- How easy is it to find what I want on your site / store?
- Is the product readily available? (final three feet logistics which I will write about later)
- How quickly can you get that product?
- Is it packaged in such a way that the product can survive the entire trip (from MFG to DC to store to your house). Of course, the store part is increasingly being eliminated.
- How easy can it be returned? Here I think of packaging and labeling so if I buy the product and decide to return it the process is simple for me to repackage it and put it back in the supply chain stream to get back to a returns center
- Is it low cost?
- How easy is it to pay?
- How quickly do I get the credit back if I have to return it?
All of this is enveloped by world class customer service (Think Zappos) which makes you feel great and enjoy the entire experience. Think about how Disney World makes you enjoy what is essentially waiting in long lines. This is what the order fulfillment customer experience has to be like.
The battle is increasingly being waged between Amazon.com and Wal-Mart's on line brand. I will not pretend to judge who wins in this case although I think it is clear if the game ended now Amazon would win. What is not clear is whether they can continue winning given the massive head start Wal-Mart has had in developing its supply chain. For expertise, Wal-Mart can just hire a bunch of Amazon people so I am not overly worried about the talent pool.
Challenges facing Amazon now include the high cost of building out a massive infrastructure (which Wal-Mart already has), the change in sentiment for sales tax collection (plan on paying sales tax on all on line purchases soon) and the high cost of final mile delivery which is required for Amazon but not necessarily required for Wal-Mart (see my posting on Wal-Mart testing out a locker system and crowd sourcing their deliveries).
The problem for companies like Wal-Mart and other retailers is they are losing the "branding" war. The name "Amazon" is becoming synonymous with on line shopping. People I talk to really do not "shop" on line they just go to Amazon to buy what they want. It is becoming what Marissa Mayer (New CEO of Yahoo) calls a "daily habit". As a consumer, you decide whether you are going to go to a store or buy on line. If you decide to buy on line you go directly to Amazon. I am sure Wal-Mart has all sorts of statistics that try to pat themselves on their backs but reality is Amazon is building a brand which equates to on line shopping - The Amazon brand is to on line shopping what the term "Xerox" is to copiers. If this hole gets too deep, Wal-Mart may not be able to dig out.
For years, Wal-Mart has been known as the world class supply chain company. However, they could be at the cross roads where their supply chain is so tightly wound and so tightly integrated to a "bricks and mortars" experience they cannot adapt to the on line requirements. This would not be the first time a well managed and world class supply chain became trouble for a company.
Think Dell and how incredible they were in a tightly wound and highly efficient supply chain designed to build desktop and tower computers. A funny thing happened: The consumer moved to laptops. While no one wanted to look at desktops before they bought as most were under your desk hidden away (lending itself to a build to order, direct buy model) everyone wanted to look at laptops. Laptops are a visible appliance. This meant a need for retail space. Further, the build to order did not need factories. Go to an Apple store or Best Buy, buy a laptop and right there they will upgrade memory, install devices etc. etc. Dell's huge competitive advantage with towers and desktops became a competitive disadvantage in the move to laptops. Due to their size, retailers were willing to display them as they did not take a lot of shelf space or store room space. Essentially the entire model for buying computers changed in what appeared to be an overnight transformation. Dell was not ready and cold not change quickly enough.
If I were advising Wal-Mart I would study this well to ensure they do not make the same mistake relative to on line purchasing and competing with Amazon.
In the end I believe Wal-Mart and the other big retailers can and should be able to beat Amazon. Just like Dell could have and should have beaten Asus and just like Sears could have and should have beaten Wal-Mart. One thing we do know is due to the Innovator's Dilemma big companies tend to get crushed eventually by small start ups . What is fascinating is how these small start ups, once they become big, make the exact same mistakes and eventually get crushed. This is phenomenon is described in detail in Clayton Christenson's seminal book titled "The Innovator's Dilemma" and why some big companies cannot see what is clearly in front of them is described in detail in the book "Denial" by Richard Tedlow (Both professors I had at HBS). Should be required reading and I have put a link to those books below (Yes, through Amazon).