Posted in Marketing & Strategy Articles, Total Reads: 1790
, Published on 08 September 2012
Every consumer has felt that if there is someone who takes care of their shopping needs before they arise, it would solve most of their problems. They could trust someone for assessing their needs that would arise in near future and give them the desired product/service. For example, if you have received a parcel of a beautiful dress which you saw yesterday while watching your favourite show on television, how would it be? Is this something strange? This revolutionary concept is called “Yesterday Shipping”. This term was coined by Amazon Inc. and they are the pioneers and originators for this idea.
How it works?
As per this concept, Amazon choses its top 10-15% of high shoppers and then based on their past purchase decisions, sends them a similar item even before the order is placed on the site. The item will reach the concerned person on the same day and then if they like it, they have to pay cash and receive it. All the physical concerns like size,colour and other attributes of the products will be decided based on the past purchases of the concerned customers.
The algorithm developed by Amazon will capture the top purchasers (in terms of revenues as well as the number of items purchased) into two separate lists. This list will also have the minute details such as the colour, the size (if it is a wearable one) and the price ranges of their purchases. Then among the new items which Amazon wants to test with its customers, based on the above attributes, it selects the most appropriate item and then ships that item and it makes sure that the item reaches the concerned person on the same day.
At the receiving end, the concerned shopper will be shocked and double checks the address as well as his/her memory to make sure that there was nothing actually ordered by them. When the delivery person explains the importance of this type of shopping highlighting the importance of the customer in Amazon database, the chances that he/she accepts that particular item are very high. Amazon pays least importance on the price issue and makes sure that the customer pays the price at the last step.
This concept is very useful to test the user acceptance of new products that amazon can sell through its website. Also, it provides a huge opportunity for any manufacturer to tie up with amazon and test their product’s acceptance with the actual users.
Why it works?
The research in consumer behaviour studies suggests that for any new product, the market will react as per the following way.
As from the diagram above, we can observe that the first 2.5% of the target population are called “Innovators”. These people will use the product with the zeal of trying out new things even with minimal marketing efforts. The next 13.5% are called “Early adopters” and these people adapt to the product at a faster pace compared to other population. These early adopters also act as the main source for word of mouth advertising. The next 34% population are called “Early Majority”. It is observed in the research that majority of these 34% use the product on the advice of the early adopters.
Based on this research, we can come to a conclusion that, from the marketers’ point of view, it is important to please the innovators and early adopters of any company’s products to yield optimum market share. Amazon wanted to target these kinds of interested users through their innovative model. These users are the ones who try out new products in the market as and they come into the market. And for these users, if these products are supplied directly to their places, then it creates an emotional bonding between those set of customers and Amazon. The research also proves that the costs incurred on converting these early adopters into loyal customers for a particular brand yields the maximum revenues in long run.
This can have multiple advantages. These set of people act as unofficial brand ambassadors for the brand and this garners word of mouth publicity for the brand in initial stages of its launch. These users can also be used as alpha testers by the companies for their new products. Another advantage is that the company gets direct first-hand information about its products from the exact target customers and how the customers perceive the latest innovation in the products.
What issues it might face?
The main issue for Amazon in this innovative model is the logistics and supply chain operations. Its core competency lies in the incremental supply chain model that exists. It offers the customers same day, second-day and other fulfillment options depending on the cost the customer and the company can bear on a particular product. This is possible because of the location of Distribution Centres (DC’s) across the globe. The other huge differentiator is that Amazon has a large range of partnerships with distributors, manufacturers, publishers and other partners.
In case if the selected customers through this initiative are at long distance from the Distribution Centres (DC’s), then Amazon has to depend on the third party agreements for shopping the items before they are even ordered. The other issue Amazon might face would be the customer backlash in case if the customers are not satisfied with this product. In case if the customer is not interested in that particular product, then it can backfire on the relations between the target segment and the company. Also, these users take their vent on to the social media channels and this can result in larger brand damage. So, Amazon must be extra careful in selecting the customers for these types of activities.
Basically, it must ensure that the customers selected in this initiative are Opinion Leaders. One more problem that Amazon may face is the breach of privacy. It is observed in the research that majority of ecommerce users are concerned with the privacy and security of the information that they share with these websites. Also, reports on breach and theft of confidential information are one of the top concerns these users have. So, it is important for Amazon to safeguard this information and also be responsible to its customers regarding all kinds of concerns they have.
How e-commerce industry reacted to this innovation?
This is one such innovation where the entire e-commerce industry took it in awe. To come out with such a program, one should have that kind of customer base as well as the decision generation algorithms. Also, the supply chain initiatives and issues should be taken care in the large scale. As of now, when this issue was taken to its strong competitors like EBay and Flipkart (in India), they responded that they would wait and see whether such an initiative will work in already competitive ecommerce industry.
As of now, EBay offers Deal of the day and other interesting offers to its customers and they want to build their loyal customer base. Flipkart is in an aggressive expansion mood and they want to increase the product diversity and delivery scalability of its operations. So, Amazon is currently in its leadership position and they can test this initiative and wait for customers’ reaction.
What is next for Amazon?
In case if the initiative is successful and the customers react positively to these kinds of activities, then Amazon can expand this operation to the entire 13.5% customer base. They can also develop similar initiatives and this can act as a big booster to the customers to use ecommerce more aggressively. Also, over a long run, the company can increase its customer base towards the loyal customer base. This also helps in increasing the brand togetherness with Amazon compared to other competitors.
But, if the initiative flops, then Amazon can revert back to its normal operations and can putthis initiative on the back burner for reconsideration.
Overall, this is one such strong innovative measure taken by Amazon which can revolutionize the entire ecommerce working. These ideas are to be dealt with care as it is a double edged sword. If the customers feel that they are taken for granted, then it might turn out to be on the negative side for the company in the long run. So, Amazon should carefully select the customers and then go on with this initiative in the start.Once it receives success and customer approval, then they can expand it to 15% base for every product in the long run. Whether Amazon succeeds or not in this innovation, the customers must benefit in the long run.