Amazon’s gamble with planes for Prime Air

Amazon recently showed off one of its new 767s that will ship some of its products purchased through the site, with Prime Air printed on its side. Last spring, Amazon announced that it was going to lease 40 such planes in an effort to curb some of its shipping costs.

Prime Air
Amazon Prime Air planes are soon to be crowding the skies.

Recently, shipping costs have outpaced sales growth, cutting into Amazon’s bottom line. In fact, in 2015, Amazon spent a whopping $5 billion on shipping expenses. Leasing the planes is a pretty clear demonstration of Amazon’s desire to streamline its logistical and delivery network.

Amazon trucks have delivered its products for quite some time, particularly with its 2-hour delivery service, Amazon Now, and its grocery fulfillment, Amazon Fresh. However, manning an airplane fleet is a much bigger and costlier proposition and is sure to disrupt what we know of traditional air shipments. Amazon’s hope is that the Prime Air planes will substantially reduce that $5 billion shipping cost.

Prime Air planes may not be such a gamble.

What does this mean for UPS and FedEx? They both should be extremely worried. Both FedEx and UPS depend on Amazon, with the online retail giant accounting for a large share of its business. But you can’t stop progress and it naturally fits for Amazon to take on those duties on its own.

For it to work, Amazon must secure an internal delivery and logistical system that also makes great brand sense. (Much like when FedEx purchased Kinko’s years ago in part because the brands of FedEx and Kinko’s aligned with each other so well – each were about piece of mind.) Amazon’s brand features a sense of discovery and convenience because it has everything you need that you can get easily. A key component of that is actually getting the physical items to the person who ordered them. That’s where the Prime Air planes fit in.

If Amazon can do it with the same or better efficiency as FedEx and UPS, why would Amazon do anything else?

Think about it. Amazon only has to do it as well as FedEx and UPS for this to succeed. That could be the catch because, if Prime Air can’t match that service level, the Amazon brand could be damaged significantly.

However, my money is on Amazon.

Macy’s should have seen this coming

We have written a number of times about Macy’s failing brand. Most recently we wrote about it in July and also in May.

Whenever we have written about Macy’s, the theme has always been the same. It needs to change. Macy’s problems are not unique. The retailers is just one of the most glaring examples of how badly retail in general fails to predict and adapt to the changing needs and expectations of their customers.

The problems at Macy’s have been there for years.

Now, Macy’s is closing 100 of its namesake stores sometime in early 2017. This roughly accounts for 15% of its total remaining stores. If you recall, there once was a retailer called Circuit City that employed the same strategy, figuring it was better to just close stores rather than change. We all know how that turned out.

While Macy’s has brand equity and heritage that Circuit City lacked, this is still a major problem for Macy’s, the malls its stores anchor and the retail industry in general.

Macy’s and other retailers have failed to act.

Macy’s claims that closing stores will allow it to improve overall business and help it to better perform in an omni-channel environment – specifically online. Macy’s isn’t the first one to make this claim, but online isn’t the problem. Whatever its brand means is the problem.

The blame retailers place on companies like Amazon is simply an excuse for poor management and a failure to act. Amazon has been in existence for 22 years and retailers couldn’t see what was on the horizon?

Amazon has given consumers a reason to care about Amazon. As difficult as it for retailers to grasp, it’s not all about price. Amazon has consistently tweaked its services to better meet the needs of the changing customer. Retailers, on the other hand, have historically failed in even giving consumers a reason to care about their brands, instead believing their troubles are all about bargain shopping online.

As I think about retailers like Macy’s, JC Penney’s and Sears (just to name a few), I struggle to understand who they believe their target audiences are. Not knowing who the brand is for is quite troubling.

But at least I know who it’s not for.

I don’t believe all is lost for brick and mortar retailers. They still have an opportunity to make their brands important to the consumer again. But I do believe they need to stop blaming their legacy of inaction and poor vision on something that has been brewing for nearly a quarter of a century. Online isn’t going away and we all knew that the moment when we first saw it.

Everyone but the retailers themselves, apparently.

Amazon Prime Day fits the brand

For years, people have teased Hallmark for creating holidays like Valentine’s Day, Mother’s Day and Grandparent’s Day just to sell more greeting cards. While not entirely true, these holidays certainly do boost Hallmark’s bottom line.

Amazon has also created its own made-up holiday. July 12th marks the second annual Amazon Prime Day, a holiday designed to prompt you to sign up to be a member, then buy stuff from Amazon.

Amazon Prime Day
Only Amazon could get away with something like Amazon Prime Day.

According to Amazon, last year’s Prime Day produced more sales than Black Friday (another made-up holiday). This year’s prime members-only holiday will have even more deals with prices either at their lowest ever or the lowest in the past 12 months. So now my $99 year gets me free two-day shipping, Amazon streaming services and an opportunity to buy low?

