Published on: December 2, 2015
"The Innovation Conversation" is sponsored by ProLogic: Leading the Industry in Loyalty Marketing Services for Independent Grocers.
Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.
And now, the conversation continues...
KC: So here we are, just coming out of the Black Friday-Cyber Monday hullaballoo, and it is my sense that at this point, these are just marketing constructs that retailers are imposing on consumers that no longer reflect the reality that e-commerce essentially has made such "events" meaningless … you don't have to go out on Thanksgiving night or early Friday morning to get deals, and you certainly don't have to sit at your computer on Monday morning to do so. To me, it is all about a) communicating value, and b) understanding that the consumer is in the driver's seat, not the marketer. Am I right about this? And what are the implications for the future?
Tom Furphy: I agree with you that it’s about communicating real value and embracing that the consumer is in the driver’s seat. Especially when it comes to price and choice. Retailers can no longer dictate behavior to the shopper. The retailers that serve real needs and deliver real value will win.
But I do think these “events” that are constructed by the industry will continue to be a factor. Whether it be Black Friday, Cyber Monday, Alibaba’s Singles Day or Amazon’s Prime Day, they are all events that are designed to trigger emotion and prompt action. And they work.
The “value” of the recent hullaballoo can certainly be debated. I suppose the value is in prompting people to buy the gifts that they need to buy for the holidays. These events prompt people into gifting mode and effect the transition into the holiday season. Super deep discounts are expected and may prompt someone to buy at a certain store over others during these events. If a retailer is silent, it will likely be overlooked by shoppers and miss out on selling opportunities. Also, smart retailers will obtain important information about shoppers during these peak selling events. They can use that information to be more relevant to shoppers in the future, which could make the discount a good investment. However I’m not sure that most retailers are actually being that strategic about it. Going forward they will need to be.
Is the frequency and sharpness of these events hastening the race to the bottom? Probably. They certainly highlight price transparency and encourage comparison shopping. You could say they exacerbate what e-commerce enables all year long. However, I think the notion of value is going to continue to evolve beyond price as e-commerce further grows. While deep discounts in late November are a good value for the gift-buying shopper, what about the rest of the year, and particularly in regard to non-gifting occasions? Perhaps help with meal solutions that turn into shopping lists that turn into orders would be valuable to a busy mom in March. Or perhaps a back-to-school solutions or product bundles would be valuable late August. How about a skin care regimen for Mom or a shaving regimen for Dad? There are a range of personal and household needs that can be solved when merchandising is not constrained by shelves. That’s where value will go with e-commerce. Retailers that figure out how to deliver this in a compelling, easy to manage way for shoppers stand to win big.
KC: Something that we've never really talked about here is drones. It seems like it in the space of a couple of years, they've gone from being a far-fetched parenthetical thought at the end of a "60 Minutes" piece about Amazon and Jeff Bezos, to a delivery concept that seems like it will happen sooner rather than later, and that will be embraced by a lot of companies looking for alternatives. Is that a fair assessment? And what do you think the rapid way in which drones seem to have become a factor in how we think about fulfillment tells us about e-commerce in a broader sense?
TF: Yes, I think that is a fair assessment. Amazon is dead serious about drones and has been aggressively investing in the strategy for several years now. From what I’ve heard, Amazon is convinced that the regulating authorities are going to come to terms with acceptable regulations to govern their operation relatively soon. I think the moves the FAA has made over the past year in allowing testing support that. And there are an increasing number of colleges and universities offering coursework and doing research in this area. It’s on its way.
I admit that, initially, I thought the "60 Minutes" segment was about PR. But when you think about how advanced the technology has become, it is completely realistic that Amazon will make this successful. Frankly, it’s much safer to bystanders and other traveling vehicles than the self-driving cars that Google is developing (although you can be sure they will also become part of the last mile delivery infrastructure in the future). Through his Blue Origin initiative, Amazon’s CEO is working on manned space flight and safely returning rockets back to earth for re-use. Drone package delivery is child’s play compared to that. Other companies will follow Amazon’s lead in this space. In a few years, drone delivery will be available to many retailers for certain purchase occasions and package deliveries.
To answer your second question, I’d say that this tells us that e-commerce is being boldly defined by the leaders in the space, and is moving at warp speed, with no regard for traditional boundaries. It’s about shortening the route to the shopper and removing friction of every type. When you think of today as Day 1 and you are not saddled with traditional paradigms, when you believe anything is possible, drones become quite logical. Many inventions become quite logical.
When our team was at Amazon, we learned about the power of invention. We were encouraged to take risks in improving the customer experience. We were encouraged to invent. This allows us to think about serving customers in completely unconstrained ways. The user interface - web, apps, smart appliances and smart products - can be reimagined constantly. Delivery paths - plane, truck, van, bicycle or drone - can be configured to deliver an experience that meets the needs of the shopper, on economic terms that work. When you truly obsess over shoppers and their problems and needs, when you think in terms of “invention”, many innovations become quite logical. The cost of trying things becomes easier to budget. It requires lots of small, responsible bets. But it will also require a few big bets. If you make these bets with your customers’ needs in mind, they will appreciate you for it and reward you with their loyalty.
"The Innovation Conversation" will return in a couple of weeks. If there are subjects you'd like us to chat about in the future, let us know.
- KC's View: