Thursday Apr 30, 2015

A New Kind of Discount Retailer

It used to be that I always assumed Amazon had the lowest price.  Now I have to double-check before placing an order.  Lately Amazon has been focused more on customer experience than price, offering lots of goodies for Prime customers and really fast shipping.  Might that allow a new competitor to enter the market?

In the early days, sometimes had to buy diapers at Costco to ship to its subscription customers, sacrificing margin for share while the rest of infrastructure caught up.  The company was based on supply chain efficiencies and a lower cost to acquire and retain customers.  It worked so well that Amazon first fought them, then bought them.

So after spending two years with Amazon, Marc Lore is on his own again building a new kind of retailer. is a cross between Costco and eBay with a huge focus on squeezing out every nickel of savings.  Consumers pay a $50/year membership fee, which is the only income for  Then offers products from various retailers at deep discounts.  Those discounts come from passing on sales commissions, using the most economical shipping, combining orders, and avoiding credit cards.

To be successful, must have the world's most efficient supply chain.  Perhaps more efficient than Amazon and Walmart.  The lynchpin will be an intelligent order management system that can efficiently source, combine, and ship products at the lowest cost.  Then there will also need to be lots of creative deals with merchants to lower prices in exchange for waiving the right to return merchandise, sharing customer data, or establishing subscriptions.

Of course this business plan requires massive scale, so the trick will be staying in business long enough to establish a large and loyal customer base. has already raised $220M before the website is even live, every penny of which is required for infrastructure and marketing.  But I just don't think Amazon and Walmart will stand by idly.  I think a major online price war is on the horizon, and consumers will be the big beneficiaries.

Tuesday Jan 03, 2012

Best Buy in a Downward Spiral?

Larry Downes seems to have struck a nerve with his popular Forbes article Why Best Buy is going out of Business...Gradually.  As of this writing, he's already had over 550,000 views for the five-page, somewhat long-winded diatribe that was posted yesterday.  Larry basically lays out his reasoning for Best Buy's demise based on poor customer service while refuting the excuse that cheaper online retailers like Amazon have an unfair advantage.  He cites the recent cancellation of orders by Best Buy just before Christmas as the ultimate failure to serve customers.

As a former Circuit City employee, I can feel Best Buy's pain.  Electronics is a tough market. The products become obsolete quickly, installation and configuration can be customer service nightmares, and the Web has made competition more fierce than ever.

I haven't shopped at Best Buy in quite a while, so I don't have any good or bad recent experiences to relay.  But I did have three good customer experiences recently, so I thought I'd share:

1. We decided to do some remodeling in the kitchen so I ordered a faucet, cooktop, and range hood from  They were available to be delivered from the local store in two weeks, but since we'd be on vacation I put a specific date in the comments.  Within an hour of submitting the order, my local Lowes called to verify exactly when I wanted the items delivered.  Everything arrived as planned.

2. I ordered a MicroSD card from Amazon, but the wrong type of card was delivered.  My order was accidentally switched with another Austin resident who got my product.  I called Amazon and they immediately shipped my original product via 2-day delivery with no questions asked.  I understand mistakes happen and just want them rectified quickly.

3. Lastly, I bought an expensive blender from Costco which went on sale the next week.  I called and they happily refunded the difference.  By the way, I chose to buy the blender from Costco not because they were cheapest but because they have an excellent return policy.

All three situations had a few things in common.  First, the employees I spoke with had good attitudes.  I felt they enjoyed their jobs, and it made the conversation that much better.  Second, all three retailers had the necessary systems to enable my purchase and handle post-purchase issues.  Third, the people I talked to were empowered to make me happy.  There was no runaround at all.

In this blog I focus lots on the technology that powers retailers, but in the end its the human touch that makes it work.  Perhaps Best Buy needs to get back to its customer service roots.


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