YES, A $19.9 MILLION PRIVATE ISLAND ISN'T FOR EVERYONE, BUT THAT'S NOT THE POINT. AHALIFE FOUNDER AND CEO SHAUNA MEI SHARES HOW BUILDING AN AMAZING CUSTOMER EXPERIENCE WITH A HEALTHY DOSE OF SHOCK VALUE MAKES ONLINE SHOPPING SING.
After graduating with a degree in computer science and electrical engineering, Mei dabbled in finance before transitioning to the world of luxury retail and design. She now serves as the CEO of AHAlife, a luxury e-commerce website that gives customers the opportunity to discover high-end items not commonly available online. Mei believes that her willingness to take risks with bold, dream-worthy products sets AHAlife apart from the crowd.
Shauna Mei MIT grad and CEO of AHAlife, a luxury items ecommerce website (Click Image To Enlarge)
"I think there are too many shopping sites that will only put up what they absolutely think will sell. I think what we believe in is building an absolutely amazing customer experience."
In the retail frenzy leading up to last Christmas, Mei launched the AHA100, a list of the most-sought-after--if slightly unorthodox--products in the world. Customers could, were they so inclined and deep enough of pocket, purchase a $20,000 treehouse. Or, if they were even deeper of pocket, a $19.9 million private island, featuring a Frank Lloyd Wright-designed house on the property.
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"Those are ideas that we just kind of threw on there because they are really cool. We didn't think anyone would buy them."
Surprisingly, at the end end of the promotion, the treehouse had sold.
"When you give people a dream or a product that's amazing, there is that customer out there that will buy it."
Bottom Line: Experimenting with your product offerings can draw in unlikely customers
COMMENTARY: In a blog post dated October 1, 2010 titled, "8 Innovation Secrets From Apple CEO Steve Jobs," and a blog post dated October 6, 2011 titled, "How Steve Jobs' 'Digital Hub Strategy' Made Apple Into One of the Worlds Greatest Technology Companies," I commented Steve's innovation principle's for successful technology innovation. One of those innovation secrets was "Sell Dreams, Not Products." You can read about Steve's 8 innovation secrets below:
Shauna Mei is correct when she says too much emphasis is placed on selling products to your target customers instead of offering an insanely different and amazing customer experience. In a blog post dated June 14, 2013, I wrote about the five ways to build engaging customer-driven experiences, and I highly recommend you read it.
Courtesy of an article dated May 29, 2013 appearing in Fast Company
THE E-COMMERCE SITE FOR EVERYDAY DESIGN WARES IS GOING ANALOG WITH A NEW BRICK-AND-MORTAR RETAIL STORE--ONE OF A FEW NEW TRICKS THE COMPANY'S FOUNDERS ARE TESTING AS THEY ATTEMPT TO CONQUER THE WORLD'S DESIGN MARKET.
Fab's brand has become as synonymous with the term "pivot" as the e-commerce company's founders want it to be with "design." In three years, Bradford Shellhammer and Jason Goldberg havetaken Fab throughtwo failed gay-centric ventures and a successful flash-sale e-commerce business, expanding to 28 countries and about 600 employees along the way.
Goldberg says Fab's first store will be more like a showroom, where people can come to see products in person and sample materials (Click Image To Enlarge)
Interior view of Fab's new retail showroom store located in Hamburg, Germany (Click Image To Enlarge)
This is the first of multiple Fab retail stores that will open within the year, the second of which will also be in Germany, Goldberg says (Click Image To Enlarge)
So, naturally, the pair decided the time was ripe for another pivot.
Goldberg and Shellhammer unveiled the big details:
"Ikea and Amazon big" ecommerce website.
Overhauled suite of web and mobile apps.
New lines of "Exclusively Fab" products forged by an in-house design team of about 10 Fab-brand product designers and partners such as the Andy Warhol Foundation.
A new "Designed By You" option for shoppers to custom-order products.
Fab's first physical retail store in Hamburg, Germany.
The pair also announced Fab has acquired Massivkonzept, a German online custom furniture maker. Massivkonzept's custom-order tools will anchor the new Designed By You Fab channel, an outlet where shoppers--just in the EU to start--can order products to their exact specifications. Shellhammer says Designed By You will start off with mostly wood products, such as tables and shelving, as well as some upholstery and modular seating options.
