As we shared in Amazon Flywheel transformed its business - Bezonomics, discovering it’s Flywheel in 2001 transformed Amazon into the powerhouse it is today.
If your business isn’t being threatened by Amazon, it’s a matter of time before it is.
Brian Dumaine, shares in Bezonomics: How Amazon Is Changing Our Lives and What the World's Best Companies Are Learning from It, Amazon is expanding into the smart home industry, making its own Wi-Fi-linked microwaves, clocks, and security cameras. In early 2018, it even invested in a small prefab housing manufacturer, suggesting that the company might someday build homes. Amazon already has a deal with Lennar, the nation’s largest homebuilder, to preinstall Alexa in all the company’s new homes.
If you’re in the transportation business, the USPS, FedEx, and UPS are threatened by Amazon’s entry into delivery services. In 2018 Amazon announced a new program, Delivery Service Partners, for entrepreneurs who want to start their own local delivery business.
Amazon is investing billions in new technologies promising to revolutionize last-mile delivery, including self-driving vans, robots that drop off packages at the door, and drones that can drop a box of new Bose headphones in your backyard. McKinsey & Company predicts autonomous deliveries will allow retailers to slash shipping costs by more than 40 percent. Amazon could save more than $10 billion a year, giving it yet another edge over its competitors.
It makes sense to consider what Amazon is not good at doing. Amazon provides great selection, service, attractive prices, and fast delivery.
Amazon itself has as strong identity. It isn’t good at is building a strong individual brand identity. Can you name the brand of Amazon’s chinos or its line of midcentury furniture?
It’s a highly efficient utility providing commodities to shoppers when and where they want them.
It’s not good at making its customers feel special.
Except for a Walmart or Alibaba, most businesses will have a hard time besting Amazon on both price and speed.
Retailers of the future, Dumaine explains, need to focus on four major areas to Amazon proof their business:
- Create an Amazing In-Store Experience - Digitally Merging with an Amazing Online One (Examples: Nike, Casper mattress, and Sephora)
- Offering a Highly Curated Selection of Exclusive Products or Require a Lot of Hand-Holding (Williams-Sonoma, Crate & Barrel, Best Buy)
- Investing Heavily in Technology, Including Mastering Social Media (Stitch Fix, ASOS, and Lulus)
- Doubling Down on a Social Mission in a Way That Makes Customers Feel Good About Buying from Them. (Warby Parker)
Dumaine cautions, “with Amazon’s invasion of brick-and-mortar retailing well under way, it won’t be enough to compete by mastering just one of these four strategies. Anyone who wants to keep up in an Amazonian world must eventually master at least two or three or even all four, because it’s certain that Amazon will be trying to master them as well in the empire of brick-and-mortar stores it’s building.”
My Personal Experiences
Strategy #4 In 2017, dissatisfied with the service and high price of replacing my prescription glasses, I published Are Entreprenuers Risk Takers – Originals Discovery. Reading about Warby Parker in the book Originals, I decided to purchase my next set of glasses there. I’ve since purchased prescription sunglasses, and glasses for my son. The service is fast, the prices significantly lower. In my experience Warby Parker does not flaunt their social mission.
Apparently social philanthropy was in the plan from the start. Warby Parker uses its social mission to create motivated teams of workers who provide superb in-store and online service—a hallmark of their brand. “The biggest benefit we’ve seen is on the employee side,” says CEO, Neil Blumenthal, “where we’ve been able to attract some of the most talented and passionate people in the world.” To help keep the passion going, Warby Parker sends employees on a trip to the developing world to see the difference its eyeglass giveaway program makes among the poor.
“What gets us psyched now,” says Blumenthal, “is that we want to demonstrate to the world that we can scale a business while doing good in the world, without charging a premium for our product.”
Strategy #2 Another way to Amazon Proof is to sell products that need a lot of handholding. If there were a award for being a mechanical klutz, yours truly would win it. I’ve hired Best Buy’s geek squad to install TV’s or get my existing remote to work correctly.
Former CEO Hubert Joly cleverly outmaneuvered Amazon by implementing a strategy called Renew Blue. Renew Blue marries an improved online experience with a store strategy that entails a massive shift to products requiring advice and installation, such as complicated home theater hookups and home Wi-Fi and security systems. As Rodney Zemmel, the global head of McKinsey’s Digital and Analytics practice, explains: “You have to ask yourself: What do you have that is really defensible? What have you got that is store or human being dependent? How do you compete on quality of customer experience?”
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NEXT BLOG – Clarity of Your Flywheel
As your business struggles to recover from COVID19, clarity is critical. Everyone at Amazon knows the company’s direction. It’s crystal clear due to the transparency of Amazon’s flywheel. Shouldn’t your team have clarity on your company’s direction? Next blog, how your flywheel drives clarity.