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Amazon’s $13.7B Endorsement of Brick and Mortar

For years Amazon’s guerrilla forces have been leading a small cadre of pureplay electronic retailers in a battle to overthrow (or steal profit from) the Commerce Establishment. They’ve been motivated by battle cries like “Give me electronic liberty or give me death”. Or “in your margin is my opportunity!” This scrappy group has, in the true form of guerrilla fighters, used high profile actions to dominate the attention of their well established brick and mortar opponents. As a result, the establishment has wasted time, energy, and opportunity being “anti-Amazon” rather than being “pro consumer” or “pro growth”. Press coverage has made it clear the field of battle is littered with casualties. And, in true war correspondent style, the number and type of casualties are often overstated for the sake of a good story. There is real damage on both sides. There are many very large casualties on the e-commerce side (a fact often ignored). And this year we’ve seen very serious casualties among traditional retailers – but not all from this fight.  A lot of brick and mortar damage is self-inflicted or the result of warehouse and discount stores. Then, we reach June 16, 2017 – a day that will go down in the annals of, well, something. That’s the day that…Amazon strode across the field of battle to join the other side. Wait… What? Yup. Amazon just joined the establishment…well, sort of. With all the retail casualties strewn across the field of battle, the establishment isn’t what it used to be. And with the […]

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Reading the Fossil Record: Why Data and Machine Learning Tell Us Less Than We Think

A few years back I read a post on Retail Wire that pondered whether retailers will need traditional research once mobile tracking is “in place”. The question reveals a very common flaw in how people think about research. And That flaw continues today amid all the AI and machine learning hype. Developing conclusions from mobile data is the equivalent of scientists reading the fossil record. When I was a kid, scientists had been observing the fossil record for hundreds of years. So, they really thought they knew what the truth was. Dinosaurs were reptiles, they had reptilian skin, they were cold blooded, lived isolated lives, and modern day lizards are their direct descendants. Fast forward to 2017. My kids learned that some (many) dinosaurs had feathers, that some (many) were herd animals, they were pretty fast moving, that some lived in family based units, some hunted together, and that birds essentially evolved from dinosaurs. The original scientists weren’t bad at their jobs. In fact, they were brilliant. The problem was all they had was observed data. They created solid, grand theories from the observed facts they knew. With Observed Data You Never Know What You Don’t Know. Paleontologists erred in their theories because there were thousands and millions of fossil truths they couldn’t see – they hadn’t yet been discovered or analyzed. Mobile data puts us in a similar spot. So does purchase history, shopper behavior, browsing behavior online, phone call data, and almost every other type of data the modern AI theories are based […]

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Competing with Amazon: Innovative Products are Key to Brick & Mortar Future

Lately I’ve seen writing that suggests retailers can’t win long term competitive advantage with products. To be fair, retail IS incredibly complicated and success depends on smart strategies throughout the eco-system. Steve Dennis, for example, recently discussed the importance of “the story” that leads consumers to your store. And although I believe Steve is too dismissive of products in this instance, I agree with the importance of story. But… Wait…What? No competitive advantage in products? Retail ONLY exists to sell product! It’s true that retailers gain no strategic advantage when buyers merely load up stores with products (any products) or search for “best products” without a plan for how they contribute to strategic success.  The buyer’s job must be more than filling in a spreadsheet of products. Still, since selling product is the only reason stores exist, a product based strategy must be a key focus in order to survive and thrive. But how? One Strategic Option:  Leveraging Innovative Products One way to build strategic power with products is with a program around innovation. In this strategy, retailers seek out innovative products, put them prominently on the shelves…and advertise them at significant levels of spending – usually with TV. In 25 years of working with programs like this, a reliable and consistent innovation program will: Bring very large numbers of new shoppers into stores. Bring very large numbers of existing shoppers back more often. Make shopping more interesting and entertaining. All that adds up to higher foot traffic, more spending per visit, higher product margins, improved brand preference, and better shopper retention. In fact, using Steve Dennis’ term, done right these products become a core part of your story. […]

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Quote from a Forbes Article

Recently, a comment of mine appeared in the Forbes Article “Should Amazon Make Their Boxes Available to Advertisers?”.  My Answer: If Amazon keeps these deals rare, then they can keep a freshness and still be worth it. But if Amazon does this regularly we will ignore the Amazon boxes as easily as we ignore the other advertising wallpaper in our lives.

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Quote from a Forbes Article

Recently, a comment of mine appeared in the Forbes Article “Should Amazon Make Their Boxes Available to Advertisers?”.  My Answer: If Amazon keeps these deals rare, then they can keep a freshness and still be worth it. But if Amazon does this regularly we will ignore the Amazon boxes as easily as we ignore the other advertising wallpaper in our lives.

