Wednesday Feb 20, 2013

Shipping Wars

I messed up.  My son wanted Borderlands 2 for his XBox so I ordered it from Amazon, but its taking 8 days to arrive.  That's a long time for a kid.  I'm saving him $15 by using the Free Super Saving Shipping, but he really wants it now.  (I've since discovered that Amazon Prime can be shared with family members, so my brother added me to his account and now I get free 2-day shipping!)  I think he's typical of many shoppers, which is why there's renewed focus on next day shipping.

I'm trying ShopRunner, which is a club that offers free 2-day shipping for several retailers, including one of my favorites, Newegg. It's well integrated with the Newegg site so its very easy to use.  Of course its 2-day shipping from when the order is picked, so it can end up being 3 days.  Several retailers have created their own free-shipping clubs because free shipping is very important to web shoppers, and fast shipping delights.  In fact, shipping charges and shipping time account for 76% of cart abandonment.

Now that Amazon has agreed to charge sales tax in Texas (where I live), they are opening three new fulfillment centers in Texas.  This should make it more cost effective to offer cheaper, faster shipping.  With enough scattered fulfillment centers, they could conceivably offer next day shipping to most major population centers.

Not to be outdone, eBay is testing same-day delivery in limited markets via its eBay Now product.  Basically it tracks inventory at nearby stores, sends a courier to buy the item, then delivers it to your door for a fee.  There are several similar services being tested in limited markets.

This is an area where brick-and-mortar stores might just have an advantage over online, especially if the Marketplace Fairness Act goes through and levels the tax playing field.  Being able to ship items from a local store can be cheaper and faster than fulfilling from some warehouse on the opposite coast.  Retailers that have already mastered "buy online, pickup in the store" need only change the pickup to delivery.  Grocery seems to be focused on this, with Fresh Direct leading the way in New York and AmazonFresh in Seattle, not to mention the many successful offerings in the UK which are projected to double in five years.

I think the lesson here is that fast delivery is becoming a differentiator in some markets, so retailers would be wise to make sure the basics are ready.  Make sure perpetual inventory is accurate and visible, labor scheduling is efficient, and shipping/delivery partners in place.

Thursday May 12, 2011

Gamification of E-Commerce?

Zynga makes money hand-over-fist producing simple games that are easy to learn and highly addictive (at least for some).  Other companies, like Foursquare, challenge people to earn badges and status.  Even the Amazon Gold Box appeals to a certain type of user.  Flash Sale sites like Gilt, Hautelook (now owned by Nordstrom), and MyHabit (recently launched by Amazon) attempt to add excitement and fun to shopping in their own ways.  Games, and more specifically friendly competition, can be used to inject fun while influencing behavior.

And what could be more fun than an auction?  There's competition with other bidders, the need for strategy, and a nice payoff if you win the bid at a discount.  An entire industry has grown up around eBay to support this type of retail business.  In both the eBay and Flash Sale models, the retailer brings buyers and sellers together for a transaction that benefits all three parties.

But there's a new group of retailers that have combined auctions and gaming (some might even say gambling) into a fun way to shop and possibly go broke.  I recently saw a TV commercial for Quibids where they claimed someone got an iPad for $24.74.  Yeah, right.  But after investigating, I believe it could have happened.  And while one lucky person got a great deal, many others wasted a lot of money.

The way these penny auction sites work is that you must pay for each bid you make, typically 60 cents.  Items start at one cent and each bid increments by a penny within a preset time limit. Each bid can potentially extend the time limit as well. So using the iPad example, 2474 people submitted bids netting Quibids $1484.60, which is well over 100% markup.  The last guy got an iPad for $24.74 and everyone else wasted their money.

To their credit Quibids now offers "Buy It Now" so that the money you spend on bids can be put toward the same item at list price.  So if you made 25 bids on the iPad, they credit your account $15 toward the purchase of an iPad at the list price.  Its that very feature that makes Quibids look like an e-commerce site with a gaming front end.

Their homepage reminds me of all the slot machines in casino.  Its very enticing...and profitable.

About


David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.


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