What comes to mind when you think digital payments? That would probably be PayPal. We all know Ebay subsidiary PayPal leads the game in digital Payments but now the game is set to change.
Although it does have the first mover advantage and has been going strong into omnichannel retail, PayPal is threatened by the largest tech companies in the world:
First of all, company president David Marcus has resigned (or has been fired as rumor has it) to join Facebook. His mission – building a new type of … messaging tool. And by that I mean Facebook Payments.
Google is pushing hard on its Google Wallet, a mobile bridge between online and offline sales. It is a fully NFC compatible payment system, which now accepts all major credit and debit cards, loyalty cards and discount cards. It also allows customers to save offers and buy using touch-to-pay systems.
Everyone raved about the Amazon phone but the actual big news is … Amazon Payments. With over 200 million credit cards stored and the ability to pay with one click (for a very long time Amazon held the patent on that), Amazon is probably the biggest competitor to Ebay’s PayPal.
Apple also has a huge database of credit cards stored on its server. It also has a massive database of customer options, customer history and a fully featured Keychain app built into Safari, ready to help customers do a quick checkout. Its wide device adoption allows it to become one of the most important players in the omnichannel payments area.
Two companies have redefined retail in the past 50 years. One is a company founded by Sam Walton in 1962. Mr. Walton opened the first Walmart in Rogers, Arkansas. The other is an Internet company, founded by Jeff Bezos in his small garage in Bellevue, Washington. This second company is Amazon, the largest Internet Retailer.
Both companies went on to be huge successes but in terms of revenue, Walmart has the upper hand. With $469 billion in 2013 revenue and 10700 stores opened worldwide, Walmart beats by far Amazon’s $74 billion 2013 revenue. If you look at the raw data Amazon is no match for Walmart. But pull back just a bit and the picture is changes. By comparing the track records for the two companies an interesting insight becomes clear:
The chart above is a comparison in terms of historic revenue. On one hand you have Walmart – the biggest and most successful retailer in recorded history. Employer of 2.2 million people, crusher of markets and destroyer of mom and pop shops. On the other hand you have Amazon, the brave new world of online retail. Both redefined their markets and both are leaders in their respective fields.
But one is unlike the other. See – I couldn’t even put together figures from the first years in Walmart’s history. Walmart’s revenues starts 6 years after the first Walmart opened, in 1968. That’s when the company reached a figure ($12.6 million) comparable to Amazon’s first year with recorded revenue (1996 – $15.7 million). 17 year after the company launch, Amazon registered $74.4 billion in revenue, while Walmart registered “just” $6.4 billion.
Both the trend and evolution show one thing – Amazon is on its way to become the biggest retailer in the world, a type of retailer the world has never seen. This might probably be a good time to reconsider your stock choices.
Online retail is a fast moving sector and there are lots of outstanding business leaders out there. Among the best of the best, some really stand out. The way they’ve founded their companies and directed their investments have placed them in the higher echelon of influence in online retail.
Jack Ma, a former English teacher in China, got his first taste of internet entrepreneurship in 1995, when he founded China Pages, a directory of Chinese businesses. He previously worked as a lecturer in English and International trade in the Hangzhou Dianzi University.
After founding and running China pages he briefly worked for the Chinese Ministry of Foreign Trade and Economic Cooperation, between 1998 and 1999. In 1999 he founded Alibaba, a B2B marketplace connecting Chinese manufacturers to the world.
Alibaba’s spectacular growth pushed Ma and his associates to add new companies to the group. AliBaba Group now owns Alibaba.com, Taobao Marketplace, Tmall, eTao, Alibaba Cloud Computing, Juhuasuan, 1688.com, AliExpress.com and Alipay.
The company is now only outmatched by Walmart in terms of revenue. Recent developments and an increase in online retail spending have made the Chinese market the largest online retail market in the world. The big winner: Alibaba Group. Through its subsidiaries, the AliBaba Group now handles $248 billion in transactions, 84% of the total online retail market in China.
You wouldn’t think of the fifth wealthiest man in the world as one of the most influential persons in online retail. But he is. Through it’s flagship company and different personal investments, he is in control when it comes to online retail infrastructure and software.
For once, Larry Ellison is Oracle and Oracle means, first and foremost, databases. Ellison started his career working for the Ampex Corporation in 1970, on a relational database for the CIA. His designs were based on a paper written by Edgar F. Codd, called “A Relational Model of Data for Large Shared Data Banks”. The same design was implemented by IBM, but the company didn’t have time to solidify its dominance on the market. Challengers soon began to emerge.
