Tag Archives: online retailer

How retailers can beat Amazon’s anticipatory shipping

amazon-shipping-boxLate last week, Amazon made headlines (again) for receiving a patent on a method that predicts the eventual shipping destination of a product (see coverage on TechCrunch). The proposed method enables Amazon to leverage various data points to begin shipping an item before it is actually ordered — something that is both creepy and cool! In a way, it isn’t any different than the big data solutions that the NYPD is actively using to fight off crime or what top national universities use to recruit students.

While it may seem somewhat futuristic, it actually isn’t much different than a grocer watching the weather and ordering extra beer in anticipation of a run before a snowstorm. For Amazon, it is also the natural extension of their Subscribe & Save Program which gives customers a 15% discount on regularly purchased products, such as toilet paper, cereal, and dog treats. As this program enters its third year, Amazon is poised to not only see an incremental improvement in operating costs through real-time ordering/inventory management but also to prevent others from taking this same path.

As some retailers may be concerned that their competitive advantage is slipping while data-driven organizations like Amazon are gaining marketshare, the reality of the situation is that retailers aren’t that far behind. They simply need to initiate a “test and learn” methodology where there’s a focus on measuring an outcome through data collection and analysis. As part of a holistic data strategy, retailers can collect and stitch together information from several good data sources. For example, retails can understand:

  • Shopping intent by collecting web traffic data on product reviews, weekly circulars, online shopping lists/wish lists.
  • Buying patterns by collecting in-store transactional data (along with loyalty program data).

The key is for retailers to define a strategy!

This also reminds me of a recent slide that I came across from a Big Data presentation by McKinsey that showcases the profitability that UK-based Tesco experienced over the past 15 years:

tesco-profitability-and-big-data

It seems that the inflection in profitability didn’t occur until a significant investment was made in data collection/analysis.

For retailers looking at this graph, it is telling a story that there’s no better time than now to make such an investment.

What additional steps do you think retailers should take to secure a foothold in the marketplace?

Amazon focuses on customer experience, sees improving sales

Online retailer Amazon.com recently blew out revenue estimates by posting a 28% rise in quarterly revenue to $5.45 B for Q3 2009. According to the conference call transcript (source), the improvements were due to a few factors, including:

  • Continued focus on Amazon’s value proposition: low prices, expansion of selection, convenience, and good in-stock levels.
  • Availability of Amazon Prime program, which allows customer to enjoy “all-you-can-eat” fast shipping on eligible purchases for an annual membership fee of $79.

Amazon Logo (small)Amazon has leveraged their low prices to attract buyers. While pricing is important to these visitors, the online customer experience helps convinces them to complete the purchase vs. going to a rival retailer. For example, Amazon monitors when a customer drills down on to a specific product and uses email to send them special pricing for that item if they don’t purchase it. Amazon has been able to expand their selection of products by offering better tools to sellers, which is another area that Amazon invests heavily to keep their brick-and-mortar competition in check. In addition to these, there are many other feature that Amazon has refined over the years to improve the online experience (view analysis of Amazon’s online experience).

According to a 2008 study by ServiceXRG (source), customers are 3X more likely to to buy a product or service and 4X times more likely to recommend the company or renew the relationship if they have a positive experience. The recent quarter at Amazon is a testament that you can own the market place by implementing only a few simple, fundamental changes.