Amazon Has a ‘Basic’ Problem

The Wall Street Journal: “There is one major problem with the idea that Amazon will eat the entire universe … Amazon is good at identifying commodity products and making those as cheap and available as possible … But this system isn’t very compatible with big-ticket, higher-margin items. Could Amazon’s Lab126—famous for both the successful Echo and the failed Fire phone—ever produce something as premium as an iPhone or an OLED TV? Its success in electronics has come from driving their prices to the very bottom.”

“The same goes for Amazon’s other businesses. For example, could Amazon Studios, which has shown little ability to create hits, ever produce a franchise like Marvel’s Avengers or HBO’s Game of Thrones? … Amazon may be mastering commodity goods; its own Basics line went from about 250 products in 2013 to over 1,500 today. But making items widely available at low prices runs directly counter to the way higher-profit businesses work.”

“Consider the makers of high-end handbags, which limit who can distribute their wares and, as a result, who can buy them. Not surprisingly, many of those brands refuse to sell on Amazon at all … The bulk of our everyday goods and services may one day come from Amazon, and everyone from CVS to Uber should watch their backs. Even so, there will continue to be countless competitors that would never dream of branding any of their products ‘Basic’.”

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Why Do Shoppers De-Value Digital Goods?

Harvard Business Review: “Despite the many advantages of … digital goods, companies find again and again that people value and are willing to pay considerably more for … their physical counterparts … experiments suggest that the key driver of this value loss is not the resale value of the good, or how much it costs to make, or how long it can be used, or whether it’s unique or popular. We find that the key difference is that digital goods do not facilitate the same feeling of ownership that physical goods do.”

“Because we cannot touch, and hold, and control digital goods in the way that we interact with physical goods, we feel an impaired sense of ownership for digital goods. They never quite feel like they are ours, and when we feel that we own a thing, we psychologically inflate its value. As a result, digital goods don’t enjoy this premium we extend to things that we own.”

“Ownership may be achieved by increasing users’ feeling of control through touch interfaces, and customization opportunities that involve users in the production or design of the product … people may devalue autonomous devices that require little or none of their input … those devices will not benefit from the value premium extended to goods for which people feel psychological ownership … Because perceived ownership is impaired for digital goods, people may not feel that their piracy causes the same harm to their owners as does the comparable theft of physical goods.”

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Bookstores are ‘Houses of Seduction’

The Globe and Mail: “Unless you’re just about to board, bookshop browsing can be a deeper and more untethered exercise than other kinds of shopping. Just opening a book and reading a few lines can draw you partly into another world, one you might not have planned to visit. According to Vancouver publishing consultant Thad McIlroy, only 40 per cent of bookstore purchases are premeditated. All the rest are decided on impulse.”

“Knowing this, booksellers and publishers think carefully about how to design the space and arrange the stock … a good bookshop is a house of seduction, created to lure the book lover and keep him or her circulating in the aisles. The sumptuous beauty of shops such as El Ateneo Grand Splendid, in Buenos Aires, is part of the game. Systems for displaying the wares may follow a wonderful, idiosyncratic logic. Altair, a travel bookshop in Barcelona, arranges even its fiction and poetry titles geographically.”

“In the online trade, only the books circulate, while the readers stay at home in front of their screens. Algorithms make robotic suggestions, following a practice launched by the London bookshop Hatchards (established in 1797), where live, professional readers still select and ship books to subscribers. Hard-copy books are still published by the thousands; it’s the transactions that have become ethereal.”

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Returns: The New Retail Battleground

The Wall Street Journal: “This year traditional and online retailers have expanded the number of locations and routes consumers can use to return merchandise, from in-store kiosks and lockers to the mall concierge, grocery stores, parcel shipping locations and at-home pickup … Online retailer Amazon.com Inc. said it has expanded options for in-person returns this year, with a network of 2,000 ‘locker’ locations, including 400 at Whole Foods stores, where customers can drop off items to be returned. Amazon also partnered with Kohl’s Corp. stores in Chicago and Los Angeles, which are accepting returns of Amazon goods bought online.”

