retail news in context, analysis with attitude

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.

This week's topic: Questions from MNB readers.

And now, the Conversation continues…

KC: As we wrap up the Innovation Conversation for 2017, I thought I’d pass along three questions that I’ve gotten from readers….

First … about Amazon packaging.  A reader wrote in to mention how he’d recently bought an electric razor from Amazon, and it came in an enormous box, with lots of bubble wrap.  It struck him as a total waste … and I think we’ve all had that experience.   What’s the explanation behind how products are boxed up?  Is this a weakness for Amazon as people become concerned about the environmental impact of such practices?

Tom Furphy:
I think packaging is an area that Amazon takes seriously, but also an area that they are far from mastering. I’ve had personal experiences as well where boxes were excessively large and also where items were boxed together in such a way that a heavy product caused damage to a lighter product.

Amazon’s systems calculate which box and fillers should be used based upon the items in the order and those being shipped together. And I think they’re pretty good most of the time, but not as often as they strive to be. In the outlier cases where the packaging is clearly excessive for the order, either the packaging algorithm was not accurate or the fulfillment center employee did not select the correct box or did not pack it properly.

And Amazon Fresh has also struggled with packaging over the years. Totes, bags and cooling materials can quickly become excessive in an effort to protect the products. It’s a constant effort to reduce these.

Amazon relies on feedback from customers to gather data that they can use to reduce these problems over time. For example, if they saw a high customer contact rate on the razor mentioned above, they would look into it to identify the source of the problem and rectify it. So I would recommend that anyone that has these issues should feel free to report it. You’d be doing Amazon and the environment a favor.

Amazon also has a couple other strategic packaging initiatives that they’ve championed over the years. Frustration Free Packaging reduces the amount of packaging being used and makes it easy to open and use the products inside. Things like twist ties and clamshell cases are eliminated. They also have a program called Ships in own Container (SIOC) that encourages manufacturers to package their products such that they can be shipped without over-boxing and adding extra materials.

These efforts are intended to drive a better customer experience. And it is all a work in process.

KC: Second...Do you have a sense of whether Walmart/Jet are customizing their home pages the same way that Amazon does - creating an entirely different experience for each unique user?  I’ve done it from different computers and it doesn’t seem to be the case.  We’ve always identified this ability to personalize/customize as one of Amazon’s key advantages.

Walmart does have some very basic personalization based upon recent browse experience. However it does not appear to be nearly as sophisticated as Amazon’s. I would imagine that this is something they are focusing on improving. Personalization is critical to succeeding in e-commerce.

I would also expect Amazon to continue to up their game in the coming months and quarters. As they gather more and more customer-specific information from behavior across devices and voice, they will continue to hone the individualized experience. Not only will placements continue to be improved, but you will likely see search results becoming more tailored to the individual.

KC: Third…and this is a question I get a lot…if you had to guess, what do you think Amazon’s next big retail acquisition will be, assuming you think that Whole Foods is not their final bricks-and-mortar move?  We won't hold you to it, but there’s a lot of speculation out there and you have a better sense of the company than most people.

I also get asked this question all the time. And I feel completely unqualified to answer it.

Whole Foods was a logical acquisition toward Amazon’s Fresh strategy. It is a fantastic platform upon which to innovate on behalf of their customers in order to find the optimal way of serving their grocery needs. But it was made after years in the business in which they were able to experiment, understand and appreciate the value of a local brick and mortar presence. That said, I don’t think that Whole Foods will be Amazon’s final brick and mortar acquisition.

I would expect any future retailer acquisitions to be made under similar circumstances. It would likely come in a category where they feel that a physical experience and local presence is important to the shopper value proposition. Perhaps that could be in the apparel and fashion space with a company like Macy’s, Nordstrom or Kohl’s. Or perhaps it could be in pharmacy if the company pursues that direction. Maybe a retailer like Rite Aid would make sense. None of these are obvious to me now, but if it makes sense based on Amazon’s testing and strategy, I could see them making a move.

The Conversation will continue … in 2018…

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