Willful blindness and selective denial
Willful blindness is legalese for “ignorance of the law is no excuse”. Other selective denial expressions include, ignoring the elephant in the room, sparing sacred cows, believing in the emperor’s new clothes, shooting the bearers of bad news and groupthink.
Humans tend to deny new facts when they are too shocking, painful and/or scary to confront. But, companies that acknowledge, debate and act on truths beat competitors who remain in denial. And, they will be better able to compete with Amazon in the ecommerce cloud of 2021. Continue reading 105. Connecting Customer Profitability and (Amazon) Cloud Commerce Effects
The Present Facts
Amazon (AMZ) is building out the first value channel from end-users back to factories. And of course, this channel is a cloud-based digital channel. The customer-centric channel is comprised of 10+ intersecting, reinforcing, winner-take-all platforms starting with the 60MM Prime members in the U.S. (100MM+ worldwide). This monopoly capability will allow AMZ to sell into, and/or collect fees from, all verticals that sell anything to Prime members.
This cloud-based value channel has breakthrough advantages over legacy, product-push channel players. Hence, there is insane loyalty from Prime members and astronomical sales growth. Continue reading 104. Innovation Two-Step: Core Renewal and a Cloud-Based Value-Channel
Why Are Your Margins Too High v AMZ’s?
Your margins must cover your channel cost structure which was built for bygone days. Most channel costs evolved (from WW2 on) to push true-new products to first-time buyers. Cold calls (requiring product-education) required both factory and distributor reps to create demand. Both sets of reps got paid roughly 5% of their respective sales. Today (70 years later), most channels still have two sets of reps costing about the same. What other elements of your push-channel costs will AMZ threaten?
2018 Legacy-Channel Challenges:
- The US consumer-society lifecycle is mature with too much global supply. Power has shifted to customers. And, AMZ owns the increasing numbers of Prime customers. Brands must go to where the eyeballs are and sell them the way they want to buy.
- 80%+ of distributor product sales are for equally-excellent commodities (no demos needed)
- 90% of sales are rebuys from experienced customers (fewer cold calls)
- The internet makes all product – information, availability and pricing – 24/7 available. As digital information grows, product knowledge help from local reps drop.
- Mark-ups for full-lines of SKUs create profit/loss cross-subsidies. Average-pick size and turns are ignored. Buy: a popular $500 piece of equipment at 20% margin and some fittings for $1 to $3 each at a 40% margin. The equipment’s $100 of gross profit covers: its activity costs; the losses on fittings; and residual company profit.
- Mark-ups covering bundled services are not customer-centric. Customers get an assigned rep whether they want them or not. If reps were unbundled for fees and customers got 5% rebates for buying on their own, what would happen? Without unbundling, Millennials will web-room you on the big-price, popular and most profitable items on AMZ for less. They will: check the $500 equipment price at AMZ. Sees savings of $X. Spot buy it. Then, order the little-dollar picks (net-profit losers) from the distributor.
- And, the Perfect Clones of most profitable items are increasing at AMZ. Clones – with great information content, reviews and prices – will steal share from top brands not there. Clones can skip channel development costs and go right to AMZ’s unlimited cyber-shelf space using Fulfillment by Amazon.
- Loyalty to – brands, distributors and reps – will continue to erode.
Factories and distributors share SKU profitability analytics to solve cross-subsidies and rethink their respective service bundles. And, factories get on AMZ to win the content management war against the clones. For more: contact me for a free, virtual, SKU analytics session. email@example.com
AMAZON’S SMALL-DOLLAR-ITEMS: Math and Solutions
Amazon knows warehouse activity costs to the penny. Their 9th generation warehouses may have the lowest, cost-per-pick on the planet. Some stats:
- The “click to ship” elapsed time is 15 minutes and dropping.
- The average human time input for each order is one minute which includes 15 seconds to pack.
- The cost per pick – in the narrowest sense – is 44 cents for a human and 20 cents for a robot.
Continue reading 94. Amazon’s $7 Per Line-Item, Wake-Up Call
Does your company plan to sell – physical or digital – goods to AMZ Prime members in 2020 and beyond? Then, backcast about the ideal customer shopping journey that AMZ will be dictating. And, start changing now.
It’s visionary planning:
- Start with an ideal vision of what customers might want in 2020+.
- With that end in mind move backwards from the vision to the present.
- Then ask: “What do we do today – step by step – to move towards the vision”.
- “Back” contrasts with “fore”- casting which takes our past and extends it into the future. Backcasting will move you towards the future you will need.
- Talk in the future perfect tense. “By 2020, AMZ will have achieved this next-level shopping experience. And, we will have accomplished…” (What: to stay vital?)
- For backcasting slides search the term at Google Images.
Continue reading 93. Amazon (AMZ) Backcasting Strategies
According to an Amazon Business (AMZ-BIZ) funded study, reported in the December 2017 issue of Spend Matters magazine, procurement pros increasingly want to reduce long-tail spending costs.
The big-spend items have been automated and integrated, but the pesky bottom 35% of items eat 1% of the spend dollars, take over 50% of purchasing’s time, and are a pain for everyone to easily buy. Corporate citizens want Amazon’s B2C shopping experience in their B2B world, but purchasing wants controls. So, AMZ-BIZ continues to invent cloud tools for purchasing control and analytics and continues to win sales. Continue reading 88. Amazon Promotes Long-Tail Spending Cost Reduction: You Can Beat Them