To succeed as a major retailer today, you need to effectively manage reviews, recommendations, catalogs and advertising. Supply and demand are continuous lines that must connect. Everything must work as one.
It’s an Amazon Christmas because they’ve nailed the whole picture. Moreover, Amazon has blazed a trail others can indeed follow.
This holiday season, Sears Roebuck & Company, a staple of American life for generations, has marked the closing of its store in Austin, Texas, where Pocketmath traces its roots. Likewise, Toys R Us is noticeably absent having shut down US stores months ago. We could beat the drums with well worn words like ‘walled gardens’ and cliched eulogies to brick and mortar. These retailers didn’t have to die, but they did need to evolve.
Today, I’m interested why Amazon doesn’t have more competition. Certainly the folks at Walmart, Target and other usual suspects are trying to clinch victory by playing an increasingly inspired game of e-commerce catch-up.
With such behemoths fighting for survival, how does Amazon’s dominance continue? What does the landscape look like for its competitors? How can others borrow from this success?
Amazon does product searches, recommendations and advertising on balance better than anyone. How? Amazon has unprecedented strength in feedback cycles.
Breadth and depth of customer relationships drive superior context
As consumers discover, buy and review, the company connects more dots than anyone else. Amazon understands buyers because it can defty segment audiences based on hundreds of hours worth of interaction between a person and the company.
Amazon knows the consumer’s journey. Amazon knows which competitors’ products were browsed, what else the person shopped for and when they bought. Moreover, Amazon has reviews that show explicitly what the consumer was thinking. Amazon even knows which reviews someone paid attention to and which ones they skipped past.
Every review is a treasure trove because it contextualizes the product. Just as we build audience segments, Amazon can categorize and segment products. Those product categorizations and segmentations can then be matched with audiences. Understandings of the products and audiences coalesce simultaneously.
When you search on Amazon, the company can use the benefit of positive reviews about a product to more accurately respond to your query. A new electric toothbrush might be great for its fast charging capability which is nowhere to be found in the product description. Instead, the last 12 reviewers had great things to say about its fast charging. So, results to your query for a “fast charging toothbrush” are spot on.
With every cycle of browse, search, buy and perhaps review comes refinement. Everything that happens on Amazon improves the ability of searches, recommendations and advertisements to more accurately connect the right product with the right consumer.
The bigger the product catalog and the more browsing and buying that takes place, the better it gets. It’s no wonder the world’s largest e-commerce company is leapfrogging itself.
With increasing privacy regulations and GDPR, companies like Amazon have another ace up their sleeve: consent. These are sites where serious consumers go to buy. Just as they’re willing to punch in their credit card number, they’re also willing to consent to the use of their data.
So, what is Amazon’s secret to success? In three words: the ‘ultimate walled garden’.
Now, I could go on and on singing the praises of Amazon’s logistics, their rockin’ customer service or inspired forays into services.
When Jeff Bezos set out to build Amazon, he was nearly laughed out of the room for his vision of a website that sells pretty much everything. Well, Mr. Bezos, you’re doing a damn fine job! By having such a big footprint across so many consumer needs and wants, Amazon can optimize the customer experience and the matching of customers to products better than anyone else.
What can others learn from Amazon’s success? The more you can link things together, the more opportunity you can build. The depth and breadth of customer engagement is your kingmaker. You’ve got to link it to every aspect of your online marketplace and advertising.
Of course, you don’t necessarily have to pay for all that advertising. As a marketplace, you can get your merchants to chip in! You’ve got yet another revenue stream in advertising because you have depth and breadth of customer interaction.
How competitors borrow, own niches
Now that Amazon has demonstrated such astounding success with its model, plenty of retailers are eager to borrow pages from the playbook. Some are doing quite well when tackling a few verticals at a time, but no one so far seems to have the breadth Amazon enjoys. While more verticals seems to increase the ‘Amazon-effect’, there’s plenty of money to be made without owning the whole pie.
The H-E-B grocery store chain in my home state of Texas has rolled out competitively priced delivery. An already low margin operation, privately owned H-E-B is a multi-billion dollar business that knows a thing or two about volume, logistics and keeping customers happy. H-E-B is a recognizable brand that people will seek out as they look for lower prices with the convenience of delivery. You’ll be hard pressed to find a Texan who hasn’t shopped at an H-E-B, and that kind of market penetration could translate to tremendous data on a very, very wide berth of consumers.
Both H-E-B and Amazon’s Whole Foods now link online and offline purchasing behaviors. H-E-B does so by allowing customers at select stores to check out using the H-E-B Go app. Whole Foods scans a QR code from Amazon Prime members in exchange for discounts.
Austin based BazaarVoice has built a business helping companies enter and thrive in e-commerce. It’s said BazaarVoice has an unofficial focus on taking cues from Amazon. The company has been tapped to help Walmart with its ratings and reviews.
Since the acquisition of Kosmix in 2011, Walmart has funded its own Labs division to pursue growth opportunities driven by digital solutions. Walmart has long been famously adept at supply chain management. Amazon-like feedback cycles can further optimize the path from manufacturer and even product design to the consumer.
One might say while Walmart introduced the most impressive commercial examples of supply management, Amazon has nailed the other side of the equation -- the demand side. When the feedback used to generate demand is married all the way back to the beginning of supply and product creation, very next level things can happen.
I see a wide field where a lot of competitors will fill niches. Not all of the efforts need be moonshots. Retailers like The Home Depot offer specialized selection, services and convenience. It may yet be a while before Amazon can get you a few 8 foot long 2x4’s cut to spec in-store in under an hour at a price that’s palatable.
A long list of of traditionally brick and mortar retailers are building an effective offline-online hybrid experience. The Home Depot has effectively combined online inventory browsing, availability, reviews and purchasing with fast and easy in-store pickup, in-store returns and helpful staff face to face. Similarly well honed experiences exist at many stores catering to niches. Some examples include Neiman Marcus, Saks Fifth Avenue, Crate & Barrel, Texas-based Spec’s Liquor, O’Reilly Auto Parts and Batteries Plus Bulbs.
For international markets where Amazon does not have a strong presence, it will be a race to critical mass that powers the all-important, self-feeding advertise-discover-search-buy-review (and repeat!) cycle. Overseas, dominant firms may leverage their existing market recognition or simply be first to gain scale.
Now, please excuse me. I need to finish my Christmas shopping, order my groceries and get a charger for a dead car battery while every purchase benefits The Nature Conservancy. I’ll just need one website, and the credit card they gave me comes with 5% rebates on everything. How’s that for an ecosystem?
Eric Tucker is the co-founder & executive chair of Pocketmath.
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