October 22, 2013

Lock-In / Amazon

Ponder this one for a moment.

Retailers will ship an item from one store to another store, or from a store to your home, or from the online channel to a store, or from the online channel to your home.

On the surface, this is one version of what is called "omnichannel". This version of omnichannel is branded as a way to compete with Amazon. Heck, here's an article that speaks of "hope" when competing with Amazon (click here).

Pretend I am Gap - my comp store sales are down 20% over the course of the past decade - at a time when inflation should have caused a 34% increase in comp store sales. Or pretend I am Best Buy - selling the same stuff Amazon sells, but having to charge sales tax - in effect, having to be 5% to 10% more expensive all the time than Amazon in numerous states. Is the problem I'm trying to solve really all about using stores as virtual warehouses? Is the problem I'm trying to solve really all about converting a mall into a distribution center? Is the problem I'm trying to solve an integration of the customer experience across all devices at a time when customers can pay less via Amazon in 36 states?

And then we have the problem of lock-in.

Why aren't "omnichannel retailers" addressing this problem?

Each year, I pay Amazon $79. In return, Amazon promises to ship stuff to me, fast. Really fast. Two days fast. I order on a Sunday afternoon at 3pm, I get a shipment on a Tuesday afternoon at 3pm.

Once I lock-in with Amazon, at $79 (complete with Season 1 of Downton Abbey, streamed to my phone, immediately), tell me how an "omnichannel solution" will separate me from the lock-in? I am committed to getting everything I can for my $79 investment - I simply don't care that Macy's can get me a belt from their Mt. Vernon store when it is not available in Snohomish County. So what? I don't even have to enter a Macy's store to learn that the item is not available - I'll get a comparable belt on Amazon without leaving the house.

Omnichannel is a solution, but it isn't a solution to the real problem.

The real problem is aligned with three core issues:
  1. How do you defeat lock-in?
  2. How do you defeat the "department store" merchandising aspect Amazon possesses, where you can order a road atlas, an external hard drive, a pair of shoes, and a bluetooth speaker all in the same order?
  3. How do you offer better every-day prices than Amazon?
How will we solve these very real problems? Why doesn't anybody want to talk about real problems - instead moving to less-than-likely solutions (omnichannel)?



  1. Anonymous7:18 AM

    Proprietary product (or some relatively protected core competency) must be part of the answer, no?

    1. Proprietary merchandise helps, doesn't it?

  2. It's almost impossible to "offer better every-day prices than Amazon" unless you're willing to lose millions each quarter. Ahem. Without proprietary product or an ultra-compelling niche that you dominate, it's very difficult to keep sales from Amazon.

    I used to work at an apparel company (100% proprietary) that had a wholesale division. Whenever an item started selling well on Amazon, their buyers would call our wholesale division and buy direct. The company gained sales (Amazon can sell more than you can of the same item), but lost big margin numbers. I think at some point you need proprietary product that's strong enough to drive sales without requiring you to sell it on Amazon.

    It's a tough market out there. You have to be very operationally efficient in addition to having great product and great marketing. Little room for error.

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