Cool

Amazon: The Merchant’s Best Friend?

Attention, eCommerce merchants: Amazon is not your enemy. On the contrary, the company can actually help its partners increase its conversion rates 20 times over. In a lively and informative discussion, Patrick Gauthier, Vice President of External Payments at Amazon and MPD CEO Karen Webster blew the lid off “the best-kept secret in the industry” and how Amazon Prime is becoming the web’s VIP pass.

If you’re an eCommerce merchant that is smaller than Amazon – which is to say, if you’re any eCommerce merchant other than Amazon – there’s a distinct chance you view the big-name platform as something other than your best friend.

But Amazon is trying to help merchants understand how it can be a very valuable partner to other merchants, as Patrick Gauthier, Vice President of External Payments at Amazon, recently explained to MPD CEO Karen Webster. By applying the very competencies that brought about its own unparalleled success to other merchant platforms, Amazon can actually bring those merchants who view Amazon as the “big bad” something that they value more than anything: customers and conversions.

And it starts, Gauthier says, with the customer, an ethos that he says defines everything that Amazon does. For Amazon, the customer experience is “the North Star” – it affects product design, customer service, et al.

As a consequence of that focus, Gauthier, a former PayPal and Visa senior executive, says that Amazon can “look at things very differently.”

'THE NEXT FRONTIER'

In his conversation with Webster, Gauthier “painted a picture of commerce” and how Amazon is defining it as something than can extend into a variety of channels and places. One of those places is the home, he said, which could in effect be a commerce station. In a way, it’s always been that – thanks to catalogues, phones, and computer access – but now the home is poised be “the next frontier” for Amazon.

How the company can achieve that, says Gauthier, is by first upending a common perspective in the eCommerce industry, which “so often defines the market as a function of what it does versus the function of what it does for the customer.”

“The home is a place of consumption,” he notes, so consumers have opportunities to refill. Consumers have time at home, so they can “browse and try and experience.” The home is a place where consumers have increasingly more interconnected devices – and connectivity, for Gauthier, is a defining factor of an experience. Omnichannel was yesterday’s talk; today’s question is: “Are [consumers] connected or are [they] not?”

When consumers are connected, the capacity to bring a level of information about the products, the services, and the customers themselves “completely changes how they experience commerce,” Gauthier emphasizes.

They watch TV and they can buy a sweater that Seinfeld wears in an episode. They’re in the kitchen, and can ask an Echo device to order a pizza. They’re in the den, and their PC is supplemented by a variety of other devices.

The home is “really a blank sheet of paper,” and the companies that start with the customer and think about the things that can make his or her commerce experience more personable and more pleasurable are the ones keyed into what Gauthier describes as “massive opportunities [for] reinvention.”

THE IMPERSONALITY OF OMNICHANNEL

Webster posits that omnichannel isn’t really separate from connectivity, because connectivity is what gives rise to the ability to stay connected to the consumer as he or she is moving throughout Gauthier’s “slices of life.”

Gauthier doesn’t necessarily disagree; what he’s really pushing back on is the label itself, that omnichannel is defined by the function of how it is fulfilled rather than what it means for the consumer. “No consumer is going to tell you, ‘I’m shopping omnichannel.’” It’s strictly an industry term, with no link to the consumer experience.

With so much breadth of growing technology in the payments industry, notes Gauthier, it’s “easy to forget about creating an experience for a customer.”

[pullquote][We always start] from the promise we made and [architect] everything we do from the promise, rather than the other way around.[/pullquote]

As he puts it, “[We always start] from the promise we made and [architect] everything we do from the promise, rather than the other way around.”

PRIME DIRECTIVE

Webster brings up a key aspect in building a successful customer experience: removing friction. For instance, she points out, the benefits of being an Amazon Prime customer – easy checkout, free shipping, massive product selection – is what compels her to buy from the site, sometimes even multiple times in the course of a single day.

Gauthier says that she is not alone in that practice, or in that motivation. He refers to a piece of research from Millward Brown showing that Prime users convert 63 percent of the time, compared to the average eCommerce rate of 3 to 4 percent.

Though acknowledging that 63 percent is an “amazing” number, Webster jokes that she’s “surprised it’s that low” – as Amazon Prime customers who visit Amazon probably do so with a serious and strong intent to purchase.

Another contributor to the high conversion, Gauthier says, is that Amazon provides what he calls “browsing shopping.” The biggest inventory on earth lends to the discovery of new things to buy.

The statistic both “showcases what we’ve accomplished in terms of removing friction [and] also sets the bar” for other merchants. “Any merchant today that does not make part of [its] strategy the question, ‘how will I connect with an Amazon Prime user?’ is probably missing [out] on something really important.”

