Jan
02
2012

Amazon’s Price Check App + Bikes = nothing new (yet)

Recently, the people at Amazon.com launched a mobile app called Price Check, allowing anyone to use the camera on a web-enabled phone to scan a barcode, and then the app scours Amazon’s site for that product, letting you compare prices.  This news should be entirely unremarkable given how long this technology, and others like it, have already existed.  Not only that, but other longstanding barcode scanner apps, such as RedLaser and ShopSavvy, will search a wide array of online merchants, not just Amazon.

Quite simply, this isn’t news – rather, it’s something else entirely: PR.  Egads, we’ve been hoodwinked again, this time by Amazon marketers who cleverly repackaged something you already had, and sold it to you again with extra glitter and some hot fudge topping. No need to fear though, because it’s a technology thing, and technology things change really fast, so by the time I finish writing this, it could all shift again. The more time we worry about what’s already happened, the less likely we are to spend time actually thinking about what’s about to happen next.  That, right there, is the important bit.  You can stop reading now if you like.

It’s worth noting that the fans on this particular PR flame were powered in part by the company I work for, and specifically by our President, Mike Sinyard, in a letter he wrote to all Specialized dealers in the USA alerting them to this technology – but not for the reason you might think.  Mike was letting dealers know that if products they carried from other brands were also available through Amazon, either directly or indirectly, that this meant their shops were becoming showrooms for these online sales channels of other retailers.  This is absolutely true, and has been true for some time. Specialized has a long (and at times imperfect) history of selling only through independent retailers, and the logic is that if a retailer elects to only sell products that are available in other independent retailers, you’re unlikely to lose the sale to an undercutting online competitor. If you haven’t seen the letter, you can read it (and some related commentary) here.

Bike shops, along with many other retailers, are vulnerable to this brave new world where information symmetry between retailer and customer is coming into ever-sharper focus.  People buy stuff online for all kinds of reasons: convenience, geography, selection, less pressure, online reviews, and for sure, price.  And even within a trusted retail environment, it’s pretty reasonable to use a smartphone to check online reviews, whether of the product or of the retailer you’re in, and yes, to compare prices.

Back to Mike’s point: by carrying brands that Amazon doesn’t sell, bike shops (and other retailers) are ‘defended’, which is true to a point.  They’re certainly better off than bike shops who sell products widely available online at deep discounts. But this defensive strategy only goes so far.  If I walk in looking for new bike tires, and I can pay $NUM for brand X tire that I quickly learn is not available online anywhere, then sure, I might feel confident in my purchase. But imagine what will happen when Amazon (or any other similar app) gets smart enough to suggest a comparable tire from brand Y that *is* available online, for 30% off, and it has 17 reviews that are all 5 star, and 8 of those reviews are from riders who live within 100 miles of me.  Eventually, information symmetry will mean this: every retailer is competing not just with retailers that also sell the same products, but also with retailers who sell products that are ‘comparable’ in terms of whatever the salient metrics might be: performance, weight, color, style, size, material…anything.  Everything.

That’s the piece that I think seems to be missing, and that’s where I think this will end up: retailers (bicycle and otherwise) are not just competing with on price. They’re competing in a pair of landscapes: one of “same product for $NUM less”, as well as a parallel landscape of “comparable-or-better product for $NUM, now on sale!”.  A customer’s ability to cross reference products as being comparable has never been more powerful, but we’re only seeing the start of this trend: through something as simple as a google search, or as advanced as aggregated user-generated reviews and feedback, cross-brand comparisons will become common.  Just look at the comparison sites that level the field for TV’s, cameras, and computers.  This means that retailers will need more than just a brand amazon doesn’t sell.  Unless they’re comfortable being a high-volume, low-margin retailer that can survive by operating at large scale, then retailers should probably be looking to combine four things:

1. Trusted and respected brands that are effectively controlled online – perhaps unavailable, but more likely: just consistently priced & presented.
2. Products that are, in the eyes of customers, incomparable with others once they’ve committed to a favorite (think: perfume).
3. Perfect, individualized customer service.

And lastly, but most crucially,
4. A digital strategy that accepts, and supports, the reality of sales channel agnosticism. Customers don’t see much difference between buying in store and buying online anymore, and that’s only going to become more true. Related: did you know that Ebay is the world’s largest car dealership?

I think, in general, this is all good for customers right now, and eventually it will be good for many bike shops.  If we can reduce the intimidation factor in bike shops by empowering people with information, buying a bike gets less scary, and (maybe) we get more people willing to go into a bike shop instead of relying on the comfortable anonymity of a Walmart or Costco. Years ago, car dealers bemoaned their fate when people could walk in having already researched the invoice price of a car that was on their showroom floor. Today, buying a car is less intimidating, and the brands and dealerships that offer great service and an integrated online/offline sales channel are thriving. That better service and seamless sales experience creates reviews, social buzz, and endorsements. It’s a virtuous cycle, as long as you’re on the right side of it from the customer’s perspective. Just ask Apple, they’ll tell you.

So retailers need to assume customers know everything – that’s the information symmetry in full effect. Many times, people will willingly pay more for something when the purchase experience is as good as the ownership experience.  And seriously, and speaking as a customer myself: if you try to prevent me from scanning a bar code in your store, I will assume you have something to hide.  Instead, try treating it as an invitation to a conversation, and an admission that I’m actually considering buying that product, and not “just looking, thanks.”

Written by chris in: General Musings |

11 Comments »

  • Jason Thorpe

    Nice article, Chris. There’s another dimension to this, too… there are some online retailers that, in addition to offering really good prices, also offer terrific customer service. One particular online retailer has earned a certain amount of “local shop”-type loyalty from me, and I generally consult their online catalog first. This particular place also happens to have a brick-and-mortar presence in Portland, so it’s not quite as soul-less as Amazon.

