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For Amazon, a Focus on the New Helps Push Sales of the Old

Not Only Must Company Fulfill Customers' Current Needs -- It Must Also Anticipate What They'll Want Next

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Like Walmart, Amazon.com sells food, clothing, media and electronics -- the old-school foundation of modern retailing. But Amazon keeps reinventing its business by coming up with new lines to sell, some of them tangible, some of them the stuff of imagination not too long ago.

Amazon's new Kindle Fire is the evolution of its popular e-reader -- and an iPad challenger.
Amazon's new Kindle Fire is the evolution of its popular e-reader -- and an iPad challenger.
In 2011, the e-tailer unveiled everything from the Kindle Fire, a tablet computer version of the company's popular electronic-book reader, to Amazon Silk, a web browser designed to enable easier loading of content onto Kindle screens, to AmazonLocal, a distributor of local deals that appears to be the Seattle company's answer to the Groupon and LivingSocial craze, and MyHabit, a response to the "flash sales" of high-end fashion merchandise that became popular on Gilt.com.

What do all these disparate elements have in common? Simply put, they demonstrate Amazon's deep comprehension of this fact: If you want to keep selling to consumers in the digital age, it's not enough to have the right goods in stock. You also have to master new methods of distribution that make purchasing easier and draw a more intense brand of consumer to your particular shop.

True, several of Amazon's new developments appear defensive -- the company isn't always first to glom on to the latest craze, whether it be flash sales or local coupons. But give it this: Once Amazon does get into the arena -- and it isn't really late to the game in any of these early days of digitally revamping old ways of selling -- it can use its mass and reach to really make a go of things.

Amazon has been on a pretty frenzied track. In 2010, it launched its "Amazon Mom" effort, a free membership program for parents and caregivers. In exchange for telling Amazon a little more about themselves, customers open themselves up to more personalized emails and exclusive offers. Late that year, Amazon snatched up Diapers.com and Soap.com owner Quidsi, which in 2011 has made a push into groceries. And it made an early and successful bid to take over online shoe-and-apparel retailer Zappos.com in 2009.

It's almost as if Amazon has realized staying on the edge of the new will help it keep selling the old. The site has long burnished books, music, and consumer staples (like diapers and soap). But to keep those items flying off shelves (and bringing in the revenue it will need as it continues to expand), it has to adopt the newest customer-retention strategies and sales techniques.

That pressure has led Amazon to some bumps in the road -- and led some to question whether the online retailer can continue to grow its financials. Keeping at the forefront doesn't come cheap, and Amazon's recent third-quarter earnings announcement proved disappointing to investors who worry whether continued investment in sales fulfillment and other customer-related ventures will compromise the company's rate of growth.

Amazon's focus on the user experience has helped it take share from traditional retailers, said Barclays Capital analyst Anthony DiClemente in a recent research note, but it faces steady competition from any number of other online retailers, and its focus on investing in its business could crimp its operating margins and stock price.

But Amazon is clearly taking the long-term view. And many traditional retailers who did not are no longer around to debate whether that remains a smart strategy.

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