One of those challengers was Larry Ellison’s Software Development Laboratories (SDL), founded with two partners and later renamed Oracle, based on the database Ellison developed when he was working for the CIA database.
After a long struggle against the largest competitor, IBM (which would push its DB2 and SQL/DS products) and other challengers (Informix, Sybase, Microsoft) – Oracle eventually took lead in the database war. In 2010 the European Union approved Oracle’s acquisition of Sun Microsystems. One of the most important assets Oracle got was the wide-spread, popular MySQL database.
So for one – Oracle now dominates the database market, the underlying infrastructure of connected systems and retailers worldwide.
And that’s just the begging – Oracle is currently on a purchase streak, aiming to build a strong multichannel retail presence. It is second only to Adobe Systems, with its customers registering over $200 billion in revenue in 2013.
It’s presence is split between Social marketing, ecommerce platform software, site search, customer service, personalized content and transportation management.
To give you a glimpse on how serious Oracle is about its investments in multichannel retail – they paid $1.5 billion in 2011 for Right Now Technologies, a company providing customer service software and services to the likes of Overstock.com.
Larry Ellison is also one of the major shareholders in Netsuite and Salesforce, two companies shaping the global B2B and B2C commerce future.
1. Jeff Bezos
Net Worth: $30.1 billion Company: Amazon
Jeff Bezos is the one man we all picture when we think about ecommerce. He is a Princeton graduate with a degree in Computer Science. After graduating from college he pursued a career in investment banking in Wall Street, which he left to found Amazon, after noticing the fast growth in Internet usage.
He set up his company in the proverbial garage with few employees and in 1995 launched the beta version for 300 friends. Days after the launch the book selling eshop managed to ship books across US and 45 foreign countries. Yearly sales in the first year reached $510 000, much more than Bezos envisioned. The company grew and grew, survived the dot com and went on to register $74.5 billion in 2013 revenue.
By expanding the initial book selling operations into CD’s, videos and later clothing, toys, electronics, home & garden, jewelry and even art, Amazon essentially became the “everything store”. Amazon is now the biggest online retailer and a disrupting force in retail.
Everything from the ecommerce revolution to online payments, shipping and marketing has been heavily influenced by Amazon and guided by Jeff Bezos, both a star-gazing visionary and a focused micromanager.
But beyond his influence in online retail and retail at large, Bezos is a special human being. A libertarian, he invested in projects most of us would consider unreal and unattainable. He was one of the first investors in Google, financed a clock that would run 10 000 years and a company that’s working on lowering space flight costs, to allow humanity to explore the great unknown.
This short list, headed by Jeff Bezos, is prone to change. The world around can change as well, partly due to these people’s and efforts. To get a deeper glimpse on how they did it and what motivates them, have a look at Jeff Bezos’ Princeton graduation address, “What matters more than your talents”:
Twitter keeps getting closer to social commerce. The social network just announced a partnership with Amazon where users can add products to their Amazon cart with a tweet.
The process is fairly simple. Amazon customers who are also Twitter users can add products by following three simple steps:
Connect their Amazon and Twitter account
Watch for tweets containing an Amazon link
Reply to above mentioned tweets and adding “#AmazonCart”
After users follow through these steps products are automatically added to their Amazon Cart and they can buy later. If Twitter users didn’t connect the accounts or the service is not yet available in their area, they get an automated message from @MyAmazon guiding them to a specific Amazon web page describing the service:
Most avid users – the Amazon affiliates
After quickly connecting my accounts I was expecting to see a public stream of Amazon shoppers announcing their purchases.
Not even close. Right now most of those tweeting the hashtag are Amazon Affiliates asking their followers to reply to tweets containing their affiliate links.
Apparently this is somewhat of a feature, as Julie Law, Amazon spokeswoman states: “We have a significant number of customers who use Twitter, and a significant number of affiliates who use Twitter, too.“
Twitter is serious about eCommerce
The #AmazonCart partnership is probably just a first step for the two companies. Amazon is interested in social commerce and as Facebook is probably harder to steer, Twitter seems the right choice.
Twitter on the other hand, showed interest in developing ecommerce abilities by hiring ex Ticketmaster CEO Nathan Hubbard. Moreover, this year information was leaked about a potential partnership with Fancy.com and mobile payments company Stripe, involving a three way solution allowing Twitter to leverage potential customers.
A couple of weeks ago someone asked me a great question. It came from an entrepreneur interested in opening an online store. She had a brick and mortar shop, some experience in offline retail, great merchandise. Previously she’d noticed her customers were asking why can’t they order online, so she decided to give it a try.
