Tag Archives: retail

Amazon, The Data Company, Not The Retailer

Last week I blogged about $GOOG.  This week, we’ll talk about $AMZN.

I find myself using Amazon much more than I used to.  I use the desktop version and the iPhone app though most of my usage comes from the iPhone app.

I’ve tasked myself to think about why I use Amazon.

Price was my first reaction.

Buying online for consumers used to be about price – mainly because you did not have to pay sales tax.  Amazon is collecting sales tax, but from just 8 states but three of those states are the most populated states in the USA including California, New York, and Texas.  Based on a July 2012 estimate, they collect sales tax on 35.45% of the country.  New Jersey and Virginia are expected to join the Sales Tax list in 2013 which would push the total coverage of the USA to 41% of the US population.

So eventually, buying online will not be about saving on sales tax.  It’s about something much bigger.  Convenience.  Selection.  And much more.

Here’s what I basically netted out to:

Amazon isn’t necessarily about the lowest price, but the most convenient shopping (1-click).

The 1-click shopping experience on Amazon is amazing.  It’s dead simple.  I cannot tell you how many times I’ve been sitting with someone who recommends a book and I pull out my phone and within fifteen seconds, I order the book and its delivered via Amazon Prime (48 hours).  Their search works, their catalog of product is deep and broad, and the checkout experience is headache-less.

I wish every single site and store deployed a similar checkout mechanisms.

At the agency, we’ve partnered with Amazon in an advertising relationship and are working with them on a client business or two.  I never thought I’d be working with a retailer in this capacity, but I am.

So what is Amazon?

To me, in my opinion, is a data company that uses intent and e-commerce to build its dataset.  Sound similar to Google?  Yep.  Only difference is that Amazon is a bit more diverse with its data set as it has the actual sale of product.  Keep that in mind.

Oh, and Amazon also has an entire cloud hosting division.  How much data resides and passes thru their cloud?



Stores in an Information Society

I live in the suburbs of Manhattan and within an 8 minute drive from my home, I’m surrounded with retail stores… and there are a lot of them:  standalone, strip malls, and large malls.  Many of these stores were built when we lived in the industrial revolution society as that’s when urban planning was done for this area.

The industrial revolution is over.  Long ago.

We’re now in the information revolution.  Many things should change in this new chapter of life but the one area I’d like to highlight is the retail experience.

I’ve had many poor experiences lately in retail locations, even from stores which are supposed to have excellent in-store staff.  The more and more I go about my daily life and see how my kids are living theirs, retail stores need to adapt because consumers are now less than 3 clicks away from buying almost any item sold in any store at any time on any day.  Do retail stores really need to be tens of thousands of square feet and sell/stock everything in their catalog which is redundant to their e-commerce store?

Why can’t retail stores be discovery-and-customer-service engines staffed by salaried product specialists?  The actual goods that I might want to buy, maybe outside the top 10, would be ordered online and be delivered to my home or a central pickup area.  Stores would have a lot less overhead, smaller, wouldn’t be competing with their e-commerce P&L, attribution of marketing would be easier (shopping in one place), and product distribution would be easier for brands.  This doesn’t sound half bad…

Retail needs to change.  Just look at Best Buy.

Retail Game Cards

Such a genius business.  Extracted from the original interview.

And why do retailers love these cards? The economics work in their favor.

Now, there’s an interesting fact about these cards. Retailers love them over any other product they have in their store, because the cards themselves don’t take up any inventory.

They’re not activated until they’re purchased, so they don’t sit on the balance sheet of the retailer. They feel like “free money” to retailers. So it’s a very positive business for retailers to get into, and it really lowers the bar for any retailers who are unsure about it, they don’t need to worry about losing money on it.

The really big untapped market for these digital media companies is gift giving. No matter how much someone loves an online world no one is going to say “hey, merry Christmas. I logged into your account and gave you 25 bucks.” Not to mention the impulse buy.

Gift Cards & Certificates – Arbitrage Opportunity? Pearlman, Speak Up

Plastic JungleWhen I go to the movies, I don’t just watch the characters on the screen, but I have an interest in figuring out how it was made.  The special effects, scenery, and other ingredients that go into the movie are extremely fascinating and I love trying to piece them together.

I apply the same thought process to retail.  When Sherri and I went down to North Carolina to buy furniture, we went to FLS (Furniture Land South) which is a 1,000,000 sq. foot showroom of furniture.  Whilst walking around, I thought of about a half dozen easily implementable ideas that would create efficiencies and in turn, save them money.

I’m always thinking… and the same occured today.  Sherri and I met my grandparents at Bloomingdales (White Plains) to return some gifts that we had received for the wedding.  Even though we had the gift receipt, Bloomingdales refused to give us cash back for the value of the item(s).

Card AvenueOver the past few months, we’ve racked up quite a few gift cards of significant value to Bloomingdales.  Yes, both of us shop at Bloomingdales and we’ll probably use the cards over the course of the next year or so (some handbags, a new watch, jeans, etc), but what if we wanted liquidity today?  What if I wanted to take that money and go and use it towards a lease payment on our car or to pay this month’s credit card bill (you get the point)?

