competing with Amazon, how to, the smart approach


1

For a number of months I have been thinking how to create an e-commerce solution that competes with Amazon. I came up with an idea that is probably lame, but i'd like to understand why it will not work.

Amazon is great for products that do not perish (11% off when compared to retail), but it is not good for perishable items like milk, eggs, etc. And simple things like nails, light bulbs, band-aids where the convenience of location and not the price is the determining factor for a purchase.

I am thinking an ecommerce solution for all the real-state shops around a city should do the trick. However this would be a community of integrated ecommerce sites that allow the consumer to:

  • have their order pre-packaged and ready for pick up at any store. think pre-packaged groceries, so you just go to the market, grab your bags and leave.
  • have some guy deliver the items to you (ala food delivery mechanism)
  • or have their product shipped to you (ala how ecommerce works today, however you should be able to drop shipping costs since it will originate from a local address)

At the end of the day I believe there is a void in the market, and that is mom & pop shops have ZERO online presence right now. There are disparate ecommerce sites here and there, but they are stand alone systems. And consumers are confused with so many different ecommerce sites for small shops (think the confusion of MySpace profiles and their designs vs. the Facebook profiles and their lack of design but encoragement to engage more)

I think something like this woudld be great for

  • bakeries that already deliver their fancy weading or birth-day cakes
  • flower shops who do not wish to pay the 20% overhead of flowers.com, etc
  • or for consumers that want to find all the shops in their block that has a particular type of light bulb.

A solution like this would also resolve the following issues:

  • switch the directionality of the search, so if I want a specific light bulb, this system should tell me which stores have it near me...
  • allow collective reviews on a single product to take place. If 10 people review the same light bulb from different mom & pop ecommerce shops, all the reviews will be sharable, so this will allow for crowd-reviews to take place down to the level any product ... be it nails, orange juice, etc.
  • among other benefits...

But alas, by now this has become a super long question. If I am missing any negatives or positives please bring them to light. However, I have the eerie feeling that I am not see an 800 pound gorilla here.

Getting Started Ecommerce Large Companies Retail

asked Aug 5 '11 at 23:31
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Somid3
195 points

5 Answers


3

It's a bold idea. In the UK, a related story is playing out.

The UK is pretty developed for online grocery ordering. The major supermarket chains (such as Tesco ) have online ordering, and most will allow you to order food and other items for delivery or for collection at the store. They also operate many formats under related brands, from large out-of-town operations to local convenience stores.

These are companies that have successfully translated their on-street presences into online businesses. And we have an ongoing case study of something related to your suggestion.

Ocado was founded as a kind of Amazon of food. It operates warehouses and a dispatch network, and for some years it was also essentially the only the way Waitrose customers could order groceries online.

Now Waitrose is also offering online ordering in competition, and Ocado has introduced new lines from other suppliers. But the business was thought by many far less valuable than its own IPO expectations, and some think that in essence Ocado is a case study in the difficulty of applying the core online+warehouse Amazon business model to groceries.

These same grocery stores are very definitely in competition with Amazon in all kinds of non-food categories. What they lack in breadth and depth of product lines they make up for in brand awareness and consumer marketing savvy. It's an interesting fight.

A linking factor of all these operations is that they have excellent systems in place tracking stock through the system, managing local pricing and so on. A system covering multiple retailers needs to cope with a variety of back office systems, and many or most small independent stores and chains may not have systems that will easily cope. So the customer service and operational back ends may have all kinds of complexity.

However, if you were to trim back from the idea that you cover all stock lines in all stores to covering, for instance, common brands and essential goods that can easily be substituted, you may have a minimum viable product worth validating in the market. There's a strong incentive for small stores to participate, and in the delivery use case you could market test without the retailer's consent.

Good luck. Someone's going to do this some day, and it doesn't have to be Amazon!

answered Aug 6 '11 at 00:43
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Jeremy Parsons
5,197 points
  • Funny, all this time I thought Ocado was just Waitrose's online brand... – Edralph 8 years ago
  • You and a lot of people. I guess that was the point at the beginning. Waitrose got to trade online without building their own infrastructure and the (banking background) Ocado guys got access to one of the leading premium brands. Now it looks kind of messy, and I for one find it slightly odd that they've started to fill out the range with Carrefour products instead of going for specialist premium lines. – Jeremy Parsons 8 years ago

1

First of all, this wouldn't be competing with Amazon, it would be getting into a niche that Amazon doesn't currently service.

Now, last year two of my friends had a very similar idea & I'll tell you what I told them - I don't think it will work.
I'm coming from an Indian perspective, but I think it would largely apply to other places too.

  • In most, probably all neighbourhoods, grocery shops home deliver goods & take orders over the phone. They already have a platform that lets people shop from their homes.
  • To get into your service I assume they would have to pay a percentage of the profits & they would loath to do so for a service I don't think they require. I talked to a shop owner friend of mine who said even if they agree they won't share more than 10% of the profit as the margin on most of these products is very small. So to make a sizable profit you'd require quite a large volume for products sold.
  • Another challenge would be to maintain the database of all the different products in all the different shops. Though its possible, it would require an internet connection in the shops.

All things said, I believe that such an enterprise, selling groceries & hardware items over the internet, is only feasible if you have stock the products yourself & have a delivery system in place. I could be wrong though.

answered Aug 6 '11 at 00:30
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Elssar
367 points

1

I guess you all would love to hear this awesome Audio,

Revealing Design Treasures from The Amazon by Jared Spool:-

http://chi.conversationsnetwork.org/shows/detail4681.html http://chi.conversationsnetwork.org/audio/download/chi.baychi-JaredSpool-2010.09.14.mp3

answered Aug 6 '11 at 02:54
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Muzaffar Ali Rana
56 points
  • wow, this audio file was great! thanks. – Somid3 8 years ago

1

As elssar points out, you're not competing with Amazon.

Keep in mind that Amazon chose books initially because they had reasonably high margins and had a known quality.

As a consumer I may buy branded packaged goods sight unseen - but I am reluctant to buy anything online where the quality (or fitness for purpose) is uncertain. If I can inspect the items before acceptance it may be less of a problem, but not much. The price has also got to factor in the relative inconveniences of shopping trips and delivery delays.

Also remember that the data entry costs to keep track of products, stock levels and availability may be excessive for smaller operations. A small store many not track inventory on a computer and may not track it using a system with interfaces you can use. If you send someone on a wasted trip you have probably permanently lost a customer. If you don't have price and availability information, you are just a local search engine.

There's possibly something in the idea, but you should probably try and find a specific niche with good margins and known product quality and start from there rather than trying to be everything to everyone.

Also look through the histories of all the dot.com failures (and successes) that tried to do something similar and see what you can learn: Webvan comes to mind.

answered Aug 6 '11 at 04:10
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Mike
946 points

0

Amazon delivers groceries / perishables to my house regularly and I've been pretty impressed with the service..

Amazon Fresh They are currently based in Seattle, but are apparently expanding:

Amazon Fresh Plans to Expand That's not to say you couldn't compete with them, but.. Looking at urban development and the cost of transportation, it's significantly more effective to have one truck stop at multiple homes, then to have individuals commute to pickup goods. With that in mind, Amazon is pretty much pro at transportation infrastructure..

answered Aug 9 '11 at 14:47
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Justin Hammack
151 points

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