Amazon and Kohl’s in a “smart home” alliance

Amazon and Kohl’s announced jointly that they are setting up “smart home” shops in 10 test stores in Chicago and Los Angeles this fall, using 1000 square feet to promote items like Echo along with related devices and the home services to set them up. Reportedly (according to RetailWire) the shops will be staffed by Amazon and the revenue will accrue to them. Here’s my comment:

A ten-store test in an 1100-store chain is not significant in the short term, but it’s an interesting alliance. (My usual full disclosure: I worked for Kohl’s between 1982 and 2006.) It’s curious that the sales revenue goes straight to Amazon (with a presumed piece of the action to Kohl’s), compared to the traditional model where somebody walks into the store and uses his/her Kohl’s card to buy an Echo Dot. It’s also a recognition that the “smart home” business needs more hands-on salesmanship.

Amazon look like the winner in this deal, because it potentially leads to another brick-and-mortar tie-up with a much bigger store footprint than Whole Foods, without the cost of a flat-out acquisition. Meanwhile, Kohl’s benefits from increased traffic and a meaningful use of space at a time when it is “right-sizing” about half of its stores. This bears watching.

“Voice assistants” riding a wave

Two recent RetailWire posts address the growth of Amazon and competing voice recognition devices — with Amazon’s Echo being the most popular:

Anything that makes the Amazon shopping experience even more seamless is a market share opportunity. As the panel discussed recently, it’s no wonder that several national retailers are aligning with Google’s voice assistant instead.

Retailers probably have their own opportunities to apply voice recognition technology to their own mobile apps. (Maybe this has already happened.) Voice activation seems to be the next “smart” thing, so it’s a win for whoever gets there fastest.

The second post concerns the national retailers who are aligning with Google, not Amazon:

If this works, it’s an opportunity for Google to play catch-up on the head start that Amazon has established with Echo, and to establish a stronger beachhead on the “device” front. But it’s also an opportunity — or attempt — for several retailers to marginalize Amazon’s e-commerce business that has eaten into their own market share.

Can Apple restart its growth trend?

Recent reports from Apple, about the slowdown of its key iPhone business, have observers worrying about its underlying strategy. Here’s a recent comment (from RetailWire) on the topic:

To some extent I agree that Apple can learn from the kind of profitable incremental volume that Amazon generates with its cloud services and membership revenue. But at heart Apple is a different kind of company. Its brand promise is based on product development (not just ancillary services like iTunes). And the product development has been lagging for the past few years, especially on the smartphone side.

The perceived saturation of the iPhone business, and the change in pricing strategies by the phone carriers for the past couple of years, are major disincentives for the annual trade-up frenzy that used to drive Apple’s business. The company needs to worry about how to jump-start its smartphone business, but more importantly Apple needs to figure out where the next game-changing product is coming from.

Amazon’s Echo: Where’s Apple in this product category?

You’re probably seen or heard about Echo, the voice-activated “smart assistant” from Amazon. RetailWire panelists recently discussed why Apple has been slow to gain traction here, and I added my thoughts:

This seems like the type of category where Apple would move faster than the competition, but perhaps they are aiming to be a “fast second” while learning from somebody else’s wins and losses. But Apple-watchers have made the same argument for years about Apple TV, which has yet to make a significant dent in the streaming TV battle.

So — for now — advantage definitely goes to Amazon. It’s not just a matter of developing an innovative technology (as with the Kindle) but their ability to link Echo to its entire e-commerce ecosystem. This is something that Apple simply can’t compete with, regardless of the products it develops in Echo’s wake.

Amazon finds another new business to try

With Amazon’s recent announcement that it’s testing a streaming service for video games, there was some speculation on RetailWire that this is “one category too many” for the giant e-commerce retailer. I disagree:

Amazon’s expansion into new businesses doesn’t appear — so far — to have affected its core brand promise, which is to deliver a wide variety of products quickly at a competitive price. In fact, delivery speed is getting faster: I bought a pair of shoes on Amazon on a recent Saturday that showed up the next day (a Sunday) for about 10% less than I would have paid at Nordstrom. And, of course, shipping was free.

Video games may be a logical extension of Amazon’s streaming businesses, or they may turn out to be a misfire like the Fire Phone. Either way, Amazon is prepared to jump on the success — or pull the plug on the failure — quickly. So I don’t see it as a misfit with bigger volume opportunities such as grocery delivery.