BIG, BAD AMAZON

[pullquote]Amazon is the word that strikes fear in the heart of a retailer.[/pullquote]

Webster wouldn’t disagree – except there’s one lingering question: “Amazon is the word that strikes fear in the heart of a retailer. It is what drives retailers’ strategies; everybody has their ‘Amazon strategy.’ And, she points out, that doesn’t necessarily mean partnering with Amazon; it means, ‘how do I avoid having my lunch eaten by Amazon?’

“And since, Patrick, you’re in charge of actually talking to merchants and saying, ‘no, no, no – look at my statistics: 63 percent conversion; there you guys are sucking wind at 3 percent. I have Prime members, I can bring them to you, and I can help you drive conversions,’ is that enough?”

Gauthier helpfully notes that he doesn’t tell merchants they suck wind.

Nor would he say that every merchant necessarily has an “Amazon strategy” with or against the company. Rather, he would submit that “the vast majority – if not the totality – of its customers [meaning merchants] are also Amazon Prime users” as individual consumers. As a consequence, they probably can’t ignore that Amazon is an important factor in the life of a consumer, because their own consumer experience exhibits that reality. Even as companies are worried about how to compete with Amazon, they hold an admiration for it and a desire to emulate it.

The question then is, do they emulate the feature – “let’s do two-day free shipping” – or do they emulate the intent – “let’s make consumers’ [lives] easier?”

The ones who take the route of intent, they ask themselves the question, “can we do it on our own or not?” In that conversation, says Gauthier, Amazon can point to things that they’ve previously done for merchants that helped them grow their businesses.

[pullquote]Because Amazon starts with the customer always…it often leads [other merchants] to some counterintuitive conclusions.[/pullquote]

“Because Amazon starts with the customer always…it often leads [other merchants] to some counterintuitive conclusions.”

For example: No large retailer around the world shares its logistics chain with its competitors – none, that is, save Amazon, with its Fulfillment by Amazon program.

No large retailer shares its IT infrastructure – except, again, for Amazon, in that case with Amazon Web Services. Once they did, Gauthier points out, “Lo and behold, Netflix [started running] with AWS.” [Netflix is a competitor to Amazon Streaming.]

“If that’s not a validation of the fact that we can work with a competitor in a way that adds value to all – to the consumer, first and foremost – what else is?”

Hold up, says Webster. What Gauthier is pointing out is leveraging infrastructure. It’s not the front-facing, customer facing part of the business.

Gauthier bends a little on that point. Has Amazon developed some unique competencies that put fear in some other merchants? Sure. But the company is also willing to use those competencies to partner with the very people worried that they’re about to be taken over by Amazon.

“There are 2 million merchants selling on Amazon, and not all of them are small,” he said. A number of them are worldwide brands that have reached the conclusion that Amazon stands for “a trusted, reliable, customer-centric experience,” and that it’s not a bad thing for them to do the same.

Patrick Gauthier will be discussing more about how Amazon can be a great asset to merchants as a panelist at Retail Reinvention, hosted by PYMNTS.

For more details on R2, click here.

THE DATA QUESTION

Before Webster can even finish asking how Amazon gets over “the data question,” Gauthier says, “It’s very easy – we don’t use the data.” Merchant partners don’t get customer data from Amazon – although some of them do get their own. And Amazon, Gauthier explains, has some rules about that.

Rule No. 1: Don’t ever compromise privacy. That runs part and parcel with Amazon’s focus on the customer.

Rule No. 2: Other merchants’ data is their data, while Amazon’s data is its own. Amazon doesn’t see other merchants’ shopping carts, and any data that it may share with partners (for example, whether or not a consumer is a Prime member) is only done with the consumer’s consent.

“How many businesses do you know [that] are willing to share the information that a customer is one of their top clients with anybody?”

This obviously being a rhetorical question (the answer being “nobody but Amazon”), Webster responds with a concise one of her own: Why does Amazon do that?

It creates more value for the customer, explains Gauthier, which builds a stronger attachment between him or her and the Prime program.

“It’s truly win-win. Conversion goes through the roof for the merchant, [the] customer gets…better treatment, and the Prime program, as a consequence of those two things, stands reinforced.”

Gauthier then raises the lid, as it were, on a new partnership that Amazon has entered into with British fashion retailer AllSaints. “The results,” he tells Webster, “have been eye-popping.”

In general, any merchant that fully implements Amazon’s Login and Pay API, overnight – “and I really mean overnight,” stresses Gauthier – Amazon becomes one of the merchant’s Top 3 methods of checkout. Specifically, AllSaints saw its conversion rate jump 34 percent.

There is a strong correlation, as Webster suspects, between big conversion rates like that and Prime members who are big shoppers.

FAMILIARITY DEFEATS FRICTION

That leads Gauthier to mention a few more sophisticated things that Amazon has been working on. The company’s business unit, Amazon Media Group – which handles digital advertising – is able to run campaigns on behalf of merchants that specifically target Amazon customers “in a variety of other places.” And when these customers are led to the merchant’s site, they see the familiar Amazon button.

