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The Name: Amazon
The Place: HQ Seattle, USA and practically every connected house on the planet
The Story: Who hasn’t heard of Amazon? Launched in 1995 it is the largest online retailer on earth with annual revenues bigger than the GDP of most of the countries in the world. Their mission is as follows: “To be earth’s most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.” So they think big over in Seattle. And with third quarter results up 44% to $10.88 billion they can afford to.
Amazon: continuing to woo early adopters
Getting motivated for innovative change in such a huge company must be like turning a tanker?
It’s just not true with this particular company. You have to admire Amazon. It feels like they launch something new every 10 minutes and it’s been doing that its whole existence. It starts in a garage selling books. And in next to no time it moves into music, videos, DVDs, computer software, consumer electronics and clothing and footwear. In 2011 alone it has added kitchen items, DIY, baby, jewellery, health & beauty, musical instruments and scientific supplies to its categories. Now, of course, they will sell you computer space in their computing cloud which puts them head to head with some of the biggest IT businesses in the world. They will in due course be selling everything you could possibly want. World domination will follow no doubt.
Really? Well, the deterioration in trading of bricks and mortar retailers follows on from Amazon’s entry into any category because they are so good at coming up with new ideas to tempt the consumer in. In fact they have always tempted other retailers in as well. Selling other people’s products on your site was unheard of back in the day. And also providing operated-websites for other retailers – some very large ones – was also pretty novel. And this is the clever bit, they charge around 10% for each transaction. But the real killer blow is that they do not give the company any customer data at all. They keep it and use it to tempt that customer back to their own site.
So tempt me now. Okay. This year they launched a Click & Collect scheme in some shopping centres in the UK – they already have a few in Seattle – where you buy online and then go along and pick up the goods from a locker at a location near to you. This is a perfect blend of online and physical store for what is a dyed-in-the-wool pure-play business.
More? How about ‘frustration-free packaging’. Seriously there are whole departments devoted to this. Just so you can stop fiddling about with cardboard. Absolutely anything that might induce you to shop with them rather than someone else will be considered. And then of course there is ‘Prime’.
There is? The jewel in the loyalty scheme crown. In the UK it works as a subscription model. You pay £48 and you get unlimited free deliveries with no minimum order. Once that fee is paid customers have no interest in shopping around on price anymore. It’s Amazon all the way. The only snag is that Amazon is moving to free deliveries anyway in the UK soon so the unique selling point of Prime is somewhat negated.
Still need more tempting? Blimey. Right, they are also impressively innovative in m-commerce. They have developed an app which allows you to take a picture of a product you like and then Amazon will match it to something in their own catalogue.
OK, that is good. I haven’t even begun. They are absolute geniuses at the whole trade-in/used category, often aimed specifically at cash-strapped students. A dedicated electronics/gadgets trade-in store was launched in May 2011. All your gadgets get thrown into one big box and there is free shipping. Amazon does not tend to pay for trade-in goods but you get Amazon vouchers downloaded to your mobile within 48 hours making sure you buy on their site yet again. They are truly light years ahead in this whole loyalty thing.
Wowzer. And you haven’t even mentioned the K word… I know I haven’t. I’m coming on to it now. Kindle. So having been originally a bookseller Amazon suddenly found that it had to make sure not to fall behind on e-books of all things. And in 2007 it launched Kindle which now has around 850,000 titles at its disposal. By July 2010 ebook sales outnumbered hard copy books for the first time by 1.4 to 1. They also make money on a mobile advertising service. You buy the Kindle for a discount of $25 and it comes with advertising – not in the books but as screen savers. For the last two years Kindle has been the best selling product on Amazon and the tablet Kindle Fire was launched in the autumn. Early indications suggest that its price is attractive enough to allow it to go head to head with the iPad as Amazon hoped.
Goodness, they’ll be publishing their own books soon. Keep up. It was announced in August they are moving into publishing. They will tie authors into exclusive deals to sell their books in bookshops, as hard copy on Amazon, and also as ebooks and audio books.
Are there any challenges left? Yes, China. They want the stuff but they are not internet savvy. But if anyone can crack it then Amazon will.
So, on planet Amazon the only physical shops left soon will be coffee shops. Good point. I’ll mention it to the packaging department. They’ll have something sorted in no time.
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