While I poke fun at myself and the millions of other Amazon Prime subscribers, the reality is that Amazon Prime Day represents Amazon’s brightest move.

What Amazon Prime Day means for its brand.

If you really think about this, Amazon Prime Day is on brand. The Amazon Dash button, same-day delivery and even Amazon Web Services for businesses represent what the Amazon brand is all about – lots of stuff, low prices, as easy as possible and a bit of discovery. It’s the sense of discovery that is missing from other retailers.

Amazon’s promise is so powerful that people will pay to have the privilege to use it. Think bout this: Consumers are still willing to pay Amazon for the future promise that Amazon will live up to its brand. Oh, and Amazon made up a holiday with a single purpose to get people to shop at its site. That is brand power.

Sure, Amazon gets some flack over Amazon Prime Day. It runs out of the really good deals too soon, for example. But those concerns pale in comparison to the numbers of consumers who will shop on July 12th because they have bought into Amazon’s brand.

The Amazon perishable effort will succeed

It’s not just retailers that are threatened by Amazon. Now, supermarkets will be too.

The Wall Street Journal recently reported that the online retail giant is slated to offer a new line of private-label brands, including perishable foods.

Amazon perishable
The Amazon perishable goods initiative will work.

As the report elaborated, these goods will first be available to Prime members as another nice perk to add to the $99 a year membership. (Thank goodness I have one.)

What’s more, the Amazon perishable initiative will join forces with brands like Happy Belly, Wickedly Prime, and Mama Bear. Doing so will allow the company to offer cooking oil, vitamins, coffee, tea, spices and nuts.

The Amazon perishable effort will succeed because of its brand.

While I have only once bought perishable food from Amazon — I had an unyielding craving for coconut covered cashews — I bought a top of the line brand and I ended spending a bit more than I wanted.

Now, overspending on select brands doesn’t have to be the case. I can choose an Amazon select brand for a fraction of the cost and feel satisfied with my purchase. Because of the trust I have in Amazon, I have the confidence that the product will be of quality. A hunch that I am not alone in that thinking.

Granted, the offerings are slim for the moment, but so was the Amazon Music catalog when it first began, and now it’s one of my favorites to frequent.

It’s a known fact. If your desire is to influence preference and increase market share, then it is a given that you must have a better understanding of your target audiences. And the Amazon perishable move is a perfect example of that awareness.

How many times have you thought how nice it would be to order your food from Amazon, have it shipped and be done with it? I have a lot. This is Amazon dipping its toe in the water of that reality. Before we know it, this Amazon Produce (UK based) and Amazon Fresh (select US cities) will be available for all of us as one entity. When that occurs, supermarkets had better watch out.

What retailers can do about Black Friday

It’s their own fault. As forecasts predict declining sales on Black Friday this week, the retailers only have themselves to blame. What was once considered a special event – a social one, even – has been diluted by sales before and after the day, while online sales continue to rise.

Based on a survey by retail consultancy WSL Strategic Retail, only 29% of women (the primary audience for Black Friday) intend to shop that day.

Now that doesn’t mean retailers are going in the tank that day. Black Friday will still exist, but it may never be the special day that it once was. The impact of online shopping is one reason, with 33% of women saying they will shop online (including 71% of Millennial women), which is simply the way of the world now.

Black Friday
Improve the experience and Black Friday may yet return.

The problem for major retailers is that a vast majority of those online shoppers will head over to Amazon, the single biggest threat to the brick and mortar stores that have long been the bedrock of holiday shopping.

But it was the retailers’ own greed that has done them in. In the rush to claim as much space in the holiday shopping market, retailers began Black Friday earlier and earlier. (That’s why our own senior brand strategist, Corbin Rusch, applauded REI for its no Black Friday promotion.)

In fact, one of the reasons why women in the WSL survey said they wouldn’t shop on Black Friday is because sales aren’t as good as they used to be (73%) and, more importantly, because sales are just as good before and after Thanksgiving (78%).

As a whole, retailers may make out OK this holiday season, although I suspect Amazon is going to eat up a large chunk of that market share.

How to fix Black Friday.

So what’s a retailer to do? For one, retailers need to stop trying to “out open” each other by pushing back the clock further and further until the sales start on Halloween.

For another, they need to face the biggest problem in retail: The lack of brand identity for the individual chains and brick and mortar shopping itself.

Black Friday has long focused solely on sales, getting the best price for a gift. That trigger has lost its impact now that sales start when the kids are trick and treating and last until Christmas Eve.

Instead, to re-build the category of Black Friday, retailers need to highlight the fun of the event itself. The social interaction (even though sometimes they lead to fights) should be improved as a whole so that shoppers feel like they are having fun.

Right now, Black Friday feels worthless because you fight crowds for prices shoppers can get elsewhere and at another time. But the day used to be something a little bit exciting. Market the day, not the low prices.