The end result, says Gauthier, is that Amazon has “created, on the merchant site, an experience that is trusted and familiar.”

“Trusted, familiar…and easy,” it sounds like, offers Webster.

Gauthier dodges that compliment somewhat by pointing out that he has never seen a checkout solutions provider tout its own experience as “unsafe and inconvenient.”

For Amazon, he says, a pivotal addition to the common lineup of descriptive words – “fast, safe and easy” – is “familiar.

Lack of familiarity with a process makes customers anxious, and that equates to friction.

“Friction is not just a function of the number of clicks,” Gauthier espouses. It is also a function of how knowledgeable a customer is about the process and how trusting he or she is of the company behind it.

Speaking of that process, specific to the relationship of Amazon and its merchant partners, Webster is curious to know more about how the economics work.

Amazon receives a transaction fee for processing the payment, Gauthier explains, and the merchant pays for the Prime benefit. And while today the benefit is free shipping, he adds, “tomorrow you might see other Prime benefits,” citing the current example of free video on JetBlue flights.

ROLLING VIP

Amazon’s pitch to merchant partners, as Webster understands it, is to position itself as offering the top echelon of membership benefits anywhere on the Web – Prime is the consumer’s VIP Pass for shopping online or via mobile devices, and merchants that want to accommodate those VIP customers can now do that, and reap the rewards or higher conversions.

Gauthier concurs with that assessment, adding that what gets potential partners over the hump, as it were, is threefold.

First is the merchant’s complete understanding that getting into business with Amazon does not mean handing its data over to the company.

The second concern to be assuaged is that Amazon might displace the merchant’s CRM system – also not going to happen.

Lastly, Amazon puts merchants at ease with the fact that no information is shared without the consumer’s consent.

The external payments procedure that Amazon has in place today, Gauthier admits, is different from Checkout by Amazon, which he describes as having been more of an order-management system than a commerce identity system. Its implementation brought to light for Amazon some of the aforementioned issues that made merchants nervous, so the company has since moved away from it.

[pullquote]This company is so customer-centric, and so data-driven[/pullquote]

“This company is so customer-centric, and so data-driven,” says Gauthier, “that we don’t need to go and use other people’s data to understand what is important for our customers and to act on that.”

Amazon offers tools to help merchants better understand what’s happening on their site – for example, a conversion measurement tool that is solely for the merchant’s benefit. Doing so is logical, from Gauthier’s perspective, because for Amazon to promise an optimal experience at a third-party merchant that couldn’t deliver one would be to work against its own best interests.

AMAZON'S PLACE IN HISTORY

What Gauthier has explained, Webster notes, is a story not a lot of retailers seem to understand well. Gauthier actually believes that the problem is not so much a lack of detailed comprehension as it is a more general absence of realization.

“I think we’re one of the best-kept secrets in the industry,” he remarks.

This piece is, anyway, offers Webster, if not the ubiquitous company itself, whose overall success may have created a “them against us” perspective for other merchants.

What Gauthier hopes is that, when the history books are written, Amazon will be remembered for having changed the way that customer products are designed and customer experiences are created – all by operating from the position of what is best for the customer, not what is best for the company.

Webster agrees that, from a digital perspective, that would – and does – make for a very compelling story. She wonders, though, if there’s a piece missing – specifically, whether or not Amazon can use its massive capabilities in the digital eCommerce realm to drive customers to where a lot of retailers still need them: the physical stores.

Sure, Gauthier agrees – that’s where the retailers want the customers. But the question returns: Is that what the customers want to do?

“I knew you were going to say that,” remarks Webster.

“In the world ahead of us,” says Gauthier, “[consumers] will go to the store because they choose to – not because they have to.”

For retailers to fill up their checkout lines at physical locations, he offers, they need to follow the example not of what Amazon has done, but how Amazon has done it: by putting the customer first.

Patrick Gauthier, Vice President of External Payments at Amazon

Patrick Gauthier will be discussing more about how Amazon can be a great asset to merchants as a panelist at Retail Reinvention. Taking place August 4-5 in Chicago, Retail Reinvention is a 2-day experience hosted by PYMNTS that is designed to help merchants navigate the current and future wave of disruption across the retail payment and commerce landscape.

For more details on R2, click here.

——————————–

Latest Insights: 

Facebook is a giant in the ad game, with 2.3 billion active monthly users and $16.6 billion in quarterly advertising revenue. However, its omnipresence makes it a honeypot for fraudsters. In this month’s Digital Fraud Report, PYMNTS talks with Rob Leathern, Facebook’s director of product management, on how the site deploys automated systems and thorough advertiser vetting to close the lid on fraudster attempts.

1 Comment

TRENDING RIGHT NOW

To Top