“Wal-Mart Stores Inc. is touting its Mobile Express Returns kiosks, located in its stores, where it says customers can complete the return process in less than five minutes and receive a refund within a day or so. Returns to Target Corp. and Wal-Mart are free—customers can either bring the items back to the store or print a shipping label online and drop off merchandise at a designated shipping location. Kohl’s and J.C. Penney Co. Inc. have similar policies, but don’t cover the cost of return shipping.”

Meanwhile: “Returns have become a ‘battleground’ among online retailers trying to attract and retain customers, said Tobin Moore, chief executive of Optoro Inc., a logistics provider that helps companies like Target and Best Buy Co. to take back and resell returned merchandise … Mr. Moore of Optoro estimates that goods purchased online are three times more likely to be returned as goods purchased in a physical store. In total, Mr. Moore said roughly $90 billion in holiday merchandise—purchased either in stores or online this season—will be returned over the next few weeks, with more than a third of it coming back before the new year.”

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Wausau Story: Mom & Pop Comeback

The Wall Street Journal: “Wausau Wisconsin shows how an economically thriving community might shop in a post-mall age. No longer are shoppers willing to drive distances to hit a clothing retailer. That is an online task. They are willing, however, to make an event of going downtown, to the compact shopping district where two-story brick buildings line the streets, to patronize Wausau’s local boutiques.”

“On 3rd Street, the bell chimed at The Local every few minutes one recent Saturday afternoon, signaling a customer coming in to check out Wisconsin-made Christmas wreaths, coasters cut from pine trees and candles in recycled beer bottles. Owner Alison Magnuson, 26 years old, said shoppers her age want something they can’t find just anywhere. She got the idea to open a physical store with products handmade by more than 30 local artists after selling her own work on the online crafts marketplace Etsy Inc.” She comments: “People want that mom-and-pop store again. It’s all coming full circle.”

“Three blocks from the mall, the century-old Janke’s book store was bustling on a recent Saturday. Inside, in the shadow of a 10-foot bear shot by a member of the Janke family, shoppers were buying children’s games, handmade cards and books by local authors … The store has adjusted to changing consumer demand by offering more educational toys and locally made products, Jane Janke Johnson said. Business is good for now, she said, but the recent acceleration in online spending scares her more than any other trend she has weathered. ‘People will come in here and click, click, click, they’ll buy it in front of my eyes,’ she said. ‘That hurts’.”

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What Does Luxury E-Tail Look Like?

The New York Times: “High-end e-commerce remains a bright spot in the shopping landscape: flooded with more cash than ever before and with bubblelike sky-high valuations to boot. It’s a world dominated by two behemoth competitors … Yoox Net-a-Porter, the largest luxury e-tailer by sales, is one of them. It owns the e-tailers Net-a-Porter, the Outnet, Mr Porter and Yoox; it also operates the e-commerce sites for over 30 luxury brands including Stella McCartney, Dolce & Gabbana and Chloé.”

“Farfetch, the other big name, is an online marketplace for 500 independent luxury boutiques and 200 brands as well as the owner of the bricks-and-mortar store Browns in London … Little wonder that during the past year barely a month went by without Yoox Net-a-Porter or Farfetch unveiling a snazzy new strategy or service in a thinly veiled bid to outmaneuver the other. In April, for example, Yoox Net-a-Porter introduced ‘You Try, We Wait’: a same-day try-on-and-wait premium delivery service with at-home shopping consultations. Six days later, Farfetch started a ‘store-to-door service’ in 90 minutes with Gucci in 10 cities worldwide.”

“Then Farfetch revealed a suite of technologies based on responding to consumers in the ‘Store of the Future.’ Yoox Net-a-Porter promptly responded with ‘Next Era’: a partnership with brands that debuted with Valentino giving customers access to Valentino products wherever they are, and however they want them.”

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What’s Next in Luxury Ecommerce?

