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19 Jan, 2001 By: Bruce Apar

Jeff Bezos may not yet be making money for his brainchild of a website, Amazon.com, but he sure knows how to make money for his vendors, which is what floats their boat about the e-commerce site named after earth’s biggest stream.

A leading niche label executive told me last week his company’s unit sales on Amazon have increased 250% in the past year, emphasizing that the gain is based on a substantial volume of product to begin with.

Whether watching him interviewed on TV by Charlie Rose or chatting with him for a moment at the recent Video Software Dealers Association convention, Bezos is eminently affable and accessible. To my frail attempt to pose a tough question about Amazon’s celebrated losses by wrapping it in inoffensive chit-chat -– “Has the pressure gotten any better?” –- he smoothly but earnestly employed his familiar reply: “The most pressure I’ve felt was five years ago when I started the company, and it’s only gotten less since then.”

Having a behind-the-scenes role in the VSDA convention that allowed me to get excited about the prospect of Bezos’s keynote many months ago when we learned he was willing to appear, I was discouraged by the grumbling, quiet as it was, from the usual suspects who couldn’t countenance an etailing mogul addressing members of a retail association whose legacy is built squarely on bricks-and-mortar. “What could I possibly learn from him?” was the boorish refrain. One could reply snidely in kind by saying, “If you have to ask, nothing.”

Still, I had my own reservations after Bezos’s keynote at The Venetian Hotel in Las Vegas on January 7 to open the convention.

Minutes before he appeared on stage, I did some sucking up by thanking him for appearing and noting a simple and obvious fact to anyone who’s observed the home video business for 20 years: “This industry historically has come up short on customer service.”

There’s no question that there are many individual stores that maintain good relations with their regular patrons, but as a whole, the fact home video has to constantly live down its subservient status as the beneficiary of box-office performance does not reflect a particular prowess for product merchandising.

Customer service, of course, is the indisputable capital on which Amazon.com has built its extraordinary base of loyal customers. Its ability to create compelling content and navigational tools in the service of merchandising videos, among other products, is the de facto gold standard in e-commerce. And one of the attractions to vendors about Amazon is that it knows how to move product that storefronts won’t even deign to stock.

In his prepared remarks, it appeared that Bezos was relating to the audience more as consumers than as fellow retailers, presenting but not elaborating on the trade techniques his company has pioneered.

A couple of my favorite moments from his speech were his starting off by showing the original, ramshackle 400 square-foot garage where he started, and his pithy observation that, “Email turns off the politeness gene.” Ain’t that the truth -- the most timid types who wouldn’t look you in the eye become radically rude online.

Later, I caught up with Jason Kilar, the collegial fellow who runs Amazon’s VHS and DVD business, and who worked with Bezos on the speech. He pinpointed the three keys to Amazon’s success in video merchandising as being 1) Theatrical marketing (eg, Amazon already has booked more orders on Steven Soderbergh’s cult-ish Traffic than it has to date on Cameron Crowe’s Almost Famous); 2) Customer service (in its many forms); and 3) niche content (drawing consumers’ attention to product they want but don’t know exists, like many classic TV episodes).

Kilar said bricks-and-mortar retailers can also use online merchandising techniques to upgrade their own business. With the possible exception of those storefront proprietors who know there’s nothing they can learn from an online upstart.

One lesson learned from the Amazon experience is that being a competent merchant isn’t the same as being a savvy merchandiser. One can run a store for years under the right circumstances without ever understanding the art of merchandising, let alone excelling at it.

By being a master merchandiser in a business where that’s a rare commodity, Amazon vastly improves its chances of becoming a profitable merchant.

Comments? Contact Bruce directly at:bapar@advanstar.com

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