Category Archives: AmazonBusiness

93. Amazon (AMZ) Backcasting Strategies

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.

WHAT’S BACKCASTING?

It’s visionary planning:

  1. Start with an ideal vision of what customers might want in 2020+.
  2. With that end in mind move backwards from the vision to the present.
  3. Then ask: “What do we do today – step by step – to move towards the vision”.
  4. “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.
  5. 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?)
  6. For backcasting slides search the term at Google Images.

Continue reading 93. Amazon (AMZ) Backcasting Strategies

88. Amazon Promotes Long-Tail Spending Cost Reduction: You Can Beat Them

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

84. Kickstart Your Innovation: Knock Off Amazon’s Pitch Process

Distributors sell products and react to supplier and customer needs. Innovation is not their long suit. But digital channel disruption is here, and if a company doesn’t change as fast or faster than its environment, its future is grim.

To boost your company’s innovation game, why not borrow and simplify a key technique from Amazon.

2004: Jeff Bezos kills PowerPoint presentations       

Over a decade ago, Bezos concluded that PowerPoint presentations should be banned. He felt that presenters were speaking extemporaneously from their bullet points, their communication lacked clarity, breadth and depth, and attendees were confused. The big-boss, data-free opinions always won, unswayed by a PowerPoint, and time was wasted.

The new meeting format began with everyone reading a document (6 pages max.) thoroughly prepared by whomever wanted to champion something new. These narratives were not assigned in advanced to be read unevenly and forgetfully. At the meeting, each participant was expected to take the time (5 to 30 minutes) to thoroughly read and digest the information at their own speed and in their own way.

Next, the presenter(s) answered attendees’ questions, as if they were defending a dissertation. The subsequent page-by-page review evoked questions and discussions that were informed and focused and contention was substantive, not political bickering.  After the reading, all attendees had a fresh, shared, in-depth understanding of the topic.

The presenter took notes, and sometimes asked for a re-do, usually to get more data. If the presenter pressed for a decision, the only responses allowed were: “Yes”, “No”, or “I disagree and commit”.

So, why is this better?

The innovation presenter, or team, is forced to do deep research and present clear thinking. The document should stand on its own and include:

  • An imaginary future PR statement describing a successful outcome for all stakeholders
  • Sufficient research facts
  • A proposed roadmap with assumptions, experiments, milestones and required resources
  • All anticipated questions from all potential stakeholders with well thought-through answers

This process levels the playing field between introverted champions of innovation and glib, popular politicians. The process simply delivers better collaborative plans and decisions with less total time invested.

Conclusions

Writing these narratives is tough. Most distributors don’t have MBAs adept at writing or reading such documents. So, simplify the process to fit your firm. You can perform an experiment. Go to  http://merrifieldact2.com/exhibits/. Skim the “scripts” (Exhibits 60 – 63) and pick one to read with your team. Then, discuss, improve and possibly pursue with funding from a champion.

81. Find (and Fill) Your Cross-Subsidy Fault Lines

Want to expose the ways you in which you can beat Amazon (AMZ)? Start with a line item cost-to-serve model for your distribution company or for several of your most innovative distributors. Then, create profit and loss rankings for every SKU and vendor, as well as for customers, territories and niches. Get ready for some shocking revelations. The biggest: big profit/loss cross-subsidies fault lines likely exist between your most profitable and unprofitable customers and SKUs.

The most profitable warehouse items:

  • Are popular (highly picked) commodities
  • Have high-dollar sales per pick averages
  • Have margin percentages that seem low but gross profit dollars (GP$s) per pick that exceed the cost to serve dollars (CTS$s), yielding the highest profit dollars (P$s)

Another way to think of this is using the Profit Equation: GP$s (-) CTS$s = P$s.     Continue reading 81. Find (and Fill) Your Cross-Subsidy Fault Lines

78. A Dual Strategy Against Amazon’s Digital Channel Disruption

Amazon’s digital channel has eclipsed much of the information value and cost efficiencies once enjoyed by traditional distributors. When a disruptor eats into your space, you need a dual response strategy:

  1. Downsize to your core profit customers (niches) and renew the relationships
  2. Use your incumbent capabilities to create a new business model to join the disruption growth party

Don’t Be Kodak   

Back in the day, Kodak had a massive camera film franchise. They also invented the first digital camera. But, they let the technology languish. As others began to chomp into their film sales, Kodak put film veterans in charge of a catch-up digital-camera strategy. The strategy was to get digital photographers to print out their best photos in order to stimulate film sales. Mighty Kodak collapsed. Continue reading 78. A Dual Strategy Against Amazon’s Digital Channel Disruption

77. How Amazon Will Skim Your Cream SKUs

At the upcoming Advanced Profit Innovation Conference, I will delve into what Amazon (AMZ) is doing and why you should be paying attention. I’ll present a case, based on real data, showing detailed facts about six of the most profitable, and the most unprofitable, items from a contractor-supply distributor’s total of 5000 active warehouse items.

The Profitable SKU Facts

The case distributor uses line item profit analytics to calculate a profit or loss on every SKU. For 2016, the average stats for the six most profitable SKUs were:

  • On average, 150 customers bought these items 750 times per year or five picks per customer
  • The average sales per pick for all six was over $1100
  • The average margin rate (22%) generated an average margin dollar per pick of $250
  • The average cost-to-serve dollars per pick ranged between $82-88
  • The profit equation:  $250 – 85 = $165 (less another $62 for rep pay)

Continue reading 77. How Amazon Will Skim Your Cream SKUs