So there we are – discussing the necessary steps to open the online channel and integrate it with the offline store. As she previously noticed that success in online retail is seemingly random, she asked a question I was not accustomed to:
Why do online retailers fail?
See – most people want to know what makes Amazon, Staples and other large online retailers successful. They figure that if they study these companies carefully they will get to be successful also. It seems intuitive – see who the leaders are and than copy them.
Companies such as Shopify or BigCommerce thrive on the idea that anyone can start a shop online and be successful. If Jeff Bezos can – why can’t I?
Browse the internet and you’ll find dozens of blogs (this one included) on this particular subject. “How to be successful when selling online”? You’ll get thousands of posts on what makes online retailers succeed. The harsh truth, however, is that most online retailers fail.
You should know that …
Amazon is an exception.
Staples is an exception.
AliBaba is an exception.
Ebay is an exception.
Multi-billion online retailers are exceptions. They are market anomalies. They are not the norm. The harsh truth is that beyond logistics, most of these companies have done totally different things on their way to becoming successful online. They will continue to do so. And they probably won’t share their plans and strategies online.
Even if these strategic plans and key performance indicators were available online – what good would it do? Say you had all the information on how Amazon works. What good will it do? There already is an Amazon on the market. You’ll be a challenger at best.
So there is really no way of making sure your store will succeed. But there is something you could do: minimize the chances of failure.
There are patterns in online retail failure
There is a saying that goes something like: Tell me where I’ll die so I will never go there.
While successful online retail business models are really different from retailer to retailer, failures, I’ve noticed, have common traits. Companies ignoring basic product management, employees not engaged in client service, poor merchandise – they are all things easy to spot when retailers close shops.
Before going online and browsing around for the latest marketing gimmick, have a look at six of the most common things that lead to failure:
1. Lousy and/or not enough products
Commerce hasn’t changed much in the past … umm … thousand of years. The basic concept is simple: you buy a product from the manufacturer, bring it to the customer, get something in return. Of course – the customer needs / wants to be provided with the best merchandise he or she can afford.
Failing to put the product first is the one biggest mistake retailers make. It’s easy to believe that it’s all marketing and you can sell anything. You can’t. At least you can’t do it for a prolonged period of time. Eventually people will start asking for their money back. They will post bad reviews. Your store will fail.
So focus on the product. Find manufacturers that will deliver upon high standards.
Having great products is not enough, though – they have to be plenty. Customers need choices. Of course – you might think Apple does not need variety but the industry Apple is in does. There are plenty of PC’s, laptops and smartphones out there. All at the right price.
2. The wrong price
Pricing is one of the areas most sensitive to error because it can swing both ways. You can either charge too much or not enough.
You can be charging too much and there is nothing wrong with selling expensive products but make sure they’re worth it. Remember – online, anyone can track prices. Customers can feel cheated if your markup is too large.
You can also be charging too little – remember, prices are not weapons, unless you’re the market leader. Even then – prices should be used as a last resort. A cheap product remains a cheap product. Do the math – see if your supply chain and procurement can handle low prices. If not – differentiate with services, a curated selection of products and great customer service.
3. Not paying attention to customer care
As an online store there aren’t too many points of contact between you and your customer. Probably the most important is the customer care team. Operators answering the phone are one of online retail’s biggest assets. Or liabilities.
Having a customer satisfaction – oriented team can work wonders for online retailers.
4. Ignoring logistics
Quick – do you know what makes Walmart the largest retailer in the world (both online and offline)? Prices? Sure, but that’s just part of it.
The answer is logistics. Walmart was not always the company we know today. Between 1980 and 1990 the company started a quick expansion program to enable it to match its competitors. In 1981 they tied their stores through a satellite communications system that would enable real-time reporting, as soon as products were purchased. By 1988 90% of all stores were using barcode readers to handle inventory tracking. It doesn’t seem like much now but back then there was no internet to connect the stores and barcode reading was only just taking off.
Now, Walmart is an astonishing logistics company. This is the key to keeping the company well supplied and one of the most important factors in keeping the prices down.
Amazon, too, is much more than meets the eye. Between the print on demand options, huge warehouses, robotic warehouse management and integrated supply and demand – Amazon means logistics. Retailers failing to improve their logistics will have problems staying afloat.
5. Outdated or limited technology
You wouldn’t be expecting technology to be an issue when it comes to online retailers. After all – online stores are … well … technology based – right? Indeed, but there is much more than a front end when it comes to online retail technology.
