I order online like 3 or 4 times a year, I'm not going to pay $50 to shave a few percentage points off my total bill.
For someone with the online buying habits of a typical consumer from 1999, you sure seem to have a strong opinion about the state of online commerce in 2015.
- They'll combine different orders automatically into one package
- They routinely use multiple different shippers to send packages (I've seen UPS, USPS, Fedex, Ontrac and Amazon themselves) presumably to find the best rate
- They are investing in advanced future technologies (drones, high-tech warehouses near cities, etc)
- They give you free digital money if you opt into super-slow shipping
And if you look into the future, I don't think people are going to be willing to exchange lower prices for slower shipping. I think people will want faster and faster shipping and somebody is going to have to figure out how to do that cheaply.
As for bulk orders, Amazon already gives discounts for bulk orders (and subscription orders), and are far better positioned to do that more aggressively than any newcomer.
Because I think that's where the real money is and who these guys are really targeting.
Costco launched in 1980, 30+ years after Wal Mart, and won by offering less selection and lower prices. I believe there's a real opportunity here.
Do you have kids? Are you a middle-class homeowner?
Because I think that's where the real money is and who these guys are really targeting.
Costco did not launch thirty-plus years after WalMart.
"THE HISTORY OF COSTCO
"The company's first location, opened in 1976 under the Price Club name, was in a converted airplane hangar on Morena Boulevard in San Diego. Originally serving only small businesses, the company found it could achieve far greater buying clout by also serving a selected audience of non-business members. With that change, the growth of the warehouse club industry was off and running. In 1983, the first Costco warehouse location was opened in Seattle. Costco became the first company ever to grow from zero to $3 billion in sales in less than six years. When Costco and Price Club merged in 1993, the combined company, operating under the name PriceCostco, had 206 locations generating $16 billion in annual sales."
http://www.costco.com/about.html
"1962
"On July 2, 1962, Sam Walton opened the first Walmart store in Rogers, Ark."
http://corporate.walmart.com/our-story/history/history-timel...
I have four children (three still living at home in my care, one grown up) and am solidly part of the United States middle-income category. We don't own a house however, but rent a townhouse. I have lived longer at this address than at any other I have lived at in my whole lifetime. I am a member of Amazon Prime, of Costco, and of Sam's Club. I buy different things at different stores. (I buy a lot more at Sam's Club than at Costco mostly because our local Sam's Club is much more on my way to and from other destinations than the local Costco is.) I don't see anything about the new Jet business venture that appeals to me, but I'll listen to my Facebook friends, other middle-aged parents like me, and see what they think about it. I often talk about deals I've found on Amazon to my friends on Facebook. I hardly ever talk up Costco or Sam's Club.
A website, such as jet.com is out of "sight out of mind". Unless it becomes a habit (like Amazon has for many people including me).
Costco has several advantages over a jet.com. And the Devil is in the details in terms of what made Costco a success.
1) It's not out of site in any way. You can't miss Costco if there is one in your neighborhood. You can easily miss jet.com or not think about it unless it becomes a habit.
2) Costco succeeds also by doing what Walmart does in part. Once you are in the store they get you to buy things that you didn't think that you needed. And more of it then you thought you needed. This was the concept behind Makro Self Service Wholesale in the 80's (the place that Tom Stemberg of Staples interviewed at and got the idea for Staples for. [1] (Ntim, I was at that store when it opened..)
3) Employee culture. Can be done (Zappos) online but I would say more of a benefit in a physical store (my weakest point I will agree). [2]
[1] http://www.forbes.com/sites/danschawbel/2012/07/05/tom-stemb...
[2] http://www.businessweek.com/articles/2013-06-06/costco-ceo-c...
Yup, I typically got to Costco with one maybe two things in mind, and rarely leave with less than $250 in my cart, and I'm usually one of the lightest carts I see checking out. And it's not things you need, it's things you want. I love Costco.
Re #2: The entire Jet model is the more you buy the more you save. Taking the baseball example, it's pretty easy to infer when they see you are buying cleats and a glove that they will up-sell you with a bat as well and call out the bundle discount you will receive.
Re #3: The article explicitly discusses that the founder is trying to create an "anti-Amazon" culture that values people and relationships. You can agree or disagree with this approach, but you can;t deny they are actively trying to promote a great culture to work in (no performance reviews, for example).
This is not to say that Jet.com is going to nail it, but you can't dismiss Jet.com's efforts here out of hand either.
I order online from Amazon 5-6 times a month. I've had more shipping delays and misses over the last three months than I've had in the last 3 years. IMO, Prime is dying -- they wouldn't be talking about entering capital intensive businesses like shipping if it were sustainable.
Where Amazon screwed up is the home delivery network. It's terrible. I'm sure they pay their drivers by number of attempted deliveries per hour rather than number of successful deliveries. We live in a block of flats, and we just never manage to get a delivery within several days. Eventually the home delivery people figure out we have a 24/7 365 concierge, but that still adds another day to the actual delivery whilst we wait to be notified by the concierge.
This isn't even a once or twice thing. My partner is an academic and researcher and is ordering 2-3 books per week and 1-2 DVDs per week. Nothing got delivered within a few days of ordering, over a many month period. We have lost faith in Amazon so totally, that we no longer go to them for books, let alone anything else.
If Amazon offered Royal Mail, standard post... we'd both return.
As it stands, using Amazon is absolutely useless for us, nothing arrives when we need things and it's better to use almost any other supplier. Any supplier that uses Royal Mail gets a successful delivery within 1-2 working days.
How bad is Amazon home delivery in West London? Put it like this, Christmas 2013 we bought all our gifts from Amazon, Christmas 2014 we didn't purchase a single item from Amazon.
I don't believe we're a freak exception, so there's got to be a large market of people like us who will use anything other than Amazon if the shipper will just use the postal system.
Recall what the mobile OS space was when Google launched Android in late 2007? Yep, even Ballmer made fun of the new OS. Today does anybody care about a mobile OS from Microsoft? Sure, we're not talking about the same type of business, but the key is competition, choice.
I remember when Cisco networking devices were virtually the only game in town. Then along came Juniper Networks. Today, Juniper is doing mighty good.
The key to success in a business that's dominated by the proverbial 800-pound gorilla is to find a niche and step in.
Well Ballmer also made fun of the iPhone when it first came out. Best not attach too much weight to his opinions.
It seems especially useful for regular shipments or products that tend to have large retail margins.