Marty The MerchantAt my core I am and will always be an ecommerce merchant. You can view the complete Morgan Stanley eCommerce Disruption A Global Theme report on Business Insider. I've been meaning to write about the new eCom for months. Morgan Stanley has and hasn't beat me to it.
They have created a compelling argument that we are the beginning of something not the end. One of my favorite charts is this one showing the headroom in eCom to 2016 by country:
This chart says ecommerce clicks will grow at 3x or 4x bricks. Bricks has a bigger base, but the new ecommerce isn't robbing from Peter to pay Paul. It is Amazon robbing Radio Shack as the Morgan Stanley stock report makes clear or new Internet marketer robbing from the soon to be poor old line brick and mortar. Amazon and the web is putting Radio Shack out of business. No cure for stupid :).
Calling All StartupsThere are verticals that aren't playing well with eCommerce such as groceries and personal health. Expect mobile mashups to move some of these laggard verticals into the eCom camp. Mobile is the industrial glue that will create new ideas such as ZipCar and social share fashion apps such as Poshmark and Threadflip. Social + Mobile or SMobile is sure to burrow into groceries and personal care.
Morgan Stanley sees consumers desire for low prices as the hamster wheel turning innovation:
Agree that prices seems to be at center stage, but lots of people DON'T buy from Amazon. Amazon typically sets an item's pricing floor especially if the item is selling. Amazon uses its eCom to power profits out of its partners. Amazon's scaled distribution system, a system that is now offering same day shipment on some items, provides a HUGE competitive advantage.
It is GOOD to be KING in a content network (read LINKED by Barabasi for more on the advantage of scale in a content network). Google is king of search and Amazon is king of ecommerce. What makes Amazon King?
- 300M + Pages in Google.
- Top 1,000 Reviewers means lots of User Generated Content.
- Scaled distribution.
- Scaled content engine.
- Scaled PPC engine.
- Enough high quality inbound links to choke a horse (1.7M).
- TRAFFIC (US rank #5 Alexa).
Morgan Stanley discusses 1P and 3P retailers. Took me a bit to figure this out. Amazon is a first party retailer (1P) because they've built a vast network of Distribution Centers (DCs). Amazon partners are 3P or third party sellers who use Amazon's infrastructure so they don't have to create something similar.
There is a HUGE RUB to Amazon's 1P network. I have friends who use it and anything my friends help make HOT Amazon steals by under pricing them. When you use Amazon's distribution services the most valuable payment you make is not the money you pay but the information your online stores provides. Your store gets modeled with thousands of others and Amazon knows what to use as a lost leader and for how long.
Information Business and Hard GoodsA few years ago I tried to explain the concept of Infinite inventory to a previous Chief Financial Officer. "Inventory has costs," he kept saying. "Not in a digital state," I explained. Adding 1 more or even 10,000 more "digital products" didn't cost us anything.
In fact, the more products the better in a digital state since every addition helped depreciate our sunk costs. "Inventory costs money," he would repeat. Most products live longer in a digital state than a physical one. This means we could "sell" products we didn't "own" by bridging to someone else's distribution network (drop shipping) or simply arbitraging the traffic.
Traffic arbitrage is Amazon's main game. No mistake Bezos is a former Wallstreeter. In a digital state we would gain the INFORMATION about product movement and market price points and all it took to create such wealth was nothing, nothing from cost perspective since adding new products only made the sunk costs LESS EXPENSIVE. "Inventory costs money," he said again before asking the coup de grace question.
"Who is doing this," was his killer question. "Amazon," I said and then he argued Amazon was not in the traffic arbitrage business. No cure for stupid :).
What All of this Means To Moon Audio or VestiqueTwo of my favorite Atlantic BT customers are Moon Audio, hifi for your head and Vestique, cool clothes for women. Here is what all of this New eCommerce stuff means to them:
- SMobile Now - Smash mobile into social to get SMobile and look to create innovative apps that lock engagement and loyalty.
- SCALE = Survival = have to have scale to run with the big dogs, think about finding ways to offload some Stock Keeping Units (SKUs) to a 1P network like Amazon or Estsy.com. Do so carefully and only for the advantage of the spread (i.e. don't let Amazon near the crown jewels).
- PRICING - I wrote about how to Price Your Products or Services in an Amazon dominated world, but my best advice is BUNDLE.
- Create unique merchandising combinations that reinforce your brands and are SKUs Amazon won't care about or attempt to compete on.
- STORIES - As my friend Karen Dietz wrote in the Paper.li blog, He Whoever Tells The Best Stories Wins so tell better stores about those unique bundles.
- UGC - user generated content is the best content you can't "buy", but you can ask for UGC. Help your customers tell your stories too with reviews and comments.
- Gamify - hard to have a successful review and UGC program without social incentive so gamify reviews. Create a "Buzz Team" to provide reviews and give outstanding contributors jobs for social status and eventually, when you can afford it, for money. People will do a lot for things they love.
- Be lovable - be nice and appreciative of those customers willing to tell Amazon to go jump in the lake. Repay loyalty by never being out of bounds on pricing and bundle, bundle and bundle some more.
We are HUMANS who support things we love with our most valuable thing - OUR TIME. eCom is going to grow and grow and grow and your store can win, win and win. Just takes a little LOVE, some belief and desire. I don't know a true Internet marketer short on any of those (lol).
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