Here are a few things retailers need to invest in, if they are to expect to stand a chance:
CRM software – you need to know as much as possible about customers and make sure they are satisfied with your service
Inventory management – this is a combination between hardware, software and know-how. Online retailers need to know in real time what’s in stock, what is expected to go out-of-stock and where are the slow movers. For starters.
Supply chain management – dealing with suppliers is not always easy. Technology can help streamline the relationship between suppliers, retailers and end-consumers. Automated order placement and processing, barcodes, RFID readers and tags to help track packages, inventory inflow and outflow management – these things sound boring and complicated. They are, however, necessary for any online retailer.
6. Bad management
No technology will save a company lead by bad management. And as you might expect this is a combination of factors. There is no single individual usually guilty of sabotaging the company.
One can notice in failing online retailers some patterns – a combination between managers focusing too much on marketing or PR, a rigid organizational structure and the lack of senior expertise.
There is little data on the impact of rigid and poorly prepared management when it comes to online retail. This is due to the fact that online retail is still in it infancy and performance indicators can be misguiding. It is, nevertheless, one of the most important factors in failing online retail companies.
6 things that can lead to failure for online retailers
So there you have it – the 6 big things that you need to focus on. Notice there are no tips on marketing, website design, search engine positioning and such. These are not critical problems. Marketing, design, accessibility – they can all be easily spotted and fixed.
Unfortunately – it is harder to understand and improve the product range, prices, logistics, customer care and of course – management. But this is where you need to look for a chance at building a successful retail company.
Henry Ford said “People can have the Model T in any color – as long as it’s black”, in the early 20th century. That’s when Ford’s innovation, the assembly line, vastly improved productivity thus reducing production costs. Lower costs meant companies could manufacture cheaper products and still be profitable.
The assembly line made possible the mass production of goods. Things that were previously custom-made and unique soon became available to the now emerging middle class. Clothing, food, even cars and houses became accessible to the mass market.
Industries were built around product manufacturing. The customer was no longer the center of the universe. Companies focused on the product. Products were manufactured in large quantities, distributed and sold, with a lot of help from advertising companies. Even though advertising was around, it wasn’t the type of organized industry we now know until the television set became a part of consumers’ daily lives. By borrowing some concepts used in WWII propaganda, experimenting a lot and innovating, advertising quickly evolved in a mature tool to push mass – manufactured products to the market, globally.
Mass manufacturing becomes the standard
After 1970 two trends started to emerge. First one – the mass-manufactured product becomes the norm. Faster assembly lines, improved productivity with better management and companies going global – it all lead to bigger manufacturing facilities and more money poured into advertising. In the western world people were spending earned and borrowed money faster than ever before to buy mass-market products.
The second trend was improving production with help from computers and networks. It all started small and kept growing. Innovation in the IT industry allowed companies to improve manufacturing productivity further. Soon cars stopped being built by people and robots took over. They were faster, better, less prone to error and cheaper in the long run. They also learned new things a lot better. With automated assembly lines, the mass produced goods could be reprogrammed to build new products fast.
The product development cycle was shortened. The fact that now BMW or Mercedes are able to launch a new model every month is possible because of advancements in management and IT. These companies can now target customer groups. Ford’s Model T was a “One Size Fits All” product but now everything’s changed. The auto companies can split their customers and they can build products for increasingly smaller niches.
Mass customization becomes a reality
The internet changed everything. When Michael Dell decided he would create a special PC for anyone willing to pay for it, he probably had no idea what his actions meant. Now Dell is a global company and one of the largest online retailers. When the company decided it was going to offer mass market customization features, it seemed like a really risky move. At that time, computer manufacturers were already engaged in a price war to market accessible computers. It didn’t seem like a good idea to turn a mass produced, mass marketed product in a customizable one.
Dell offered their customers what they wanted: the ability to choose between different options in terms of design, software and hardware. The order, assembly and shipment processes were streamlined using software designed to minimize human input and error. Today’s devices (be it desktop computers, laptops, tablets or smartphones) are available in many formats. Most of them are a hybrid between mass produced and customized products.
The future of mass customization is already here and the company that helped most with making it a reality is the largest online retailer in the world: Amazon.
Amazon lead the way in mass customization with Print-On-Demand
First off, Amazon made possible a type of personalized experience for customers by providing personal recommendations and notifications based on purchase history. Its second biggest innovation was print on demand. With Amazon, books were no longer published en-masse for long-tail items. Rather, for a small amount of extra cost, they were made available as items printed on demand.
This innovation spawned a new breed of self-published authors, leveling the field for publishing. In turn, readers were now able to read books otherwise unavailable and writers could skip pitching to publishing houses. The effect was so dramatic that some large book retailers had to close their brick and mortar stores.
