Amazon.com Inc. appears to be following the lead of some of its smallest competitors in its latest strategic move. Amazon’s apparent plan to build a physical presence in shopping malls and urban centers is following the playbook of internet-first retailers that are reaching shoppers through storefronts and kiosks, the WSJ reported today. The strategy by eyeglasses seller Warby Parker, jewelry outlet Blue Nile Inc. and clothing boutique Bonobos Inc. represent variations on the methods that have troubled traditional retailers and saddled them with higher inventory costs and margin-cutting logistics expenses.
The system works partly on trust and partly because of an incredibly intrusive big data system
The idea, says one of the leaders of Warby Parker, is to maintain a storefront only so that consumers can examine items that they order and have delivered if they buy the goods. It’s a variation on the omni-channel strategy traditional retailers are trying to execute, but it comes without the sprawling and expansive stores that retailers tie to their e-commerce distribution.
This strategy on the part of Amazon is very much like the logistical and mobile payments concept of Alibaba. Logistically, Alibaba has created a consortium of logistics firms which deliver not only to the 200 lesser cities of China, but which have also established some 100,000 distribution points, giving the buyer the option of picking up goods as a complement to or as an alternative to home delivery.
Variations on a theme
Alipay, Alibaba’s mobile payment system, is based on an escrow account system.
Showrooming or shopping in stores or show rooms and then ordering online; buying several items of clothing in different sizes and returning those that do not fit, has become popular in the West. With Alipay’s escrow system, one can examine the goods before making payment. The system works partly on trust and partly because of an incredibly intrusive big data system which records how trustworthy a person (the buyer) is, based on a complex algorithm. Data is kept on the trustworthiness of some 400 million consumers, rivaling the US NSA in intrusiveness.
Data is kept on the trustworthiness of some 400 million consumers, rivaling the US NSA in intrusiveness.
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Continuing our example, if the Chinese buyer does not either return the goods or pay for them within a specified time-frame, the buyer is considered untrustworthy and good luck buying the next item online. Such records as paying the taxi driver after your last taxi ride and minor traffic violations are all kept and used in an algorithm to determine how trustworthy and credit-worthy a person is or is not.
Remarkably, a similar and logistics-based discussion was held at Apple, when Steve Jobs considered manufacturing Macs to order, on a just-in-time basis, and delivering the finished product overnight. Apparently, this just-in-time logistics concept did not sit well with some of Jobs’ colleagues who reminded him of his own mantra; that of starting with the customer experience, delighting the customer and then working back to the technology, not the other way around.
Global trade implications
The progression of selling goods online while answering every conceivable question about the functions and features of a complex product such as a laptop at a kiosk, store or trade show booth, is a harbinger of things to come in e-commerce. It spans borders. Since the Middle Ages, international trade fairs featuring every conceivable product have been used to explain the functions and features of products to clients hailing from far and wide. It is then possible to sell a lot of this product to buyers all over the world.
Two fellas from Venezuela asked me about the bikes I was proffering at the New York-based Toy Fair one year. They then ordered a million dollars worth of bikes and accessories; literally container-loads of product. I was paid by confirmed, irrevocable letter of credit. My biggest difficulty was figuring out how much of each product ordered fit into 20 ft. by 40 ft. containers.