Whose Customer Am I Anyway?  Amazon is a Utility- Not a Retailer

I bought something from a brand. I bought it on their Amazon store. Amazon shipped it to me. I decided not to keep it. I returned it to a Kohl’s.  I don’t remember who actually delivered it.

When I returned it, I didn’t buy anything at Kohl’s. But I had to walk through the store and down the aisles and through various products to get to the Amazon return counter. I’m sure nobody set it up like that on purpose.

The return receipt I got from Kohl’s offered me a 25% discount on anything I bought at the store.  Kohl’s hopes that I’ll become a customer because I’m in the store doing an Amazon return.

What happened to the product I returned? Discarded? Reconditioned? Sold by Kohl’s? Return to Amazon or the brand? Who is responsible for deciding what to do with it? I wonder who pays money to whom and for what services exactly as it goes through the return process. On a couple of occasions, I bought something small from Amazon and initiated the return process. They gave me a credit and said I could keep the product. Maybe I’ll try that with a 75 inch TV.  We all know returns cost a lot of money.

As sellers justifiably try and optimize the process of getting product to and from the consumer, both for customer service and for cash flow reasons, what are they doing to their relationship with that consumer?

If you look at my favorites on my browser, you’ll see a folder for utilities. In there, you’ll find the link to Amazon. Maybe I’ll add Kohl’s. Alphabetically I guess it would come after the people who pick up my trash but after the electric company.  Probably not how Kohl’s wants me to think about them.

Yes, that’s right. It made sense to me to put Amazon with utilities rather than in a folder with other retailers.  I wonder if that would bother Jeff Bezos.

I’m going to go with no. Why would Amazon want to compete with other retailers if they can be thought of as a utility that you must do business with and have to pay every month? Not including your once a year prime membership.

If I go to a Kohl’s store- or REI, Zumiez, Vans, Tilly’s, The Buckle, Dicks, etc., etc., etc., etc., etc.-it’s partly motivated by some perception of the brand/market position of the store and what I’ll find when I get there.  If it isn’t, they have a really big problem.  They aren’t utilities.  I’ve got lots of choices.

These efforts to differentiate yourself from a world of other retailers/brandy carrying similar to identical products require careful analysis, time, money, and good management.  Some luck wouldn’t be bad. Mostly, retailers don’t have a distinctive competitive advantage in doing any of this.  They just try and do the same stuff all retailers have to do but do it better.  The one real advantage seems to be size.

Kohl’s doesn’t want me to think of them as the place I drop off my Amazon returns. The UPS Store, where I also drop off some Amazon returns, doesn’t care because what they do is ship stuff; It’s consistent with the market image they want.

If Amazon is a utility, and I’m really starting to like that characterization, they don’t have to compete in branding with other retailers. They’re just there.  I use it when I need it.  They perform a service I expect and have to have. OK, not have to have exactly but you know what I mean.

So, whose customer am I anyway?

I was kind of fuzzy on who sold me the product and who provided the customer service by the time I’d selected the product, it got to me and then made it back to wherever it goes.  Maybe I should care.

I’m not sure I do.  I’m not Amazon’s customer in the sense that I have any attachment (except practical) to them. They’re just a utility I use. I’m not Kohls’. Never bought anything there.  It was only the need to return that got me inside and I would rather have had the return counter close to the front door.  Don’t even think of myself as a committed customer of the brand I bought the product from in the 1st place, whoever that brand was.  To be fair it was something I’ve never bought before. And it wasn’t an active outdoor product. So perhaps I’m stretching this comparison to places it shouldn’t go.  But maybe not.

If you are a specialty retailer – even a big one with hundreds of stores- you need a relationship with people who buy your products as part of differentiating yourself from the other places they could buy the same product. The same is true of a brand. The pandemic and the related closures and reluctance of people to shop are establishing new behaviors that may or may not stick (no vaccine pun intended) once the crisis is over.

Right now, the common knowledge is that you retain your customers and differentiate your brand by providing “experiences.”  “Experience” has always sounded expensive to me.  It’s especially expensive if it’s more or less the same thing your competitors are doing because, like you, their products are generally similar to everybody else’s. In other words, it’s another thing in our industry that doesn’t generate, at least in the long term, a competitive advantage.  It’s simply something you have to do to compete.

I think I like the term “small surprises” better than “experiences.”  Sounds less expensive and more repeatable more often.

Ironically one of the experiences we’ve created for customers, because they demand it, is to make the buy/deliver/return process as easy and fast as possible.  Focusing on ease of process means customer relationships can become unclear to the customer.  If restaurant takeout is delivered by Grub Hub and it’s not hot, who fault is it?  Whoever’s fault it is, both brands suffer.

It’s not clear to me that the intricate web of logistic interrelationships we’ve created among entities that are primarily competitors (and are still working to improve) is good for your relationship with the consumer- even though it’s what the consumer wants.

