing down for the future.

So, what does this mean for retail?

Many of today’s current physical store advantages are going to be neutralized, so multi-channel retailers are going to have to significantly change their business models. Furthermore, the commonplace usage of video conferencing will likely cause population shifts and cause the need to shift real estate strategies. I can see some people migrating towards urban environments to satisfy their needs for more personal interaction in their social lives, and I can see others going the opposite direction and moving to rural environments to satisfy their needs for more solitude and outdoor living. Suburbs as we know them today will have less appeal and may see significant population decreases.

As I think is already the case today, the retailers who create the best customer experiences across all channels are best positioned to thrive in the future. As retail becomes increasingly self-service via customers’ constant connections to retailers and to each other and to general information everywhere, it’s going to be the retailers who get customers the right information in the right way at the right time and with the best overall customer experience who will garner the most loyalty among customers.

Retailers with physical stores may consider leveraging those physical stores as distribution warehouses while maintaining selling spaces that are in many ways showrooms. Retailers will need to consider whether or not distribution and delivery should be outsourced or become core capabilities. Will sales associates and delivery drivers become one in the same? Will sales assistance occur both via video conferencing and via direct discussion on a customer’s doorstep? Is that crazy from a customer’s perspective or incredibly convenient?

I believe the retailers who best leverage their cross-channel capabilities today will be best positioned for this brave new world. And those who attempt to protect the status quo will face pressures from all fronts.

There are lots of other things that could happen in the next 15 years that are potentially even more radical than anything I’ve predicted here. But one thing’s for sure: there can be no doubt the retail landscape 15 years from now will be very different from what we see today.

What do you think of my predictions? Even more importantly, what are your predictions? How do you think retailers should react?

Retail: Shaken Not Stirred by Kevin Ertell


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