AMAZON’S ECHO SIGNALS A TREND
Journalists reporting on Amazon’s second annual Prime Day noted that other retailers should pay special attention to how easy Amazon made it to shop with Amazon’s Echo. The voice-powered home entertainment/information hub guided owners to bargains reserved just for them, and made it super-easy for people to take advantage of their special deals. They even got an extra $10 in savings if it was the first time they’d used Echo to order something. One Orange County journalist said that his two brief (seconds each) chats with Alexa, the voice personality that emits from the Echo device, got him two super bargains. Simply telling her to buy was all he had to do—no clicks or multiple processes involved. The story went on to note that it was easy to see how shopping with Alexa could become addictive. Amazon Echo was on sale for Prime day, discounted from $180 to $130 for Prime Day, reportedly racked up its single-largest sales day ever.
HOW AMAZON PAYS FOR FREE SHIPPING
Amazon’s (and now Walmart’s) free fast shipping for members is molding consumer expectations in ways that all retailers will have to deal with. An in-depth look at the free-shipping component of Amazon Prime shows that one of the main mechanisms that makes free shipping for consumers possible is the fact that merchants pay fees on the back end that consumers do not see. Retail analysts say that many merchants price these fees into the prices they charge for products. There is a small indicator on the website that says “Fulfilled by Amazon” that lets consumers know the item is Prime Eligible and Amazon is shipping it. Amazon inventories those items, and charges merchants per cubic foot of volume, a charge that goes from $0.54 per cubic foot of volume in the first nine months of the year to $2.25 per cubic foot in the fourth quarter holiday season. Long-term storage fees add to the cubic foot charges. Merchants say that big bumps in volume justify the additional charges, plus Amazon provides a lot of support. Despite all that, shipping is still a net loss for Amazon that generally totals about 5% of net sales. For the first quarter of 2016, Amazon had $29.1 billion in sales and $1.5 billion in shipping costs.
COMPANIES FOLLOWING MILLENNIALS
Companies from Amazon to McDonald’s are moving from the suburbs back to the city, squeezing new offices and corporate headquarters into urban areas where millennials prefer to live. GE is moving from suburban Connecticut to Boston, Uber is planning headquarters in San Francisco’s Mission Bay, LinkedIn moved into a downtown San Francisco tower, and McDonald’s is moving from suburban Oak Brook to Chicago. Amazon is building a new 500-foot tall office tower complete with three 100-foot-tall futuristic looking structures they refer to as biospheres in downtown Seattle. When they open in 2018 they will host more than 300 plant species from around the world, creating what Amazon says will be the workplace of the future. Amazonians will be able to take a break and walk amid the greenery along suspension bridges and climb into meeting spaces resembling bird nests perched in mature trees to brainstorm. The new headquarters was designed to project a forward-thinking company eager to help employees be more productive, creative and happy—and give them a workplace that’s within walking distance of everything downtown Seattle has to offer. Amazon’s new campus occupies more than 10 square blocks, which is more than 15% of Seattle’s office inventory. There is so much interest in their futuristic campus they offer two tours each week; they are currently booked up through October.
INTERNET OF THINGS TRIGGERS IMPULSE PURCHASES
Almost one out of every two dollars spent online will come from online purchases made using a mobile device by 2020 according to JAVELIN’S recent Online Retail Payments Forecast report. The report notes that what it refers to as a new “contextual” consumer’s reliance on the IoT and other mobile devices creates an environment for greater impulse purchases. Buy buttons, first introduced in 2014, allow consumers to casually browse and purchase while on social media sites. Mobile payments seem easier and faster to consumers, who are getting used to the one-button, one-click method of commerce, which is perceived as being much simpler than loading things into your shopping cart and checking out on a website.
ARE BIG BRANDS THE BAD GUYS?
There is a perception increasingly popular with a new generation of consumers that the massive scale of many big brands causes more harm than good, while startup brands are inherently beneficial for the planet because they can build better processes, business models, infrastructure and more. A recent survey by Deloitte found that one-third of U.S. consumers would pay at least 10% more for a “craft” product as compared with a big name brand. However, Trend Report pointed out that big brands have the scale, reach, resources and human capital needed to effect massive change, as well as decades of accumulated skills and knowledge. So if they use their power to create change for the greater good, they can have a much wider-ranging impact than a startup. Amazon has been trying to be more transparent and let people in on more of what they are doing. They’ve let a nonprofit run a homeless shelter out of a company-owned building and are revealing some of Amazon’s previously closely guarded internal lingo, explaining, for instance, that the name of the Day 1 North building comes from founder Jeff Bezos’ belief that “every day is Day 1 at Amazon.”
WHAT IMPROVES CUSTOMER SATISFACTION
The J.D. Powers 2016 Home Improvement Retailer Satisfaction study found that customer interactions with staff on the floor greatly influence overall customer satisfaction. The study revealed that overall satisfaction declines significantly when a customer waits more than two minutes to have their question answered, and also found that the 46% of customers who asked an employee for help rated top performer Ace Hardware 14 points higher than those who did not ask for help. The study also showed that customers want retailers to provide advice, but only 42% said that the staff did so. However, if staff did provide advice, satisfaction ratings shot up. The study also found that higher customer satisfaction significantly increased customer loyalty and intent to repurchase and to recommend the retailer to others. This study was fielded in January and February 2016; respondents must have purchased from a home improvement retailer within the past 12 months. Staff interaction may become an increasingly important factor that could influence whether customers choose to shop online or in-store.
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