Guest Column | September 19, 2019

4 Things Brands Can Learn From Amazon's Focus On Retail Operations

By Meredith Han, SoundCommerce

Machine Learning IN Retail

Free same-day shipping. Sunday delivery. Delivery by Prime Air. Sidewalk Robot… or Drone.

In the last two decades, Amazon has redefined the meaning of what it means to be a world-class retailer. In the process, they’ve set new consumer expectations in not only retail, but countless other industries.

It’s awe-inspiring — and if you’re a brand trying to scale your own direct to consumer (D2C) retail operations, most likely somewhat overwhelming. While there’s little use trying to “Out-Amazon Amazon,” there are key lessons brands and retailers can learn from Amazon’s retail operations to better position for future success. It starts and centers on delivering a superior customer experience.

My latest online orders from beloved brands that include Patagonia, Allbirds and Lululemon were not delivered particularly quickly by Amazon standards, yet my click-to-delivery experience was delightful. With each, I found differentiated product, a compelling brand story, a great online ordering experience and products that arrived when I expected them. In turn, those brands can expect me to order again (and again and again).

Delivering an experience that positively impacts customers is critical for brand success. Longer term business success also depends on having a solid grounding in unit, order and customer level economics. Amazon’s playbook offers some key principles all brands can leverage to enhance their retail operations to deliver their own version of an exceptional customer experience.

A Brand’s Focus On Operations Is Equally Important To Its Focus On Marketing.

A very early pioneer of performance-based affiliate marketing, Amazon has since become one of the largest advertisers in the US. However, in its early business building days, Amazon placed surprisingly little overall focus on marketing. I know because years ago, I was hired in a customer acquisition role in one of Amazon’s central marketing groups. An early boss of mine quickly left Amazon after realizing how little value the organization placed on marketing!

Instead, Amazon placed intent focus on creating and delivering the very best customer experience in retail. One built on “selection, price and convenience.” In Amazon’s world, this included the look and feel of the company’s website combined with attention to a lot of “non-sexy” retail operational triggers that, behind the scenes meant Amazon could control and optimize every aspect of a customer’s Amazon experience. Focus was on all aspects of inventory, pricing, promotions, packaging, delivery, customer service, and ease of returns. Investments in the early Free Super Saver Shipping program were thought of as a marketing expense.

Over the years, I’ve observed different brands eagerly amplify their advertising spend, while viewing investments in better customer service and/or delivery as an expense to be minimized — if considered at all. Time-intensive debates of various creative homepage designs would take place, without much consideration of in-stock percentages for key featured items. Facebook follower growth would be meticulously tracked, before knowing the company’s contacts per order or how long it takes for customers to get an answer to a question.

In a recent interaction with a venture capital investor to consumer brands, the VC noted that since “85 percent of our investment is earmarked for digital marketing spend, we just can’t justify additional investment in technology, operations, or product.” That’s no way to build long term customer equity.

Brand, product and marketing is how you win a customer; service is how you keep or lose one. You’re pouring money down an endless drain if you can’t convert and excellently serve customers once they’ve been acquired. If your brand is not investing as much time and money on delivering a great customer experience as you are on marketing, you’re missing half, and maybe even more, of the success equation.

Being Accurate Trumps Being Fast.

Years before Amazon was known for lightning-fast delivery, they were accurate. Well before the era of Free Super Saver Shipping or Amazon Prime, the company invested thousands of man-hours in a large cross-functional project called POP, short for “Perfect Order Promise.” The project was just what it sounds like: offering up precise and accurate delivery promises to customers across all items and geographies.

As Forrester Research retail analyst guru Sucharita Kodali recently noted:  “A lot of ultrafast last-mile delivery solutions that consumers don’t even really ask for…ultimately are high-cost endeavors that don’t necessarily help a retailer’s bottom line...We still have so many issues with retailers not even having a handle on what’s in their stores, where it is, and ultimately delivering better customer service.”

Today, many brands lack visibility into their true click to delivery time frame and they do not understand how this visibility varies by geography or by products being ordered. Inaccurate delivery promises negatively impact a shopper’s experience even more than having to wait a few ‘extra’ days for an item to ship. Leveraging operational triggers for service accuracy equals service excellence.

That Said… There’s “Not Super-Fast” And There’s Slowwwww.

Next time you talk to a kid, ask them how long they expect it will take for their next package to arrive. If they’re anything like my kids, they may already be sitting on the doorstep waiting for the ‘Package Truck’ right after clicking ‘Buy Now’.

Overall, brands are getting more aggressive and dramatically improving fulfillment speed. Gartner L2 Research recently reported that a fifth of brands in their 2019 Index now offer free two-day shipping, and the number of brands offering next-day shipping has doubled.

Speed to doorstep is more critical the more broadly distributed your product is. If the exact same product is available at more than one website at different prices and shipping speeds, customers will quickly find their best option. Notably, the examples above of ‘slower-than-Amazon’ but still great service’ brands are all brands you can’t readily find on Amazon.

Know the service standards you’re directly (and indirectly) competing against. Faster is of course better - but at a minimum, you still need to be in the game with accuracy and of course, exceptional service.

Data Is The Enabler Of An Exceptional Customer Experience.

Amazon has spent the last 25 years building out its physical and digital infrastructure to make this all happen. Luckily for today’s brands, there is an ecosystem of SAAS providers that make getting up and running light years easier than in the early days of e-commerce.

Launching a brand online today typically means stitching together disparate providers across the e-commerce tech stack (like front-end e-commerce platforms, ERP solutions, Product Information Management Systems, Warehouse Management systems, customer service ticketing solutions, etc.), and figuring out the mechanics of who will ship and serve the customer.

These systems can be relatively easy to get up and running but gaining visibility across each system is harder. Answering simple questions like the following is surprisingly difficult when business-driving data resides in disconnected systems:

  • “Will I make money on this order, after all variable costs are baked in?”
  • “Will we meet the customer experience promise on this order?”
  • “How is customer lifetime value impacted by a late shipment?”
  • “How does my click to delivery time vary by fulfillment center?”

Amazon invested very early on in data capabilities that allows them to understand the long-term value of each customer, along with unit-level economics of every product, order or shipment. Don’t mistake Amazon’s willingness to invest extremely aggressively and forego short-term net profits with ignorance of what drives short- and long-term value. It’s their deep understanding of these levers that has informed their ability to invest so aggressively.

Today, you’d be hard pressed to find a successful brand who isn’t starting to make significant use of data across most, if not all, areas of their business. Those looking to quickly build capabilities here will face a “build vs. buy” choice when it comes to both the technology and brainpower required to make sense of all the noise. Increasingly, technology partners who are focused on the e-commerce operations space -- such as my current company, SoundCommerce -- can help brands shorten time and cost to collect, rationalize and start making better decisions based on all the data.

If you’re operating without a real-time pulse on the operational and financial health of the business, you’re flying blind and at a significant disadvantage. Brands who do this well will be best positioned to build and deliver a great experience for their customers and an equally successful business for themselves.

About The Author

Meredith Han leads products and services at SoundCommerce. Meredith is a veteran technology product and direct-to-consumer commerce executive with tenure at where she helped launch the health & personal care business; Kosmix, acquired by Walmart to become Walmart Labs; and Brooks Running, a Berkshire Hathaway company where she led direct-to-consumer efforts as Head of Ecommerce for nine years.

About SoundCommerce

SoundCommerce tracks real-time operational events, profitability and customer lifetime value to answer questions fundamental to cross-channel and direct-to-consumer success. Founded by Amazon veterans and backed by leading venture capital investors, SoundCommerce is headquartered in the Fremont neighborhood of Seattle.