According to The New York Times, here are three “next wave” luxury e-retailers: “Secondhand luxury (often known as the ‘recommerce market’) is fast becoming big business. The RealReal, an online marketplace that sells pre-owned and authenticated luxury items, was founded by the former Pets.com C.E.O. Julie Wainwright in 2011 and is expected to generate $500 million in revenue for 2017. It has raised $173 million in funding, and last month it opened its first store, in SoHo.”

Depop: “A mobile marketplace that says it has 350,000 active daily users, Depop has been described as “part Instagram and part eBay.” It is particularly popular with teenagers, who like the way users can personalize their digital storefronts.”

The Modist: “The so-called modest fashion market is booming, with the global Muslim clothing market forecast to be worth $368 billion by 2021, according to the latest Global Islamic Economy report. The Modist, poised to take advantage of the wave, started earlier this year.”

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Retailers Miss Mark With ‘Targeted’ Emails

The Wall Street Journal: “Traditional retailers were once pioneers of using data to zero in on what customers want. But as the importance of their catalogs and mailings have been overtaken by email and other online media, they have struggled—sometimes to the frustration of their customers.”

Brendan Witcher of Forrester comments: “Nearly 90% of organizations say they are focused on personalizing customer experiences, yet only 40% of shoppers say that information they get from retailers is relevant to their tastes and interests. The ugly truth is that most retailers haven’t done the (hard) work of understanding how to use the data.”

“At no time is that more evident than during the year-end shopping bonanza, when retailers deluge customers with messages. During last year’s holiday season, retail emails increased 15% compared with the rest of the year, but shoppers opened 15% fewer of them, according to a study of eight billion messages by marketing-services firm Yes Lifecycle Marketing.”

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The 3 C’s of Retail Revival

Quartz: Ryan Raffaelli of Harvard “studies how mature organizations and industries faced with technological change reinvent themselves. Raffaelli has termed this line of research ‘technology reemergence.’ It began with his study of the Swiss watch industry, which collectively reinvented itself (and thus survived) in the wake of digital watches. Five years ago, he set out to discover how independent bookstores managed to survive and even thrive in spite of Amazon and other online retailers.”

“Here are some of Raffaelli’s key findings so far, based on what he has found to be the ‘3 C’s’ of independent bookselling’s resurgence: community, curation, and convening. Community: Independent booksellers were some of the first to champion the idea of localism; bookstore owners across the nation promoted the idea of consumers supporting their local communities by shopping at neighborhood businesses … Curation: Independent booksellers began to focus on curating inventory that allowed them to provide a more personal and specialized customer experience.”

“Convening: Independent booksellers also started to promote their stores as intellectual centers for convening customers with likeminded interests—offering lectures, book signings, game nights, children’s story times, young adult reading groups, even birthday parties. ‘In fact, some bookstores now host over 500 events a year that bring people together,’ Raffaelli says.” He adds: “The theoretical and managerial lessons we can learn from independent bookstores have implications for a wide array of traditional brick-and-mortar businesses facing technological change.”

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Black Friday Tricks of the Trade

The Wall Street Journal: “Instead of copying Amazon.com Inc.’s playbook, retailers such as Wal-Mart Stores Inc. and Target Corp. are coming up with new tricks to maximize sales ahead of Black Friday … In the months leading up to the holiday, Target has shifted away from ‘up and down’ pricing moves, streamlining the number of promotions to focus only on ‘impactful’ sales … The company has also reduced the phrases it uses for discounts from 28 last year to seven, dropping language like ‘weekly wow’ and ‘as advertised’ … It is also offering extra incentives to its loyalty card holders, such as early access to Black Friday promotions.”

“Wal-Mart, which has long emphasized an ‘everyday low price’ message, has been experimenting with a new online system, which at times results in higher prices online than in stores for goods that would otherwise be unprofitable to ship. Some product listings on its website now indicate an ‘online’ and ‘in the store’ price … The Bentonville, Ark., retailer said it would sell more exclusive products this holiday as compared with last year.”

“For the first time, Best Buy Co. offered hundreds of Black Friday deals on TVs and other devices in early November in hopes of driving sales before the competition heats up. The electronics giant has a price-matching guarantee, but the offer doesn’t apply to items on sale Thanksgiving through Monday.”

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