What Amazon Knows About Membership

by Robbie Kellman Baxter on Jul 25, 2016 12:00:00 AM Digital Marketing, e-Commerce, Retail

Amazon Prime Day is the best day of the year for many bargain shoppers—thousands of deep discounts for one day only.

And if you are an Amazon Prime member with (at least) one of these Amazon Dash Buttons, What_Amazon_Knows_About_Membership_Image_1-111529-edited.pngcongratulations. You are on the vanguard of the Physical Membership Economy.

You've probably heard me talk about how the Membership Economy has transformed dozens of industries including software, media, healthcare and gaming, in organizations public and private, large and small. The latest industries to be disrupted are retail and consumer packaged goods (CPG).
And this Dash Button is the Trojan horse, entering our homes and changing our expectations about the kind of relationship we should have with the people who make and sell the products we use every day in our homes.
A Dash is a pushbutton ordering device sold by Amazon for a number of high frequency products. When they launched in April 2015, people thought it was an April fool’s joke. After all, why would anyone need a button they could push to reorder detergent or toilet paper?
While it hasn't fully caught on, Amazon Dash is around to stay. The company has increased their incentives to get CPG manufacturers to invest. It is just one of the many experiments Amazon has made in the Membership Economy. They have also built online forums, bought a Deal of the Day site (Woot), launched a Subscribe & Save program which provides auto-replenishment of consumables at a discount, and of course created the most exciting innovation in retail this century, Amazon Prime. All to achieve the ultimate goal of a forever transaction with their customers—a promise that if Amazon makes it incredibly easy for consumers to get every product they need as quickly and efficiently as possible, the customer will be loyal, buying only from them.
If I were a manufacturer, I'd be very worried.
Traditional retail is under attack today. eRetailers, subscription boxes, the rise of direct-to-consumer brands like Dollar Shave Club and Fabletics, Kate Hudson's new line of yoga clothing, and vending machines selling everything from high end electronics to cosmetics are encroaching on traditional retailers' turf. Technology advances combined with deep pocketed venture investors is creating a great environment for new initiatives.
CPGs should be taking advantage of this exciting time, experimenting with online stores, combining products that should be used together and selling them subscription-style, or at least, experimenting with direct sales as a means of learning about their consumers.

Finally CPGs have an opportunity to get out from under retail's thumb and build a direct relationship with their consumers.

What_Amazon_Knows_About_Membership_Image_2-088742-edited.pngBut CPGs are too worried about channel conflict to make a big play. And even if they wanted to, their organizations are optimized for two-year stints in different jobs, so no one is in any role long enough to iterate with innovation. So they are letting Amazon do the testing, experimenting and investing. And Amazon will reap the rewards. There will also be some startups that win big in the Product Membership world, but it's unlikely that any of the big manufacturers will surprise us with a new kind of forever transaction.

The CPGs love their people, products and processes more than their customers, and seem unwilling or unable to evolve to continue to surprise and delight us. Unless you think mac and Cheetos represents delightfully surprising innovation...

Robbie Kellman Baxter is an author, consultant, and founder of Peninsula Strategies—a management consultancy.
Robbie Kellman Baxter's blog
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