A blog on eCommerce, Social Commerce, Comparative Shopping Engines & Business

By Hendrik Laubscher

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You can’t out Amazon, Amazon

After writing about the 12 months post Jet.com acquisition by Walmart I have been thinking about how Walmart can win against Amazon.  While researching to write the post, I kept coming back to “You cant out Amazon, Amazon” which is both telling and indicative of how I perceive how Walmart is trying to win the US ecommerce market.

Amazon has their pillars – speed and convenience

Amazon has over the last 20 years consistently been willing to cannibalize their own business to stay relevant. They have also invested into logistics like FedEx or DHL would have and  invested into technology like Shopify and others have. By creating these levers they are able to commoditize them and sell the costs to third parties. Fulfillment by Amazon and Amazon Web Services have become like highways to customers with competitors building their own infrastructure.

Consumer wise, Amazon has focused on Speed and Convenience as being the drivers for consumer on boarding. Amazon Prime leverages both speed and convenience to ensure that customer spend heavily and create recurring revenue for Amazon. Customers have become accustomed to the convenience created by shopping on Amazon and searching with the Prime filter on.  That may seem one dimensional but in effect that is another touch point that Amazon has created a revenue generator by charging sellers to have their items delivered by Amazon.

Amazon has created speed that they are able to commercialize akin to an Uber trip (Amazon Prime Now) in which time and distance traveled are used to calculate the cost for the utilization of the Amazon infrastructure. Instant pickup weaponizes the speed to aim at brands and competitors.

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A Review On Walmart’s Ecommerce Efforts Post Jet.com Acquisition

I have purposefully not commented on Walmart’s ecommerce efforts after the retail giant acquired Jet.com. There were many immediate reactions to the acquisition but the simple truth is that no-one had any idea how it would end up. Let me be clear – the acquisition is a long term bet by Walmart on Marc Lore and his team to grow their ecommerce efforts. This is also a reflective post in which I am trying to be as objective as possible.

The day Walmart & Jet.com shocked the entire ecommerce industry

On 8 August 2016 Walmart shocked the ecommerce industry by announcing their acquisition of Jet.com for $3.3 billion.  $300 million will be paid via Walmart stock. The acquisition ensured that early Jet.com investors made large returns on their bet but no-one expected Walmart to be the ultimate end game for Jet.com as the company rapidly gained size via heavy spending on advertising, low pricing and buzz.

The initial thinking was that Jet.com was acquired due to the business taking market share away from Sam’s club. Jet.com used bulk sales and technology to provide customers with low pricing. It is important to note that while Jet.com was a startup Marc Lore ensured that he never mentioned Jet.com as an Amazon competitor but rather it was described as online version of bulk retail operations seen at Sam’s Club and Costco. I also need to mention that once Jet.com launched publicly it initially was going to use a membership fee to subsidize the low pricing it would provide to consumers. In a space of 6 months Jet.com moved away from the membership fee as customers were not willing to pay another subscription to a retailer (I believe that this was aimed at Amazon Prime but Lore under estimated the impact that Prime has on customers.)

I strongly believe that until the day of the Walmart acquisition, Jet.com did not have a business model that was sustainable nor clearly defined their future.

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Feed.fm – Music for brands to connect with customers

Music has been used for decades in retail to create a connection with customers however music is not widely used in ecommerce. Music is part of consumer science to create an environment in which the customer wants to spend time in the shop and then based on the emotional connection it will then lead the consumer spend money in that specific shop. When I worked for an ecommerce business one of the most important beliefs that must be made known to team members is the importance of a conversion. Whether it be the putting the item in the cart, clicking on a button to create revenue – nothing must stop that from occurring. A San Francisco based startup, Feed.fm is using music to help brands connect with their customers via emotional connections.

Why music has not been seen inside ecommerce

When researching for my conversation with Jeff Yasuda, the CEO of Feed.fm, the impact that music has on conversions was consistently on my thoughts. Needless to say it was immediately dispelled and described as a myth.

Music has been a part of advertising (TV and radio ads)  and retail for decades, yet when I look at ecommerce it is not widely seen. The movement to ecommerce and digital retail has been blocked by 3 factors according to Jeff:

  1. Licensing costs for music is high.
  2. Legal complexity – it takes a long time to legally be able to use music in a commercial environment. Lawyers who specialise in music rights are expensive and difficult to find.
  3. Finding the right music – everyone thinks they are a DJ and thus finding music can be emotive and not based on any relevant data.

Businesses also have a challenge in that they have to be able to connect with millennials and Generation Z who are interacting with brands mostly on mobile devices.
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Why Amazon Prime Now Is Another Trojan Horse

Amazon has entered Singapore in a new fashion that should put new countries on alerts. As I wrote in my newsletter last night that this is potentially a very big future indicator. By using Prime Now Amazon is leveraging local assets (local logistics, staff) to enter Singapore.

This past week Amazon entered Singapore via their on demand mobile app, Prime Now.  Amazon has used this country as its market entry into South East Asia. Singapore is not large and thus quicker market entry has been possible. Amazon has used 2 Singapore born staff to go run this new market. By appearing in Appstores instead of via a website Amazon has shown their secretive nature but also how they are going to go into new markets in Asia. This past week should provide more than enough evidence of the future battle that is going to appear more and more, Alibaba vs Amazon. Both have significant capital and desire to enlarge their businesses.

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Happy Returns Takes Returns Personally

LOS ANGELES – When David Sobie and Mark Geller worked at Hautelook they created the returns program that ensured that customers could return Hautelook purchases at Nordstrom Rack locations. This was prior to the omnichannel retail existing yet it lay the the groundwork for their future. Little did they know that they would create Happy Returns that would leverage their domain experience regarding returns.

I spoke with David Sobie, CEO and Co-Founder of Happy Returns and our conversation made me realize that retails future will contain a moment for returns. Returns is one of the remaining elements in retail that has not seen significant investment, yet it is a line item which provides retail Chief Financial Officers with sleepless nights.

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