My take on Amazon rumors and lessons to be learned

Amazon has been a lot on the news lately, mostly on the matter of revenues and their statements that the market just doesn’t get their “long-term” strategy. I have my personal opinion that I will share at some point, but this last days there has been some other matters about Amazon that have caught my attention. These are the rumors (more or less confirmed) about Amazon opening brick-and-mortar stores and if it’s a good or bad idea.

My first take on that rumor was of complete shock and denial. It couldn’t be, by doing so they were completely messing up the core of its business. They where fumbling with their very own values! But then after giving it some thought I started thinking that if they did it right maybe that wasn’t such a bad idea.

So, am I in favor or against? It depends, and here it is why:

In my humble opinion Amazon has got a fundamental advantage over most e-commerce sites, and that is that they are, what I call, the “masters of the positive surprise”. This helps build a powerful long-term relationship with its costumers that not many other companies have achieved.

From my point of view, until now, they have been pretty focused on this aspect. For example let me explain “the positive surprise” with my KINDLE experience :

  • When you receive the box you are expecting a heavy piece of technology (C’mon, if it can hold more than 3.000 books it must be a little bit heavy!) that will take some reasonable amount of time to boot up, specially its first time. What you get is a well-built and incredibly light gadget that starts working instantly the moment you open the box. That is a positive surprise.
  • On the matter of the screen, at the beginning it sounds a little bit 90’s technology but once you start using it simply feels like magic how the letters disappear and appear again with an incredibly crisp definition and astonishing resemblance to the ink that its is substituting. That is a positive surprise.
  • There are many more aspects that are a positive surprise… the battery life, the worldwide 3G, the book samples… etc.

And this is only with the Kindle, but the same can be said with their delivery service, it is A+. Ok… maybe the kindle is not the most beautiful piece of hardware or the books don’t come perfectly fitted in the cardboard boxes, but at the end is the long-term relationship that makes it so much worth it.

That is why I believe that the brick-and-mortar shops can actually make sense. By definition they can help build that long-term relationship and there are many ways to give that positive surprise, like having those shops as return points for their merchandise no-questions-asked. I am pretty sure there are some people who prefer that to the hassle of closing a pick-up time with FEDEX.

But here is the catch on why I think that it may end up not being such a great idea. The Kindle Fire.

Until now, Amazon had not tried to compete directly with companies such as Apple, where the “hands on, user experience” and the desirability is the main driver. Then they launched the Kindle Fire, and people expected an iPad with a great bookstore, a great battery and much cheaper. And what did they get: A small screen, comparing to the iPad, a small catalog of Apps, compared to the iPad, and a very short battery life compared to any Kindle. Those are not positive surprises that build a long-lasting relationship, on the contrary. The result?  1 out of 2 Kindle fire users is “not satisfied” with it.

And that is my worry. I think that Amazon is starting to lose its long-term strategic vision. As their margins decrease due to competition they are pounding their costs in order to keep some healthy bottom line, and at the same time, they are trying to rise their revenues with more “desirable” and spiffy products, trying to be more mainstream… That is why I believe that they plan to build the stores: (1) in order to eliminate the middleman of a growing part of their potential costumers, think Florida crocket players, reducing costs and (2) in order to bring in a halo effect of “spiffiness”, a-la-apple-store, to their products.

That is why I think they are getting it wrong. If they finally focus on those two aspects when building the stores they will be losing the battle because they will be fighting the wrong battle and abandoning their differentiation and long-term value proposition, which is the “positive surprise” and consequentially the long-term relationship, despite the “bling” of their products.

So finally here is my little bit of advice from my short experience as an entrepreneur to all those building something new: Have a very clear objective and strategy to differentiate yourself from the competition. Even at the early stage. In fact the sooner the better. If it works, focus on it, and become the best. Innovate, but not in your core competitive advantage, but on the ways to reach it. Pivot as much as needed, but don’t lose your north.

As always, hope that it helps and more than happy to hear your thoughts. (I also promise that the next post will be about my adventures as an Entrepreneur, in fact I am pretty sure I will have some good news by then ;)

Cheers!

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