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Wednesday, Jan. 21, 2009 at 8:48 am

No More Amazon For You?

By Jeffrey Eisenberg
January 21st, 2009

My Amazon habit goes way back. I joined Amazon Prime as soon as they started the program. If some villain wanted to take away my Amazon he would have to pry my mouse from cold dead hands ;-) Maybe I’m being overly dramatic but you get the point.

I no longer think about the selection, convenience, service, price, “free” shipping or much else when I shop at Amazon. Even New York State’s insistence that Amazon collect sales tax did not break my habit. Not everyone is in the habit though. Amazon is pushing hard to addict as many people as possible. Gaining market share during a recession is the name of the game and Amazon wants to hook people now so they will be loyal customers like me when the economy recovers.

In “Amazon Prime Squeezes Already Struggling Rivals” by Matt Pace on the Compete.com blog he writes an extensive analysis that I encourage you to read:

What impact on members’ shopping habits does Prime have? Does it drive heightened Amazon loyalty? Consider the following observations of Prime member shopping patterns in December:

-  49% of the time Prime members shopped online, Amazon was at least one of the retailers they visited (compared with 29% for non-members)
-  40% of the time Prime members shopped online, Amazon was the first retailer they visited (compared with 24% for non-members)
-  53% of total online retail purchases made by Prime members in December were made at Amazon.com (vs. 29% for non-members)

You can read the rest of Matt Pace’s analysis here.

I have a question for you, not whether or not you’re an addict too, even though I’m curious. My question is: What can you do to squeeze your rivals to gain market share and are you doing it?

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Comments (20)

  1. I like Amazon also. Frankly, I also learn from them as well. What are they doing right? What can I do better?

    I think it is always important to watch what the big guys are doing. It helps you keep your game sharp.

  2. Good question, Jeff. At eBay, we acquired BillMeLater last fall and from WSJ articles, looks like we did so at quite a bargain (so buying enhanced products/offerings is one way). On a similar note, I wonder to what extent of expected losses are orgs willing to negotiate? That is, how much are some willing to loose in the short term to gain advantage after the recession (especially with regards to cash flow)?

  3. Amazon’s shopping experience can be an incredible working example for all etailers out there.

  4. I recently wrote an article/blog entry about how great of a scam that Amazon Prime is. It’s the same type of scam Costco does. You pay an upfront fee for lower costs or added benefits and then you spend like crazy to make up for that loss. It’s a beautiful thing.

    By the way, when I say scam, I mean marketing gimmick. Scam is just shorter word for it. I do not mean that they are being dishonest. I just love short words.

  5. @ Ash, I wonder if Amazon will understand you use of the word scam… I sounds to me like a “scam” scam, a real scam.

  6. Ash, I, too, am fascinated by the ‘membership’ retailing model. Consumers that do make it our way (no membership required retailers) love to tell me how much they hate to buy from ‘membership clubs’ and are so glad they found us. They usually enjoy a better selection, better service, and similar pricing.
    These customers don’t enjoy paying a fee that they might not recoup, but they really dislike the barrage of pesky promotional marketing via mail and email as well.
    At the same time, I really envy the model, as I recognize that those that do join are among the most desirable and loyal shoppers that I also seek.

  7. You know the one thing that frustrates me:

    I love to shop at Barnes & Noble because you get to sit in and read and drink coffee and it’s a good atmosphere. However, I hate their prices. They charge cover price for everything. I even hated it more when they offered me 10% off for $25 year membership. Then, I fell for it because I found that I needed books fast and I bought stuff there nearly every month. Now I feel obligated to shop there because I’ve paid for a discount.

    On the other hand, Amazon has always been my favorite place to get books despite the waiting period for shipping. Now they offer me the Prime membership, and for me, it’s not compelling at all. They seem shisty about how they offer it (free shipping today, etc), instead of selling it as a discount membership like B&N. Now, though I’m sad to regret, I found that I shop at B&N more than Amazon and if Amazon would have just said “Join the Amazon Prime Savings Club for $xx.xx/yr”, I seriously would have bought it, and they would have won.

  8. Jeff – Marketing in a recession is always an interesting thing. And ironic that you bring up Amazon because Bezos’ hunches for Amazon were born during a difficult economic environment.

    While there are things we can all do and help our clients do in this environment, I am struck by how important a strong balance sheet is. Of course at my age, I’ve never worked in an environment like this – so perhaps I am stating the obvious. However, it becomes more obvious when it leaps out of the text book and into my daily life. I could name several business that had great plans and aspirations but allowed themselves to be blind sided by the macro-environment and now can’t get themselves off the floor to wipe their own chin (wanna guess who I’m talking about?).

    What I am trying to do in my corner of the world is start hoarding cash to weather the storm and make sure that I communicate real value in my interactions with clients and potential clients.

    Y’all (I imagine this word isn’t used often enough in your New York office) keep up the great work.