Top ecommerce companies selling mass customized merchandise
From shoes to t-shirts to art-prints it seems like anything is game when it comes to online-powered mass-customization. Many companies jumped the customization wagon, but few stand out. Have a look below at these companies:
One of the most popular platforms in the world for Built-To-Order, customized products is Zazzle. Its mission: “To Enable Every Custom, On-Demand Product in the World On Our Platform.” It is a mix between self-curated product designs that can be customized by customers, and a wide variety of products submitted by designers and entrepreneurs in the marketplace.
The company partnered with large brands to provide customizable products for companies such as Disney, Hallmark, DC Comics or even Google. It is growing fast, outpacing its competitors and bringing mass customization for the wide market.
Zazzle’s success is based on two main factors. The first is its ability to customize products that are manufactured separately and customized at the end, with input from the end consumer. This allows for a minimum slowdown in manufacturing capabilities.
The second factor helping Zazzle tackle its competitors is a patented color print technology that allows it to manufacture multicolored items, without signifiant increase in costs and manufacturing time.
It does also help that Klein Perkins Caufield & Byers, a well known Silicon Valley VC firm, backed Zazzle with $48 million. The VC’s have also backed up a couple of companies you might have heard of, such as Google, Amazon, AOL or Electronic Arts.
Ladies – ever felt like you could be the world’s best shoe designer? Felt like you’ve hadn’t had the chance to show what you’ve capable of? It turns out you are not alone. Founders Rumbert Kolkman and Judy Chin believed they could make shoe design a mass-customizable market. In 1999 they’ve built a B2B company that would allow shoe retailers and designers to access a rich supply chain with ease.
In 2013 they’ve opened this option to the public, unleashing the power of mass-customization to end buyers world wide. Prices are ranging from $230 to $1200 and Chiko Shoes allows customers to chose between 1300 material swatches.
The company was founded in 2007 in the Netherlands. It moved to NY, where it received a $5million founding from VC’s including Andressen Horowitz. It now runs a fully operational marketplace where designers can sell their 3D designs and customers can create their own.
As of June 2012 is sold over 1 million user-created objects. Production was provided by its Queens, NY 3D Printing factory that uses 50 industrial printers to manufacture millions of user designed custom projects.
Threadless started as a marketplace for t-shirt designers and quickly evolved into providing other customized merchandise. Users can purchase clothing items (such as t-shirts, hoodies or tank tops), art prints or phone cases.
Although Threadless does not allow mass customization per se it does allow users to submit designs. These designs can be featured and sold to consumers afterwards. What makes Threadless different is the fact that not all designs are accepted and marketed yet those who do are chosen by the community.
Ethreads allows customers to create their very own bags, starting with a blank model and adding options using the online design tool. The shop also offers options to see what others have designed and the ability to buy directly on Amazon.
Fab started as a flash sales online store. Its approach proved very lucrative for a while. The company decided to take another path by providing customized design options for furniture and home deco buyers. Although the change affected only its european operations, it seems the company is heavily interested in developing its customization options. It completely stopped marketing its products and flash sales options in the EU and is fully engaged in providing customized furniture.
The furniture is made-to-measure according to users’ needs. It allows customers to design their own products in 5 main categories: shelving systems, tables, sofas, beds and wall shelves. A complex yet easy to use configuration system allows potential customers-turned-designers to create the perfect match for the home. Inputs allow customization of size, materials, colors, finishing and others. A 3D visualization engine allows customers to view their newly created product before ordering.
This new pivot in the company was made possible after Fab purchased Massivkonzept, a company founders declared was already profitable and growing. It seems Germany is a great place to look for companies focused on customized furniture design. Woonio, a german ecommerce startup, offers customized furniture like tables, beds, lounge stairs.
The future of retail is mass customization
Examples above show any industry can allow mass customization and is prone to change. Individuals need to feel empowered when purchasing and technology has made this possible. Whether is next year or 10 years from now, mass customization will become massively popular.
It was 1999. Only three years have passed since Steve Jobs returned to Apple. Britney Spears was climbing the charts with “Baby one more time” and engineers at Apple were a few months into launching the Mac OS 9. They would dub it “The Best Internet Operating System Ever”. It was a visionary product and an awesome precursor to today’s Internet-enabled operating systems.
Unlike its direct competitor, Microsoft, Apple had a simpler way of shipping its operating systems. They would either come pre-installed on purchased computers or subjected to a standard $99 upgrade fee.