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Innovative Products Need Specialized Marketing: The Kobalt Double Drive

Product innovation is the lifeblood of consumer goods companies. And I’ve spent my career using communication to maximize business and brand impact from innovative products. The more my agency drives powerful impact from innovative products, the more frustrated I get watching companies with astounding innovation waste their opportunity with “business as usual” marketing. Innovation can’t be handed over to the same resources used for everyday marketing of products already on the shelves. The skills needed to nurture a well-known, successful product and brand are very different from the skills needed to move a branded innovation from zero to hero. So let’s look at a brand innovation success: Lowe’s Kobalt Double Drive Screwdriver. Innovative Screwdriver? Really? We have to get past the idea that innovation must “change the world”. Those kinds of innovations are exciting to theorize about. But there’s also incredible short-term and long-term payout from innovations that are incremental – making an existing product better. So, yes. Screwdrivers. In 2011, our clients at Lowe’s were pretty excited when they approached us with the Double Drive Screwdriver. We were a bit skeptical…until we had one in our hands. The core of the innovation is revolutionary gearing that leaps beyond ratcheting — as you rotate the handle back and forth, you keep on driving the screw. It’s not just powerful to use but also fun. And it offers big consumer value – tremendous advantages whether assembling RTA furniture or working on the electrical box. Business as Usual Marketing Would have Led to Weak ROI. Sitting on the shelf shoppers would never […]

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Business As Usual Advertising Won’t Drive Product Innovation Success

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2016’s Lessons: TV is as Strong as Ever

With the new year we thought it useful to look back at advertising lessons learned during 2016. A Rosy Forecast for TV. You’ve probably seen plenty of summary articles. So let’s start with something unique – what we can learn from the effectiveness of Atomic’s campaigns at driving sales impact. After all, we do a bit of a rare thing for advertising – we evaluate our work for it’s ability to drive sales at the store. Crunching the numbers, we found something that many might find surprising: Looking at store sales, our 2016 campaigns delivered as much impact per dollar spent on TV advertising as they ever have. Let me repeat that: TV was as effective as ever in 2016. This might come as a surprise to those confronted by all the hype about new digital baubles. But 2016 was also a year for re-setting things based on marketing truth. Some key examples: Few “innovations” around advertising turn out to live up to the hype. For example, remember the headlines about streaming the Olympics? Well, it confused “stream” with “average viewers per minute”. Once adjusted to compare with traditional TV, it turns out the streaming numbers were not very significant. Here is an article by Mark Ritson working through the numbers. Bob Hoffman (the AdContrarian) has played a pivotal role digging into the fraud that plagues digital advertising. It’s at incredible levels for ALL types of digital work, including digital video. Here are a couple of good links about online ad fraud AND about video fraud. Mark Ritson is a marketing professor from Australia who has done some excellent […]

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“Barnes & Amazon” Coming Soon to a Mall Near You (Thoughts from a Store Visit)

The following relies on thinking outlined in my posts on Amazon’s overall finances, their retail reality, and the latest Amazon Q3 results. I’m fortunate to live within a couple of miles of the new Amazon bookstore at Washington Square (just outside Portland, Oregon). I recently visited to see if it matched the hype. I expected the store to take cues from Amazon.com’s shopping experience with different efficiency, purchase transactions, or some insightfully unusual product mix. And since this is only their second bookstore, it’s reasonable to assume it is set up using best practices, learned in Amazon’s first wave of stores. Remarkably the store in Oregon lacks any sense of Amazon that fits with their online activities. Rather, it seems they learned they’re most successful with bookstores that are, well, corporate-type mall bookstores. Some observations: The store was BUSY. Washington Square hasn’t had a bookstore inside for years, so Amazon was filled with people. Customers were all browsing in ways they can’t online. They were standing in the aisles, opening and searching books to find something of interest. The store is smaller than a typical mall bookstore – I assume this is a strategic choice by Amazon to limit inventory and lease costs. Watching shopper behavior and the store setup, it reminded me of Barnes & Noble. Sure, the Nook display was replaced by Amazon’s Echo and Kindles, but there was nothing else significantly “Amazon” about it. After several visits and watching Amazon announcements, I think there’s a very good chance Amazon’s end game is brick and mortar retail. Of course, they aren’t going to let us in on that secret, because Amazon’s strategy is more like […]

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Update: Q3 Results Again Indicate Amazon Loses Money on Retail Equivalent Selling

Amazon has published their Q3 results and the headline was either “Amazon Misses Q3 Profit” or “Amazon Sees Continued Growth and Profitability”. In the case of the later title, it leads the Amazon release leads with good news (cash flow) so that the bad news is buried, and then gives us a huge list of bullet point accomplishments (Q3 Financial Results can be found here.). Both of the headlines are factually accurate. But what’s really going on? Amazon reports revenue in three categories designed to push their narrative. (All companies do this – nothing new here.) But digging deeper here’s what we see: 75% of the Amazon profit was from cloud services; which grew to nearly 10% of their revenue. (Sweet margins!). The other 25% of their profit came from the incredibly huge and vague “everything else” (aka “North American”) category. This includes content, Amazon brand devices, books and music, and all their retail-like sales. This 60% of revenue drove 25% of profits… Not such sweet overall margins. Their international operation lost money. What should we think? Profit from “everything else” is most likely from content and Amazon brand devices – not their retail equivalent business. This seems confirmed in their press release via the long lists of all new TV content they’re creating, and the success of their new devices. In fact, the press release says nothing about retail-like sales. Out of a massive list of bullet points, there’s nothing. Except that they’ll hire some seasonal people. My bottom line: Looks like Amazon is losing money on their retail-equivalent sales. For every dollar they take from a traditional retailer, they lose […]

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