Tag Archives: amazon

Digital Bottlenecks are Analog Problems

Digital bottlenecks are not often solved with only digital means.

Like Scott Galloway points out in this brilliant presentation about the masters of digital universe, the Amazon´s Achilles heel is the shipping:

Their shipping costs are exploding at 40% and shipping fees and transportation costs are over 9 billion. Free shipping has been one of the main reasons why people choose Amazon and what makes them unique. There is no immediate digital solution for shipping (as long as there are physical products). Drones are quite long shot to solve that challenge*.

Same way the biggest Achilles heel of Apple Watch will be the battery, which lasts only a day. The battery duration is not a digital problem. It is a chemical problem.

New digital opportunities might reveal old challenges.

*Interestingly, the unsexy solutions might be the most sustainable. Click & collect is hugely popular, albeit archaic way for eCommerce and traditional retailers might find innovative ways to use their store network for flexible warehousing.

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Who Will Be The Master of Internet Universe?

Web is dead.

That is the title of one of the greatest articles ever written about digital revolution four years ago to Wired. The main points about that brilliant piece are still valid, although speed of mobile revolution surprised many of the players for a while. The main idea of the story is that web starts to resemble more and more traditional industry with handful of players. Web is oligopoly and certain verticals almost resemble monopolies.

If you simplify the consumer-facing web business (so I am excluding infrastructure and other boring things which is where the real money is), it is about three things: products, commerce & advertising. Products enable you to connect to the Internet: smartphones, computers, watches, television sets, fridges and whatnot. Commerce is about being able to buy things from Internet and advertising is what it is: bombarding you with messages to buy more stuff.

Product category as we know it will eventually be commoditized. If you want to remain premium, you have to innovate constantly. That is the only way to remain luxury brand in this realm. Cheap smartphones will eventually beat the premium ones. In the future you are able to connect to Internet in whatever device and you do not really have to pay that much of that privilege.
Where the growth will come? Wearables can be the future winner product category, although they have not really yet taken off. The changes are rapid though. iPad was launched only four years ago, created totally new category and is currently at risk of vanishing because of the phablets. So is the life.
 
Current champions: Apple, Samsung
Challengers: Xiaomi and other cheap manufacturers
Disrupters: Luxury brands (Would connectivity enhance Rolex? I say not, but I might be wrong as well)

Commerce will become even bigger and you are able to buy pretty much everything online. Will all the physical retail vanish? Not necessarily, but the point is not about that. It is about that you are able to buy everything online, and majority of people will do exactly that, because it is more convenient and affordable.
Commerce is the biggest opportunity and a space I follow most closely. Strong brands will definitely start to create their own online retail experiences, which would enable them to bypass the more traditional retail channels. In the next decade there will be lots of turmoil in this category and many big players will fall and new challengers will arise. Biggest challenges are not that much about technology (lots of payment innovations happening), but about logistics.
Second interesting point is that idea of commerce has changed with shared economy. Both Uber and AirBnB are selling physical service, which would not be possible without digital channel. How far collaborative economy can be stretched remains to be seen. It can potentially be really big disruptor to the way we do business in general.
Last point about commerce is the ecosystem approach. Apple makes money constantly through App Store by enabling others to make money. Facebook is building app ecosystem with the acquisition of Instagram, WhatsApp and Parse. Both Amazon and Alibaba are enabling developers to build things on their platform.
 
Current Champions: Amazon, AliBaba, Ebay
Challengers: Google, Facebook, WeChat, Line, Apple (Apple Pay) 
Disrupters: Brands, FMCG brands, Collaborative economy players (Uber, Airbnb…)

Advertising will be important, because people will keep on buying stuff. Stuff makes us happy. More stuff makes us even happier. How are you able to buy that stuff if you do not know that it exists?
Will advertising become smarter in the future? Yes and no. In last decade or so, we have had one revolutionary advertising idea. That is SEM. You show people ads when they actually want to see ads. Contextual advertising and retargeting have been nice inventions, but mainly advertising is still based on interruption (some of it being more relevant like app install ads). One of the most innovative companies in the world, Facebook, makes most of its money by interrupting its users in various ways.
The advertising business is relatively simple: it is all about reach. All of the most successful advertising platforms are based on firstly to reach and then secondly the quality of those who you are reaching. That is unlikely to change. However, the biggest task is to try to narrow the gap between the interruption (advertising) and purchase (commerce). The monetary exchange is the only tangible KPI we have and less you have to travel to do it, the better.

Current Champions: Google, Facebook
Challengers: WeChat, Line, Twitter (was tempted to leave it out completely, but I give it a shot still), “Traditional media companies”(although I do not really have high hopes for their complete digital transformation, but they will remain influential on this space as well)
Disrupters: Amazon (the closer you are to the actual transaction, the less you have to interrupt), Content owners (although none of them has done any major moves and have mainly milked the status quo)

The lines are naturally blurry. The quote from Eric Schmidt summarizes the whole situation:

Many people think our main competition is Bing or Yahoo. But, really, our biggest search competitor is Amazon. People don’t think of Amazon as search, but if you are looking for something to buy, you are more often than not looking for it on Amazon.”

That is also the reason why these big companies are testing weird things and buying obscure companies. Internet has made it easier to disrupt a category and also connect categories in new way. Facebook & Google test drones, so it can bring Internet the people who don´t have it yet. Thus increasing the reach. Amazon tests drones, because shipping is the biggest bottleneck of eCommerce. When your business can start to flourish rapidly, it can also vanish rapidly. There is no time to sleep, because sleep is the cousin of death.

What do you think, who will become the master of the Internet universe?

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#AmazonCart: Innovation in Advertising (not in eCommerce)

I am somewhat skeptical about utility marketing.
Yes, brands should be useful.
But as far as the advertising goes, most of the brands are fighting with the lack of attention. They need to first crack the indifference barrier amongst consumers. For that you have to first entertain and then deliver.
To underline this point, brand apps are generally destined to fail. Over 80% of them struggle to get even 1000 downloads.
That being said this is useful marketing at its finest:

Why this approach rocks?

1. #Amazoncart taps to real behavior
People already use Amazon as a “shopping list” for their future purchases. This just makes it couple of clicks more easier. At its core, this is not really educating new behavior just a minor tweak to existing pattern. I think tapping to the shopping list behavior is the core thing and also something that many of the commentators have not fully grasped. #Amazoncart is not innovation in eCommerce it is an advertising innovation:

2. #Amazoncart is free advertising with every tweet
Besides being rooted to real behavior, every time someone tweets #AmazonCart it will be visible to followers of that person. Making #AmazonCart hashtag famous is one thing, but actually what is the most brilliant part that the amazon product link gets double exposure as you add to Amazon cart by replying. This creates more opportunities for people to see it and go buying in Amazon.
Currently it seems that the amount of #Amazoncart seems already promising (from Hashtags.org):

#Amazoncart

Naturally these are small drops in the ocean for Goliath brand like Amazon but every purchase counts. If Amazon is able to get bursts of over 8k tweets for #AmazonCart in hour constantly it definitely shows great potential for Amazon. Also after the initial development, there is not that much cost for the program (expect for the promoting it).

3. #Amazoncart is super simple
After you have connected your Twitter account to Amazon, you can reply with #AmazonCart to any tweet containing an amazon product link. This puts the item to your shopping cart and you can finish the shopping later. The beauty of this concept is that it keeps it simple enough and does not add too many steps to the progress.

Hopefully in the future we are able reply #AmazonCart to every kind of tweet beyond the Amazon links. Buying products straight from YouTube or Instagram –links anyone?

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