Back in 1997 I pulled out the magic 8 ball and predicted that Amazon
wanted to be “the Walmart of the Web”. At the time, nobody thought it
would happen since Amazon was still smallish and only sold books. My
theory was it could embrace and extend itself into any product category.
Of course, it did.
I don’t know if you caught the news the other day but Amazon reported
record sales of $6.7 billion, up 18%, and $225 million net profit, up
9%. And today you can get motorcycle parts and cloud services (silver
lining?) from Amazon.
It’s easy for casual observers to say discounting or free shipping
brought on the success. I don’t think so. Plenty of other online stores
are hurting along with their offline cousins.
In 14 years charting Amazon I’ve seen how bit by bit it built a
“virtuous circle” of ecommerce. These are the ingredients for Amazon’s
success:
1) critical mass of users, north of 50 million
2) critical mass of community, user feedback
3) critical mass of selection, more products than just about anyone,
including Walmart
4) share the wealth affiliate network that pioneered the notion of
affiliates
5) Amazon Prime, the “Costco-ization” of Amazon as price club, creates
annuity revenue stream
6) free and fast shipping for Prime members
7) deep discounts on books and used books, saving 30% to 90% vs. rivals
Alexa toolbar data extraction, giving it insight into what people
online are looking at
9) Fixed pricing, which consumers find more attractive than bidding in
many cases
10) acquired Junglee, which opened up Internet product search
11) Jeff Bezos, who didn’t give up after years of posting net losses
12) customer convenience, 1-click buying
We are in a new era of online vs. offline retail battles as a whole
generation that’s grown up with the Web has now come to EXPECT certain
things in their shopping experience. This is one of the contributors to
offline retailers finally succumbing. Circuit City, Mervyn’s, and
perhaps others to come. Certainly the lack of easy credit for payroll
and servicing debt is one factor they fell. But I believe the larger
picture shows radical change in consumer behavior that many offline
retailers haven’t grasped yet.
Consider that most offline retailers stock minimal products. Often they
are out of stock of popular items. Store clerks don’t always have the
knowledge or motivation to sell the products (ask Circuit City, which
fired its top sales people which accelerated its decline). Parking,
hassle. Driving to the store, gas. Checkout lines.
Brick and mortar stores must really rethink their value offering in
order to survive the coming changes. They cannot conduct retail
operations as if it’s 1960. The one major advantage a “real” store has
is instant gratification, buy and get it now. It has the “human”
element, people milling and sharing space. It has the “discovery” aspect
of finding and buying something unexpected, it has the “get out of the
house” factor when you need some space from family, etc.
But what brick and mortar stores are missing are the community aspect of
the Web. One reason I started Taleee (taleee.com) was to bring the power
of millions of consumers to the point of sale in the store and online.
Bring the fire hose to the faucet. The Web is no longer something “out
there” but that travels with us on our devices. It needs to be in stores
also in very smart integrations like our Taleee Web ratings. And the
leading clients are doing just that.
So when you read about Amazon and its blowout quarter consider that
something much larger is going on here than the short-term thinkers are
looking at. Commerce is now ecommerce, on and offline.