If your customer chooses not to buy your product because it will take an extra day to get to them- if your return policy is an important purchase decision- do they really value your product?  What kind of relationship do you really have with them?  Aren’t you just a utility?

You must not be a utility.


7 replies
    • jeff
      jeff says:

      Thanks Nate. It seems like I sometimes come up with my best ideas while trying to figure out what I’m writing. This was, maybe, one of those times.

  1. Chip
    Chip says:

    Hey Jeff,

    Interesting take on Amazon and you bring up many good questions. As a smallish, core brand that has been around for over 20 years, we consider Amazon a necessary evil. With 300 million shoppers a day using Amazon, it is crazy to not have a presence there. We decided to have a very controlled presence on Amazon using their “Registered Brand” program, which has been successful for us (not without a ton of headaches along the way). However, the difference between the customers that purchase via Amazon and those that use our company website could not be more different. Amazon shoppers are motivated by two things: low prices and no hassle returns. As a general rule, Amazon shoppers are far less educated about the products that they buy since they really don’t need to be accountable for their purchase. If they buy something and find out it is not right for them, they just return it; no questions asked.

    So the question of whose customer are you is a good one. We are frequently contacted by Amazon customers when something goes wrong (lost package, damaged package, etc.. ) because of how we have positioned our brand on Amazon. Other customers prefer to just use the Amazon system for returns or do the Kohl’s return thing. In every case, however (and to answer your question regarding who takes the hit for the returns) it is the Seller/Brand that ALWAYS takes the hit and is forced to absorb the cost of the return, even when you sent the customer exactly what they bought, in perfect condition and it arrived on time.

    I completely agree that from a consumer perspective that Amazon is a “utility” although, personally, I consider them more of a facilitator. The good news for us is that we are seeing the ratio of our online sales start to drastically swing in favor of our website and while we still sell more (in terms of DTC units and revenue) on Amazon, the ratio between the two is narrowing. This is great news when you consider just how expensive it is to sell on Amazon (15% off the top in commission, cost of returns, cost of Amazon advertising, etc..).

    Regarding your point on “experience” vs. “small surprises”, you are right on. Our customers love our service, you can see it firsthand when you look at our Trustpilot reviews. Why? Because we go the extra mile. We pick up the phone and make them feel like their call is the most important call we will get that day. Have you ever tried calling Amazon? “Small surprises” are what keep customers stoked on a brand and give them a reason the buy from that Brand versus a behemoth facilitator.

    Amazon ain’t going away and while some might argue a smallish, core Brand doesn’t belong on Amazon, we know that if we weren’t on Amazon all those Amazon customers would just buy some crappy knockoff that they think looks just like our product. We would rather have those customers buy our product on Amazon so that they become a fan and perhaps at some point though our advertising, marketing and social media efforts, we will get them to come to our website and buy a another product. Once they do that we feel confident that we can make them a customer for life and give them a reason to never have to buy our product again from a “utility”.

    • jeff
      jeff says:

      Hi Chip,
      Good to hear from you. Not saying nobody should sell on Amazon. It’s an individual brand decision. I would ask you, though, if your Amazon buyers are motivated by low prices and no hassle returns, is this the customer you really want? Now if you say, “No, but we need the volume and cash flow from Amazon” I completely understand. Just checked one of your products and see the price is the same on your site and Amazon. I assumed it would be. As a finance trained guy, I can’t help but wonder 1) the percentage of your business you get on Amazon, 2) how much lower the margin is after all the Amazon related costs including non specific hassle costs, 3) how much of that business would come back to you if the customer couldn’t find it on Amazon and 4) what the comparable margin from other retailers is. I’m not prepared to say you should or should not be on Amazon- you’ve been around long enough that you pretty clearly know your market- but my question is if the explanation in your whole last paragraph for being on Amazon what you know or what you believe? I urge you (and me and everybody else) to question your assumptions if, in fact, they are assumptions.

      I like the term facilitator. Maybe even better than utility though I think utility was the right word for the point I was trying to make.

      Thanks for all insight and good comments.

      • Chip
        Chip says:

        Thanks Jeff for the thoughtful reply. My intention was never to justify being on Amazon but rather to give you perspective on what role they play in our business and (I’m guessing) the role in many other businesses in our niche’/market. The last paragraph is based on experience with a dash of assumption mixed in. Even after 20+ years it’s hard to get things 100% right but I feel like we have been able to do a fairly good job of continuing to grow our Brand while still supporting our B&M retailers and continuing to grow our revenue. I’d be happy to answer your four questions you pose if you email me directly. Love your perspective and insight.
        Happy Holidays!

    • jeff
      jeff says:

      Hope it made you think which is what I’m always trying to accomplish. Please give my best to Sepp and Tommy.

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