The new Fab showroom in Hamburg, Germany, is a former showroom of German furniture maker Massivkonzept, which the company just acquired (Click Image To Enlarge)
Interior view of Fab's new retail showroom store located in Hamburg, Germany (Click Image To Enlarge)
Two-thirds of Fab's daily sales aren't from flash sales, but instead from search and browsing. So the new web and mobile apps feature beefed-up search functionality (Click Image To Enlarge)
Custom-order products will complement Fab's new push for its in-house designed products, which will initially include mostly textiles and tabletop items, but will soon also include luggage and furniture, Shellhammer says. He adds he expects to see 3,000 in-house designed products go to market by the end of the year.
Fab has created a designated 'Fab Outlet' space for products sold at deeper discounts. Goldberg says a 'small single-digit' percent of products sold on Fab fall in this category (Click Image To Enlarge)
Fab's new web and mobile apps now incl a billboard that constantly rotates out products based on your personal purchase and like history, and a 'trending' ticker that reflects what's popular right now (Click Image To Enlarge)
Fab is pushing exclusive products through high-profile partnerships with collaborators such as Blu Dot and the Andy Warhol Foundation. The company also has an in-house team of about 10 product designers (Click Image To Enlarge)
Sample materials for custom-ordered products, as well as other Fab wares, will also be on display at the company's Hamburg showroom, the first of multiple physical stores that will open this year (including a second store in Germany, Goldberg confirms). He also says Fab will experiment with various store concepts to evoke the same delight and kitsch of its online shopping experience. There's no word of a U.S. store yet, but considering Fab's international sales skyrocketed to 40% of its total in April, it's not too surprising the company has its sights set on maturing its global brand.
All of these bring Fab closer to the founders' ultimate goal: to become "the world's #1 design store." What does that mean? For starters, Goldberg believes "with certainty" that Fab will hit "double" its 2012 sales, which means the company will total roughly $300 million.
Courtesy of an article dated April 30, 2013 appearing in Fast Company
Last quarter, Amazon, which has been a freight train and Wall Street darling over the last year, surprised analystsby reporting lower-than-expected earnings. Expectations were high considering the holiday shopping season, but Amazon saw net income drop 45 percent to $97 million in Q4, compared to $177 million in 2011, although on the bright side, net sales continued to increase (by 22 percent) to $21.2 billion.
Today, Amazon continued the trend, still finding itself in a bit of a hangover after missing expectations in Q4. The eCommerce giant reported earnings from Q1 after the market closed this afternoon, in which it saw cash flow increase 39 percent to $4.25 billion, compared to $3 billion for the prior year, while net sales increased 22 percent to $16.07 billion in Q1, compared to $13.18 billion in first quarter 2012.
And by mixed results, we mean that Amazon blew away earnings-per-share expectations at $0.18 in Q1 on revenue of $16 billion. Leading up to today’s announcement, Wall Street expectations were much lower for EPS, with analysts expecting $0.08 EPS for the quarter. In turn, the Street expected Amazon to report sales of $16.2 billion, which the company just missed with $16.07 billion in sales.
In spite of the mixed results, as the market has been wont to do over the last year, Amazon’s stock was trending up, closing at $274.70 per share, on rumors that the company could be launching its own TV set-top box this fall, bringing more of the company’s hardware into your living room.
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Tellingly, in today’s announcement, Amazon founder and CEO Jeff Bezos didn’t touch on the numbers or falling profits, instead plugging the company’s efforts to take on Netflix with some original programming of its own for Instant Video customers. Last week, the company launched 14 new comedy and kids pilots on Instant Video, which quickly became the “most watched TV shows on Instant Video,” the company said Monday.
“Amazon Studios is working on a new way to greenlight TV shows. The pilots are out in the open where everyone can have a say,” Bezos said in today’s earnings release. “I have my personal picks and so do members of the Amazon Studios team, but the exciting thing about our approach is that our opinions don’t matter. Our customers will determine what goes into full-season production. We hope Amazon Originals can become yet another way for us to create value for Prime members.”
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Other points of interest:
Free cash flow fell 85 percent to $177 million year-over-year, compared to $1.15 billion in the year prior, due in part to dishing out $1.4 billion to purchase new office space in Seattle.
Operating income decreased 6 percent to $181 million in Q1, compared to $192 million in the same quarter last year, while net income fell 37 percent to $82 million from $132 million in Q1 2012.