    For me, Amazon is a bike parts source of last resort.

    That said, it is kind of annoying when you need a particular, perhaps proprietary part for a particular (major) brand of bike, and you call 2 or 3 local authorized dealers and none of them have it in stock. If it has to be ordered anyway, I might as well have it delivered to my door.

    Comment | January 2, 2012
  • Absolutely true, Jason – there are some fantastic online retailers, bike-related and otherwise. They were probably the first to figure out that powerful price comparison tools were in the hands of their customers during the shopping process. No wonder that some of them have a good niche worked out for themselves.

    Comment | January 2, 2012
  • I *was* that customer today. I was scanning products with RedLaser and later bought a product online – but it was a pair of non-cycling shoes and in my weird size so not easily available in-store.

    It was in a department store, so was relatively anonymous. Not yet scanned while in an independent store.

    However, on the other side of the coin, I was also in two outdoor shops today, looking for walking boots. In one I get a healthy discount because of a writer’s org I belong to; in the other I get no discount. I bought from the second because the service was top notch.

    Comment | January 2, 2012
  • Bryan Willman

    Even without scanning, one could always write down “supercycle model QBR blah blah blah” and then go ask people about it. The friction has been reduced, that’s all.

    A broker I’ve hired to help me buy and sell cars once told me this tidbit about how a car dealership works:
    a. The new car business is break even.
    b. The service business makes money, including on warranty work, sometimes lots of money.
    c. The *used* car business does better than the new, because not everybody has exactly the same thing all the time – there are 1000 2012model year F150s in 100 miles, but NOT 1000 1998 blue F150s with the guzzle option but no freeble option.

    I suspect that bike shops will do well if they:
    a. Have an associated custom frame builder
    b. Have bike build-up services
    c. Can deal with used stuff – take trade-ins, sell used stuff, etc.
    d. Above all, have a service department that does good work fast and at a reasonable price.

    And finally, specialized should be careful about the “independent dealers only” theory – there’s a class of people who prefer to buy goods that they see pricing for online. And order parts for online. We’ll see if/when/how-many people decide to skip bicycle brands they cannot buy online…

    Comment | January 2, 2012
  • @carlton: yes, yes, and yes! All perfectly reasonable things for you to expect to be able to do, and glad to hear that top notch service still makes the difference. Doubt that will ever change.

    @Bryan: totally true, reduced friction, which is the notion I was getting at with “information symmetry” – I think we’re saying the same thing. Your ideas for bike shop tactics are all valid, and every bike shop’s personal solution will vary, based on many factors (location, size, weather, brand image, etc). Nothing you list is a bad idea, for sure. And yes, for those who are only willing to buy online, the IBD channel may not offer the channel they want at the time they want it. That’s a strategy choice – can’t please all the people all the time, natch.

    Comment | January 2, 2012
  • Top-notch service is good, of course, but it’s potentially eliteist. Fine for high-end customers but not so fine for entry level customers. Mom and pop stores are important at getting entry level customers on to the right path.

    Clearly, it’s the smaller stores – perhaps without the clout, kudos or cash to be Specialized stockists – who are most at risk in such a volatile market. They too can offer excellent customer service but – per sale – it’s more costly for them because their turnover and margins are that much tighter.

    You may think this entry level market is shaping up to be for the supermarkets and big box retailers only but that’s always been the case.

    I’ve been reading Cycling Life lately (a US trade magazine from the 1890s) and the plight of good quality independents versus supermarkets was a hot topic in the mid-1890s. In 1893 the market for bicycles in the US collapsed, and the ‘supermarket-style’ retailers of the time moved in to mop up the remains. The market had recovered by 1896 but collapsed big-time in 1897, helped by poor commercial decisions by the formerly pro independent retailer Pope Manufacturing Co.

    Independent, high-quality bicycle retailers in the US pretty much all went to the wall, leaving only supermarkets and hardware stores selling bicycles. No amount of top quality customer service saved the independent trade – or mainstream bicycle manufacturers – in the run up to 1900.

    One of the challenges for the bicycle industry in 2012 is to not make the mistakes of the 1890s.

    Comment | January 3, 2012
  • [...] Specialized marketing guy Chris writes about Sinyard’s letter to bike shops on Amazon’s Price Check app. [...]

    Pingback | January 6, 2012
  • MG

    I agree, Carlton. We have to remember the mistakes of the past in order to not fall into the trap of repeating them, and I absolutely agree it’s worth supporting independent, high-quality local bicycle retailers. Even though there are great examples of folks offering great service online, often what those represent are online manifestations of great brick-and-mortar retailers/pro shops.

    Specialized is taking an approach with its brand only a few companies in the bicycle industry have the clout to take, and if you look at the blueprint for a world-class brand, it’s right on track. Regardless of how anyone feels about it, I think it makes sense for Specialized as a brand. Like Carlton, I just hope the smaller dealers aren’t cut out at the expense of “bigger and better”. Someday I may be trying to become a dealer… You just never know.

    Comment | January 18, 2012
  • Why worry about Amazon? The Specialized brand value is rapidly erroding as evidenced by the ever growing auctioning of their products on Ebay. It’s a race to the bottom – the genie is out of the bottle and they apparently can’t control the online free market that is thriving. As a dealer, I’m constantly threaten by both TREK and Specialized to not auction sale their product, meanwhile a select few liquidators are allowed to blow the goods out at cost with no repercussions.

    Comment | January 24, 2012
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