While standing in Bloomingdales, I thought to myself, there has to be a liquidity market for gift cards and gift certificates.  So, this evening, I googled “gift card marketplace” and came up with the following listings:

SwapAGiftIf you see the sites above, you’ll notice that I wasn’t the first person to think about this.  There have been some articles written up by Wired, ABC News, and other periodicals on this industry.  Looks like 2005 was a breakout year for these sites as the media coverage picked up.

As their popularity continues to rise, retailers can expect to see a surge in gift card sales this holiday season. The fourth annual National Retail Federation (NRF) Gift Card Survey, conducted by BIGresearch, found that gift card sales will total $24.81 billion this holiday season, an impressive $6 billion increase over 2005 when gift card sales hit $18.48 billion. Furthermore, the average consumer will spend more on gift cards than they did last year ($116.51 vs. $88.03 in 2005).  Article Link

That’s quite a market to establish the buying/selling/trading of cards and certificates.

I was looking through PlasticJungle and saw that you could purchase a $76 L’Occitane gift card for $60 which is an excellent return!  eBay even has a HomeDepot card that has $471 worth of credit selling for $420.

This could be a lucrative maketplace if done correctly…arbitrage anyone?

What Do Gucci, Nike, YouTube and Oddcast Have in Common?

I’ve been thinking about how to write this post for quite some time but after reading today’s (Thursday) Wall Street Journal, I got all excited and decided today was the day I’m going to blog about this.

Ms. Teri Agins, the reporter who covered the article entitled The Future of Luxury: Custom Fashion, Cheap Chic talks with Tom Ford, arguably one of the most influential designers of today and former creative director of the Gucci Group. I agree completely with Ford as to his statements and analysis of the fashion marketplace:

  1. In a shift from the era of mass luxury, consumers are demanding ever more uniqueness and customization in fashion.
  2. As high fashion becomes more democratic, with designer clothes available at Target and Wal-Mart – everyone is capable of pulling off a stylish individual look.

Today, however, consumers no longer want to have the same thing at the same time. “Now everybody wants to have something different,â€? Mr. Ford says. “A woman doesn’t necessarily want the same bag her friend has. That is part of the appeal of vintage fashion- you don’t see yourself coming and going. It’s something that you found.â€?

Lets now pull back from this article and apply a little Darren Herman analysis.

Lets first approach this from the online media space perspective: consumer generated content and customization of the web. Sound familiar? Consumers now have the ability to customize their news (thru RSS feeds), create start-pages (yourminis.com), post videos (youtube.com), create avatars (oddcast.com), and tons of other opportunities to make the web their own. Isn’t web 2.0 all about making the web your own? In the advertising world, many brands are looking at ways in which consumers can interact and engage with the brand in new ways, not through traditional means.

Can’t we relate this to what Tom Ford is saying in the fashion world? Yes. We have finally reached a time in which the world is about “me.â€? Not just about Darren Herman, but lately, Time Inc. says, You. Last year, Reinier Evers talked about the term MEdia. The trend in media is to make it about me. We have now reached the time in fashion where we can go mainstream and allow shoppers to customize their clothing in ways never technically available [to the mainstream] before.

Customizing the color, amount of pockets, fabric, patterns, logo, on a per fashionista basis is now available. The only leverage a consumer had with a brand was size… now, if we want 3 pockets instead of 2, or green leather instead of brown, we can now get it… and this isn’t just for celebrities any longer. It may take a little longer to receive the actual item you are buying (may have to mail it to you or pick it up in the store), but you know that you’ll be getting a customized article of clothing for a realistic price.

In 1999, a company called CafePress.com came out of the wood-work and emerged as a leader in the online customized clothing space. CafePress allows anyone to be a fashion designer (most people create t-shirts) with a simple to use interface that creates a storefront for online purchasing. If you have an idea for a t-shirt or a drawing pre-made, you can upload it in minutes and people can be purchasing from your online store.

The best part of CafePress is that the designer does not have to hold inventory… it’s printed on a per order basis. No overhead. Genius. To give you an idea of what type of volume CafePress is doing, as of December 2005, they had over 22 million unique items for sale. It’s now over a year later…I think it’s safe to assume that there is demand for customized clothing.

I predict that you’re going to be able to order customized fashion (from Gucci to H&M) at any of the stores that you’d likely to purchase that specific item from. Department stores are going to become faux design laboratories – where you can go and customize any item of your choice. When I was walking around a department store in Zurich, Switzerland, in the Spring of 2005, they had a shoe display where you could customize your strap and cork bottom. It was genius! Within 5 minutes, you could pick out all the parts to your new shoe and have it assembled on the spot… imagine the mashup possibilities when Nike and Gucci start sharing parts. Come’on, a Nike sole and Gucci straps would be hot… ok, maybe not.

Nike is already in the game with Nike ID. Have you customized your sneakers yet? Lands End, one of America’s conservative brands is being proactive in the online world… custom clothing. Check it out. What about your brand?

Lands End Custom Clothing

What I’m trying to show in this post is that the fashion world is following the web. On the web, we want it our way – built for us. Every piece of consumer generated content defines who we are… from your Oddcast avatar to your MySpace profile page. In fashion, what we wear helps define who we are as well. Today, the trend in fashion is coming that we can customize anything we want for ourselves… and it’ll be readily available. Imagine the world reversed where we start with a white t-shirt for $15 and if we want to include the Nike swoosh, we subtract $2 as Nike will pay us to wear their logo…. branding at it’s finest and money well spent from Nike.