“[…] Steve provided some details about how the advertising would work. At systems start-up, the user would see a sixty-second commercial. This ad could be regularly changed via updates from Apple’s servers. Throughout the rest of the OS, ads would appear in places where they had the most relevance. For example, if the print dialogue box indicated that you were running low on printer ink, you might see an ad from Epson with a link to its store – so you could buy some ink right then and there”.
The consensus was the main ad, the one running at systems start, would be a premium spot for top-knotch companies. Those Steve admired, say BMW and Nike. Once the ad started running , some system functions would be suspended so the user had to see the whole ad.
Apple engineers and staff were psyched about the idea and they loved the fact that such a new interface could let users try the OS and buy it whenever they felt like upgrading. Apple even registered the patent for this, listing Steve Jobs as the main inventor. Fortunately this system never went public and Apple went on to build its success and later on give out the Maverick OS upgrade for free, but that’s a story for another post.
Apple thought about it, Google and Amazon did it.
Apple was not the only company that thought about the ad-supported OS, but it was the first to seriously consider it.
For starters – like most smartphone users you’ve heard about Android. It’s the most popular mobile OS (or at least the most used). It’s free and it helps Google leverage on mobile ads. So much that it Google now takes in about half of all mobile ads revenue.
Google’s other venture into ad-supported OS is Chrome OS / Chromium OS – the web OS that has Google at its center. And Google’s Ads.
Yeah, both Google and Apple thought about an ad-supported OS. The time-frame, however, is pretty important. Apple thought about the ad-supported OS, it nearly implemented it and ditched it. An year later (2000) Google launches AdWords. After yet another 5 years (2005) Google buys Android. 6 more years passed until Google launched its Chromebooks in 2011.
Amazon, the king of online retail, thought this is a great idea also.It started using it on its Kindle readers in 2011. Later on the Kindle Fire was subsidized through ads. The ad-supported device / OS seemed so good that Amazon didn’t actually bothered to built no-ads versions. Or talk about it.
Apple’s “say no” culture lead to dumping the ad-supported Mac OS
Fortunately Apple scraped the idea and later on figured out an way to give the Mac OS for free (it’s doing pretty well selling apps and music). Its focus on delivering a great user experience finally won. It was Probably Steve Jobs who remembered his own words, spoken at the 1997 Apple World Developers Conference:
France surely is a culturally rich country. Unfortunately, when it comes to the economy – things are not really blooming. Part of that issue is the state’s ever-increasing interventionism. The country now has a project aimed at slashing development of web libraries. And by web libraries I mean Amazon.
The french Senate has voted a ban on Amazon’s free shipping on books. The free-shipping is frowned upon in France, as the policy is contravening the Lang Law. Simply put the law, named after Jack Lang, states that publishers set a fixed price to any book. Retailers can afterwards discount the book up to 5%, but no more. The reason for this policy to be so deeply ingrained is that it supports the 3500 bookstores in France. It is a “part of our cultural heritage“, as conservative lawmaker and law sponsor Christian Kert states.
So what is Amazon guilty of? Apparently the company is using the 5% discount AND offers free shipping. Isn’t this absolutely terrifying? The good people of France can’t let that happen, now can they?
The bill passed, Amazon is forced to stop offering free shipping
Put forward by the centre-right opposition UMP party, the bill passed by the senate this month. A near-universal pro vote assured the bill will stand and soon Amazon and others will be forced to drop the free shipping.
The “Anti-Amazon Law” as it is informally referred to, is rumoured to be a payback for the company’s decision of setting up its fiscal headquarter in Luxembourg, to avoid french taxes. It is also part of an increasing wave of what some might call “discrimination” against american companies. Both Amazon and Google have been having their fair share of legal issues with France and they are constantly under fiscal audit.
The Anti-Amazon law is but a symptom of a state incapable of holding onto talent and encouraging innovation
While this particular law has drawn a lot of attention, it’s but a symptom of a growing problem in France – the socialist / interventionist state. Things seem pretty grim there. Taxes under socialist leader Francois Hollande grew to upwards 75% for high earners. This caused the mass emigration of talented high earners and companies historically providing for the state’s lavish expenses.
This article in Newsweek quickly went viral as it shows the people’s distaste with the way the country is managed. Business are forced to pay taxes, rather than being encouraged to innovate and develop. Talented entrepreneurs and professionals are driven abroad, rather than being encouraged to stay and help the country recover. Still a large group of people, heavily relying on social care, heavily resisting change, do support the government’s actions.
