by David Sobeski

The Amazon Effect

January 24, 2014
Comment on: Facebook

I was watching Howard Shultz on CNBC talking about how their quarter. They beat estimates but there is a slow down in foot traffic (and only 5% growth). That said, there is an insane usage of people purchasing store card. They have over a billion in revenue that they have yet to account for because they are not yet activated. But what made Shultz’s comments interesting was his talk about Amazon.

The Amazon Effect in the next few years will be very real. More and more people are buying online and less people going to malls. Therefore, if you are not at the mall buying other goods, then, you are not walking into a Starbucks. Luckily for Starbucks, there good is a physical good. You can’t purchase a digital latte. Looking at Starbucks, they actively have a strategy at Starbucks to battle the Amazon effect. That is, more stores not in malls, more stores with drive throughs. More focus on digital ordering and picking up.

The Amazon Effect hurt Target, Best Buy and a host of other retailers. However, there are benefits in specialty retailers like Apple or Burberry. They are not putting their stores only in malls, but, compelling streets around the world. The Amazon Effect keep more people buying at home and expecting products delivered with in 24-48 hours. People are becoming impatient, faces planted in their phones buying.

A little tangent: I use an interesting Disney example to talk about how the Amazon Effect is effecting all companies. With Disney, if you are on your ESPN app, you walk past a Frozen poster and then think you should buy an Anna doll for your daughter, you want to easily transition and buy the doll with a simple tap. My ESPN identity and my Disney identity are the same (or should be the same). Then, as you transition to the Disney Store, you are already logged in because you used ESPN and you can easily make the purchase. The Amazon Effect caused Disney to make sure their is a single ID, ability to store your credit card for 1-tap purchase, provide delivery options to get the doll fast. Even, move people to stores like Amazon or Target Online or Walmart online to make the purchase as frictionless as possible. Even the Disney Store in the mall has to turn to a specialty retailer where you can get exclusive items. It has to marry digital and physical in new ways.

The Amazon effect is real and your products need to be part of Amazon’s catalog. But, the economy is about people going to work, going to malls, buying, buying buying. If people are buying on their way to work on their iPhone or buying at work on their PC, all of the side companies are effected. That is, companies like Chipolte the need the foot traffic are forever being altered. The strategy on where you put stores is something new and a big part of what they now need to consider. If you are buying at home, odds are you are going to watch movies at home and theaters will have less traffic.

In the “social” era, people are becoming less social. Staying at home. Buying online.

©2014 by David Sobeski