Amazon – Redefining Business

textbooksEvery day, I rise early for my morning walk with the dogs, first to Starbucks for a shot of caffeine, then along the beach for a romp in the sand. Mind you, the sand is currently covered with about 6 inches of snow. But with the coffee warming my innards and my duvet-like orange coat covering my extremities, I am reasonably comfortable even if the temperature has been fluctuating between -20 and -10 Celsius.

Until recently, these walks were solitary (not counting the dogs). However, the last few months, I have been accompanied by a friend who believes that adopting this daily ritual will encourage discipline as well as provide good exercise. Our conversations cover a variety of topics: the weather (top of mind these days); current events (Toronto’s mayor, Rob Ford always provides entertainment); family; the economy; as well as philosophical discussions on how the world has changed (the longer we live, the more popular this topic becomes).

Today’s discussion was especially interesting as it was about the demise of the local bookstore and the struggles of the publication industry. As I frequent Amazon regularly for my fix of books, having long ago abandoned the bookstore for the convenience of the Internet, I tend to accept the passing or significant downsizing of these two businesses as a natural evolution of the industry. She was not so complacent. Two of her siblings had lost their jobs due to this change. As far as she was concerned, the end of the traditional book business should not be allowed. We ended the walk without resolution, only an agreement to disagree.

But that didn’t end my thinking about the topic for the day. As I was skimming through my latest print copy of the New Yorker magazine, I came across an article by George Packer: “Cheap Words: Amazon is good for customers but is it good for books?” This twelve-page article described many of the same issues and concerns we had discussed, albeit in much greater depth and research supporting it.

What did it say? Amazon has redefined how book selling is done. It’s relentless focus on delivering exceptional service to its customers not only transformed buying habits but also changed expectations of the buying experience.

  • Aggregation. Search on a topic of interest and Amazon’s will come back with pages of potential titles, pricing for different buying choices and a summary rating based on user feedback.
  • Curation. Click on a specific title and you are presented with a detailed description of the product and most current and highly ranked customer reviews.
  • Availability. Even if it doesn’t currently stock it, “the everything store” provides various options for acquiring it. Even the most obscure or out of print books can be sourced.
  • Comparability. If my request is broad enough (e.g., dog training), Amazon provides multiple choices, at numerous price points. I can easily assess alternatives before making my selection.
  • “1-click” purchasing. It doesn’t get any simpler or dangerous than this. With your permission, Amazon retains your credit card information and shipping address and with one click, your purchase is on its way. Instant gratification!
  • Predictive analytics. Amazon knows what you want before you do. Based on past searches and purchases, Amazon makes recommendations, both while you are on its site as well as through email notifications. You never realized how much you didn’t have until Amazon came along and informed you.
  • “Forever” shopping cart and wish list. You may have been strong enough to leave the site without spending money but Amazon will keep that basket filled with your “almost” purchases just in case you change your mind.

Buying books has never been easier.

On the other hand, Amazon changed the business model of the publishing industry by introducing and supporting new competitors (itself, self-publishers, print-on-demand) and by offering alternative formats for reading (e-books, audio). Many publishing companies and their associated downstream retail outlets have had to downsize staff or merge with other organizations and some have even gone out of business. My friend’s siblings were casualties of this transformation.

So what is the solution? Like many other businesses, publishing and traditional bookstores need to reassess their customer value propositions to ensure they are still relevant. Can their businesses continue to thrive given the Amazon Tsunami? In a study done by Innosight on rankings of companies in the S&P 500, the 61-year tenure for an average firm on this index in 1958 narrowed to 25 years in 1980 and to 18 years in 2013. Previous leaders of their respective industries had failed to keep up with the changes in their markets. What worked yesterday was no longer a guarantee for tomorrow.

We think of change as something we need to respond to; something that impacts the status quo. Businesses produce products and services for customers and support distinct change systems to implement improvements or expand capabilities. But that is no longer a viable approach. Amazon continuously reassesses and updates what it does and how it does it. Change has become its status quo. The publishing companies and bookstores of tomorrow will have to embed this kind of change thinking into their operational systems to survive.

And so will we.

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