A deeply iconic example of France’s resistance happened january the 13th. Some of the cabbies in Paris attacked an Uber car, breaking the glass and slashing the tyres. The reason – cabbies were not happy with the new taxes and the Uber-like apps that caused unwanted competition. Inside the cab – Eventbrite founder and one of those talented professionals leaving the country to find success, Renaud Visage. The old France meets the new France. Violence ensues.
The country is also pushing for increasing regulations in the EU against internet companies such as Google, Amazon and Facebook, instead of pushing for increasing regulation to foster innovation and economic development. The country’s inability to adapt and evolve in this new age can pose serious threats to the EU itself. As France still has plenty of negotiation power, it might push further for a rigid European Union, an inward looking, scared empire that might not make it very well into the next century.
There are retailers and then there are super retailers. Here’s a list of some of the bravest and strongest online retailers and their super hero avatar.
Let’s start with number 5:
Secret Identity: Apple.com
The Batman Super Retailer is a mighty hero – strong, determined but first of all – rich. He uses gadgets to fight off the competition and just when you think he is going down he manages to bring out a game changer out of his handy secret belt (once every year during the WWDC).
But oh my under its dark armor (designed in California, made in China) lies a hurtful secret: The Batman Super Retailer misses his dad, killed by cancer. He tries to cope with the loss by continuing in its tradition and trying to save the world from bad design. Sometimes unsuccessfully.
The Redmond Joker and Mr. Android.
The Dark Knight is everybody’s target. Everyone talks about the “the iphone killer”, “the ipad killer”, “the Apple killer”. Why? Because “he’s the hero Gotham deserves, but not the one it needs right now… and so we’ll hunt him, because he can take it.”
Secret identity: Fab.com
You know that awkward kid that no one actually cared about back when he was into, what was that – photography? Oh, no, wait – it was social networking. It seems he is not so awkward anymore. Overnight he turned into this fabulous, tights wearing, home decorator that simply just loves to help you pick that lovely new carpet for your living room (yeah, he’s also gay).
His super powers are a. his spidey senses when it comes to picking beautiful products and selling them online, b. climbing on walls and giving you ideas on how to better redecorate, and last but certainly not least his unmatched ability to adapt fast to the market. By doing things like letting you design the furniture you want to buy.
The Spiderman Super Retailer has recently moved on from the recently mainstream Flash Sales market and into this new thing he’s doing right now, that doesn’t include Flash Sales and is aaaaalll about design. Also – you’ve probably never heard about it.
The Green Goblin living on One Kings Lane, and a distant cousin of Iron Man, the Doctor Octopus also known as Gilt Home.
Spiderman the Super Retailer catches clients in a pretty expensive marketing web. It seems that its greatest weakness is the high customer acquisition cost.
3. Iron Man
Secret identity: Gilt.com
Rich, famous, bright and ready to wear some of the best suits in town. The Iron Man Super Retailer was fathered by Kevin P. Ryan, that had a history of investments in some companies you have probably heard before: Business Insider, Mongo DB, Double Click. Although his corporate siblings are definitely bright, Gilt.com seems to be the prodigal son.
The Iron Man retailer is no match for any of his enemies when it comes to building the best technology, working and managing the smartest people and just being a genuine charismatic fashion and style icon.
Although not really into astrophysics the Iron Man Super Retailer manages to learn new things on the fly, adapt and … look … he does offline retail now.
The dreaded Miss RueLaLa – rich, smart and uber-sexy. She is backed up by her corporate hotshot husband, Mr. Ebay and has so far snatched a couple of victories from Mr. Gilt.
When it comes to this Super Retailer – one thing’s for sure: you do not want to make him angry. When things go south this green retail monster will squash its competition with its low prices and national coverage. You are never too far from him and you won’t be able to hide when he gets all “Hulk, Smash!” on you.
What’s his super power? The Hulk Super Retailer has the upper hand when it comes to size, strength and endurance. The whole operation employs 1.6 million people, it’s bigger than Home Depot, K-Mart, Costco, Kroger, Target and Sears, combined and most americans (90%) live within 15 miles distance to a Walmart shop.
His online operations aren’t to shabby either: it made $4.9 billion in 2011 and that’s him not really trying. When exposed to the Big Poppa Walmart’s Green Dollar Radiation this Super Online Retailer has the potential to make its fellow competitors look like scrawny kids.
