Back in 1980 when I went to Warner Cable my boss, Gus Hauser, asked me to create a two way interactive marketing and distribution channel to enhance the QUBE service he had deployed. I took on the challenge with a collection of some of the most creative people I have ever worked with. One of them, Glenn Shapiro, had an MBA and JD from NYU and had a brilliant insight into marketing and sales. I had Richard Vieth who created single-handedly the software and communications on what was then rather rudimentary hardware and software. The team was in my opinion the best one could ever imagine. Shapiro saw us creating an electronic shopping mall, a place where existing stores could advertise, promote and sell their wares on line using our video on demand capability.
I had to think through the alternatives. At the time the simple model was one where we tried to connect supplier (namely the primary service or product provider) with the customer or buyer (or end user). We had before us several models.
1. End to end provider: Namely our system would buy from providers and then do everything in between to sell to the customer. We would view the system as having no intermediary and no wholesale entity. We rejected that due to the cost and complexity. At the time it was akin to a Sear.
2. Bazaar: This model was one where we just provided a platform with no assurances that anyone using it was a quality supplier and the customer purchased at their own risk. All we did was own the infrastructure, in this case the electronic distribution system.
3. Shopping Mall: In this case we would select sellers with some brand recognition and facilitate their access to the medium. It would be akin to a shopping mall agreement; quality and traffic.
There could be a multiplicity of other models. In 1980 we chose the shopping mall.
There is a piece in the NY Times where someone appears to have rediscovered our paradigms after 42 years. They note:
By the mid-2000s, Amazon was recruiting third-party sellers. If you owned, say, a chain of shoe stores, a representative might contact you and ask: Did you want to start listing shoes for sale? If you said yes, you would pay Amazon a fee. Amazon would send you the addresses of customers who had placed orders on the site all over the United States, and you would be responsible for sending them shoes. Periodically, Amazon would pay you, after taking its cut of what the customers had paid it. In 2006, a year after introducing its Prime membership for customers, Amazon created a service that would drastically expand the seller population. Fulfillment by Amazon, as it was called, enabled merchants to pay Amazon to warehouse and deliver their goods. By making sellers who used F.B.A. eligible for two-day Prime delivery, Amazon incentivized sellers to sign up. These third-party sellers deserve a lot of the credit for making Amazon the juggernaut it is. By competing with Amazon’s own retail division, they stocked the Amazon catalog, drove down its prices and subsidized the build-out of its infrastructure, both virtual and physical. It also meant that from the beginning, Amazon’s success was predicated on a degree of ignorance.
Amazon became a Bazaar. Namely it facilitated unknown and inaccessible sellers to offer their products. For example, I bought batteries from Amazon, they came and they were all knockoffs from China. Poorly replicated at that. I also bought a software license only to find it unusable and the vendor refusing to reimburse. The list goes on. Trust in Amazon disappeared. Totally! The return process went awry and the quality was gone. One bought the proverbial pig in a poke.
Now this is just not Amazon. I have tried Walmart and in a sense they are worse. They use third parties with little if any remediation in my opinion and my experience. Worse, they unilaterally change your order without your consent. They just tell you what you ordered has been changed to what they think you should have! Amazon has not gotten that low, yet.
Will this careless set of actions resulting in loss of trust force us back to brick and mortar stores? For some things they have. One cannot trust an online purveyor of pharmaceutical or related products. They most likely are made in China and with ingredients that are risky at best.
The solution is unfortunately FDA type regulation. In my opinion and in my experience this is something that Amazon is deficient in. Perhaps now is a time to get ahead of the bow wave.
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