What does Gen Y expect from its advertisers?

A recent RetailWire discussion centered on Millennials and their “cynical” view of marketing in general. I’m not certain whether it’s fair to call it cynicism — since a lot of Gen Y opinions are wrapped in idealism, too — but it’s clear from the data that younger consumers view brands with a jaundiced eye. Here’s my opinion:

I believe that Millennials are more media-savvy than their parents and grandparents, and more likely to form collective opinions through social networking, review sites and other word-of-mouth. There is plenty of data to support this, not just the numbers reported in the article. While there has always been a degree of cynicism about marketing in popular culture, it is probably reaching an apex with Gen Y.

As to “trustworthiness,” I think that is the most critical value across all generations, not just among Millennials. The idea may have multiple definitions, however, ranging from the perception of value (a combination of price and quality) to the desire to deal with companies with a social conscience.

Bad timing? Amazon expands its tablet assortment

Amazon recently announced an expanded offering of tablets, in addition to its well-developed e-reader business. On a recent RetailWire post, I question the timing of Amazon’s continued push into maturing hardware categories outside of its “sweet spot”:

The line between tablets and smartphones is getting blurrier every day, hence the term “phrablet.” The size difference between the largest smartphones (like the Samsung Galaxy and the new iPhone 6+) and the smallest tablets (like the iPad mini) is causing the tablet market to mature, especially if a consumer doesn’t want to pay extra for connectivity other than wifi.

I don’t know how much market share is held by Amazon but it’s diving deeper into a low-growth category. (And the Fire Phone experience ought to be humbling, assuming Amazon is capable of humility.) I understand that Amazon needed to expand beyond the e-reader category as its footprint grew way beyond books, but I’m not sure a “me too” product will meet its goals.

Are retailers overconfident about IT security?

The outbreak of data breaches in recent years would make the question above pretty obvious…it’s a “yes.” Here’s my comment on the topic from a recent RetailWire discussion:

The ability of retailers to patrol their cyber-borders has been called into question by the Target data breach and many similar incidents. The bad guys seem to have the skill and speed to breach whatever boundaries are put in their paths by the most skilled IT teams. So, yes — overconfidence is a problem, especially when measured against consumers’ lack of faith about the same issue.

As to lessons learned? I would focus on faster reaction time to a data breach, as well as a more aggressive approach to a systemic and preventive solution. This may not solve 100% of the data breaches but will hopefully cut down on their frequency or severity.

Amazon adds an entry in the music-streaming business

For Amazon Prime customers (like me), Amazon has added another incentive to justify that recent fee increase. By adding a music streaming service, Amazon has also decided to wade into a growing field with plenty of competition. My RetailWire comment (below) speculates on whether this fast-growing industry is ripe for consolidation:

It’s hard to say whether Prime Music is meant to retain Prime customers (at the higher annual fee), or whether Amazon simply feels it needs to compete in this increasingly crowded and competitive space. After the Apple acquisition of Beats, it will be interesting to see whether other consolidation happens in the music-streaming business. Pandora or Spotify would be great takeover targets for a one-stop destination like Amazon.

New marketing templates for Gen Y consumers

As the size and consuming power of Millennials grow, so do the words of wisdom from a lot of “experts,” including BrainTrust panelists on RetailWire. Here’s a recent example that I posted, realizing that generalizing is always risky:

Of course, anybody who comments about marketing to Millennials (including me) will be guilty of punditry, too! But there are two key issues that jump out:

1. First, Gen Y consumes news and entertainment in tech-enabled formats that make “old media” a tougher sell for marketers and media planners. Instead of drive-time radio, they listen to Pandora or XM during drive time. (Assuming they actually live in the suburbs and drive to work, which is not a safe assumption.) Instead of watching TV on the networks’ schedules, they fast-forward through ads while binge-watching series on Netflix. And the drop in print newspaper circulation is an irreversible trend, with a big impact on the power of circular advertising.

2. Second, there has been a lot of comment about Millennials being more “tribal” than their Baby Boomer parents. This affects not only location strategies (the “new urbanism”) but especially the impact of word-of-mouth advertising. Social networking has become the tech-enabled “back fence” where virtual neighbors can share opinions and recommendations about all sorts of goods and services.

Both of these issues point to the growing empowerment of the consumer. Again, this is a trend that will onlly gain strength with time, and which any marketer or retailer needs to manage more effectively.