Biggest enemies. Biggest weakness:
The biggest enemy this hunk of overgrown retailer has is itself. Bigger is not always better. The Hulk is either a smashing machine or the smart researcher working at Walmart Labs. He is still trying to control its size and keep its balance while growing so fast. He is not yet there but he will be. From that moment on there will be only one Super Retailer that will, maybe, be able to face it:
Secret identity: Amazon.com
This Super Retailer is actually in a class of its own. He is stronger and faster than anyone else online. He has a global reach and can fly and wirelessly deliver its products to anyone, anywhere. He grows faster than anyone else and has so far proven unbeatable.
He was born in a time when people didn’t believe in its type of heroes. He struggled and after some slightly awkward teenage years (it took Amazon 9 years to turn a profit) it finally showed up at the graduation party, red cape flowing and all.
He is known for making a living of print but in time it diversified its product catalogue through a combination of digital content and marketplace products. After all – how could this Super Super Retailer finance its Fortress of Solitude other than by reporting a whooping $48 billion revenue in 2011.
General Zod, a super enemy seemingly out of this world, seems to have set up shop with AliBaba.com and is now threatening Superman’s global reach. The Hulk (mentioned earlier) is not too happy with Superman’s hegemony either and is trying to catch up but is not yet strong enough to go head – to – head with the Man of Steel.
No one has actually found the Kryptonite that is said to be the Amazon killer but rumor has it that its expanding marketplace and investment in digital sales might not be so healthy after all.
Amazon has already changed the way we think about online retail and its influence and disrupting force of change and inovation has just began to sink in. The company reported a $48.07 billion revenue in 2011, making it by far the largest online retailer, followed by Staples and Apple ($10.6 billion and $6.6 billion respectively). The company started by selling books and later expanded into CD’s DVD’s, MP3, ebooks but also jewelry, electronics, furniture, apparel and even food. Here are some of the reasons why Amazon is going to be a game changer in offline retail in the following years.
Lack of innovative competition.
It was probably Jeff Bezos visionary strategy that led the company but it also had something to do with established industries refusing to change. As you probably know it was Amazon that bet big bucks on eBooks and eBook readers but it was the lack of competition that made it so successful in that department. While the team at Lab 126, Amazon’s Kindle research team, was working hard to launch its first viable product, the competition was ignoring or at most distantly observing the emerging market. It took Barnes&Noble 2 years to launch Nook, after the first Kindle hit the market.
After eBooks proved to be such a successful story Amazon moved on to selling what the market demanded – tablets that run an Android powered, Amazon flavored operating system, allowing the company to research consumer preferences (by analyzing Kindle Fire web traffic), and most important – selling apps. As a direct result of this move Amazon is now the largest Android apps seller, closing in to the iTunes AppStore.
Amazon has a few tricks up its sleeves
Amazon is not just a retailer. It is a brand loved by customers partly because of its previous underdog image (long time gone as it is estimated to overtake Walmart by 2020) and partly because it sells things people love – books, music, apps even jewelry and furniture. But there is more. Here are some of its “to be loved” products:
1. Amazon TV
Amazon is known for selling media. Books, music, video – it’s all media. Why not join the soon-to-be-trendy market for digital TV? It has already shown it can use it’s market share to launch a digital product that streamlines media consumption (the Kindle) – so why not TV?
The company’s model features low cost (even under production costs) hardware retail as a way to create an infrastructure to deliver content profitable so TV might just be the natural choice in post-Kindle business development.
2. Amazon Offline stores
Amazon Lockers is the first step toward an offline presence. It may sound strange but Amazon will need to create offline stores in order to tackle the offline retailers. Why? Online retail is big and is growing fast but if you look at the bigger picture it is still only 8.9% of total retail revenue, even in the US.
Such a bold move may be a little different than what we expect. Brick and mortar stores have basically stayed the same for the past century so maybe there is a need for a change. Amazon Lockers may be the store of the future, not just an experiment.
3. Amazon’s private label
So far Amazon worked as a rather large market place for all kinds of products and suppliers. It may be time for the company to tackle some of the largest and most profitable companies in the world. There is speculation of an Amazon private label, that could produce everyday items such as personal care, child care or clothing. Such a bold move would really be disruptive as the competitors in this market are P&G, Unilever and others such.
The global economy can’t handle the “classic retail”
The global supply chain puts too much burden on consumers. P&G’s margin was down from 25% (dec 2008) to approximately 7% (dec 2012). To handle the global operations, marketing costs supporting dozens of brands and still turn profit in a recession means that P&G’s products must start with a rather large margin, supported by mass market advertising.
Amazon is a different kind of business. It doesn’t need large margins. It’s flexible and fast. It can adapt and can tackle markets even before incumbents notice it as a threat. My bet is that Amazon’s influence, not only on retail but on global economy as a whole, is just beginning to show.