  9. @Ash,
    You have described only one potential behavior (spending to make up a membership fee). Research Costco further and you’ll find actual bargains. Buying a year’s worth of OTC loratadine (“Claritin”) is so much less expensive than a drugstore generic brand that buying two bottles (that year’s worth) pretty much makes up for the annual membership fee. That’s a single purchase. Our brand of diapers is cheaper on Amazon than anywhere else and is delivered free; spreading the shipping I would have spent (or extra I would spend to meet the “free shipping” threshold at, say, Diapers.com) comes a few dollars shy of paying for my Prime membership. Many consumers do their homework and act in their best interests; perhaps others act like your model.
    Obviously Amazon and Costco benefit too, but there is such a thing as a win-win for retailers and consumers. When you look at the volume model Amazon and Costco deal in, you see how they can offer it.

  10. Ash, you sound like a moron.

    By the way, when I say moron, I mean smart person who hasn’t thought through what he’s saying. Moron is just shorter word for it. I do not mean that you are stupid. I just love short words.

  11. I am an avid supporter of Amazon Prime — at least I was until this past weekend when I tried to order a couple of products from Amazon that are actually supplied by other vendors. Suddenly there was a (ridiculously high in my opinion)shipping charge. Now I’m mad at Amazon. They’ve made me so used to not paying a shipping fee I feel ripped off. I’ll get over it, but my point is programs like this can backfire too.

  12. This is a fantastic program, I already ordered frequently from Amazon so the Prime program saves me a lot of money. I do notice that I am much more likely to purchase in general, than I would have been without the free 2-day shipping. There’s just so little friction to the purchase process, it seems the time between consideration of an item and purchase is almost entirely removed.

    I will take one dig at Amazon, I bought a couple toys at Christmas for my brother’s kids, and went back to buy them for mine 3 days later. The price was 65% higher, not something that will remove future friction about double checking their prices against other online retailers.

  13. Great question! My two cents on some ways to squeeze rivals and gain market share:

    1. Amp up competitive research. Competitors will be revealing weaknesses as the recession goes on. Keep tabs on competitors, learn how you can out-position and differentiate, then sell more on this basis to customers.

    2. Marketing. Often marketing budgets shrink when cashflow dries up. If you spend more on marketing or sales efforts, not only will expenses potentially be lower during recession, but you can be in places your competition can’t afford to be or have left.

    * Talk with your customers. Reach out, re-establish relationships, look for ways to solve their problems within your domain of expertise. Your competition might be reeling and now reaching for short-term solutions, and you can differentiate by thinking long term relationship strategies.

    Fortunately, the internet makes these three bullets less expensive and easier to do than ever before.

    Specific ideas:

    * Generate useful products and services available online and give away for free to build your direct email databases. Example: whitepapers, ebooks, valuable information filtering/feeds. Market these highly valuable freebies to your competitor’s customers.

    Follow-up with relationship building or sales funnel contacts.

    * Offer to license your competitor’s products. Bundle them with your own, possibly at a discount. Use to build customer lists.

    * Offer to buy out your competitors.

  14. I’ve been in small publishing for years and there are tiny markets I
    pursue that are ignored by the ‘online information marketing’ crowd due to ‘recession’ worries. Good! More for me.

    I’m watching Amazon, Cisco and Virgin closely right now because they are in different industries and thriving.

  15. Nice posting I can say,I am expecting more simplified post on the same subject But still hats of to the author for giving this posting.thnks
    Reliable Host

  16. I love Amazon. I just recently got hooked on website analytics, so I went physically to purshase some books about it to my local bookstore (Chapters) and found out that the retail price was 15$ higher than on amazon.ca, so I purshase two books on Amazon.ca instead and received them in less than 24 hours.

    On quick point of improvement for them : Why not link the reviews from the amazon.com website to the amazon.ca website. It’s a review of the same book, in the same language. For example, your CALL TO ACTION book has 31 reviews on Amazon.com, but only two on Amazon.ca. So I always have to switch between the two sites. By the way, with the money I saved, I purshased Always be Testing and I love it.

    Keep on the good work !

  17. When I think of Amazon I think of books. Prime?? Never heard of it, probably because I haven’t bought any books recently I guess. =) Amazon only gets my business for books. Their 3rd party selling mechanism is horrible IMHO.

  18. really.amazon is great for me when it comes to books.nice post

  19. On the other hand, Amazon has always been my favorite place to get books despite the waiting period for shipping. Now they offer me the Prime membership, and for me, it’s not compelling at all

  20. Amazon has always been my favorite place to get books despite the waiting period for shipping. Now they offer me the Prime membership, and for me, it’s not compelling at all

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Jeffrey Eisenberg, founder of FutureNow, is a professional marketing speaker and the co-author of New York Times and Wall Street Journal bestselling books Call to Action and Waiting For Your Cat to Bark. You can friend him on Facebook.

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