The upside for Amazon continues to rise, thanks to its move into original programming and the expansion of its selection for Prime Instant Video, which is in part due to new licensing agreements with A+E, CBS, FX, PBS And Scripps. This means that shows like Downton Abbey, Justified and Under The Dome, as well as content from Food Network, the Cooking Channel, the Travel Channel and HGTV will all be headed to Amazon. The company said that Prime Instant Video now has 38,000 movies and TV episodes in its collecton.
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In addition, Amazon touted the launch of its new MP3 store for Safari, which allow iPhone and iPod touch users to discover and purchase digital music from the company’s catalog. This comes on the heels of reports today that the influence of the company’s Appstore is growing and shows high revenue potential. Amazon also announced its Cloud Player for iPad and iPad Mini this quarter, extended AutoRip to vinyl records and announced the launch of Kindle Fire HD 8.9″.
Amazon MP3 Store Optimized for Safari and iOS Devices (Click Image To Enlarge)
Good news also came for authors and readers, as Amazon announced that it will start paying its authors their royalties monthly, ahead of the twice-a-year industry standard, along with the acquisition of popular book recommendation hub, Goodreads.
All in all, it was a busy quarter for Amazon, especially for AWS, which launched a slew of new products over the last few months and again lowered its prices. The company said in its announcement today that AWS “has lowered prices 31 times since it launched in 2006, including 7 price reductions so far in 2013.”
Looking forward, Amazon is lowering expectations, however, as it said today that it expects sales to come in between $14.5 billion and $16.2 billion next quarter — equivalent to a 13 to 26 percent increase from Q2 2012. In turn, it expects operating income to be between -$340 million and +$10 million. In other words, a potential loss.
In response to Amazon.com's statement of lowered earnings for the rest of 2013, on Friday, April 26, 2013, the market hammered Amazon.com (NASDAQ:AMZN) stock, as it dropped 19.89 points or down 7.24% to end trading at 254.81.
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In its press release issued on April 26, 2013, Amazon.com cited the following highlights for the quarter ending March 31, 2013:
Amazon.com expanded selection for Prime Instant Video, announcing new licensing agreements with A+E Networks,CBS Corporation, FX, PBS Distribution and Scripps Networks Interactive, bringing exclusive access to popular television series such as Downton Abbey, Justified and Under the Dome as well as shows from HGTV, DIY Network,Food Network, Cooking Channel and Travel Channel. Prime Instant Video now includes more than 38,000 movies and TV episodes that are available for Prime members to watch at no additional charge.
Amazon Studios, the original film and series production arm of Amazon.com, debuted 14 original comedy and kids pilots. The pilots, which feature stars such as John Goodman, Jeffrey Tambor and Bebe Neuwirth, are available exclusively atwww.amazonoriginals.com and on the Amazon Instant Video app for Kindle Fire HD, Kindle Fire, iPad, iPhone, iPod touch, Roku, Xbox 360, PlayStation 3, Wii and Wii U, as well as hundreds of other connected devices. Viewer feedback will help determine which pilots Amazon Studios will produce into full series.
Amazon expanded the popular Kindle Fire feature “X-Ray for Movies” to TV shows, bringing the power of IMDb directly to the most popular TV shows on Kindle Fire. With a single tap viewers can discover the names of actors and what they've been in, without even leaving the TV show.
Kindle Owners’ Lending Library has grown to over 300,000 books available to borrow for free as frequently as a book a month, including many titles exclusive to Amazon.
Amazon announced the launch of the Amazon MP3 store optimized specifically for Safari browser. For the first time ever, iPhone and iPod touch users can discover and buy digital music from Amazon’s 22 million song catalog. Amazonalso announced its Cloud Player app for iPad and iPad mini, enabling customers to play or download music stored in Cloud Player to their device, play music that is already stored on their device, and manage or create playlists.
Amazon announced it has extended its popular AutoRip services to vinyl records. AutoRip provides customers with free MP3 versions of CDs and vinyl records they purchase from Amazon. Additionally, customers who have purchased AutoRip CDs or vinyl records at any time since Amazon first opened its Music Store in 1998 will find MP3 versions of those albums in their Cloud Player libraries – also automatically for free.
Amazon announced the launch of Kindle Fire HD 8.9” — the large-screen version of its best-selling tablet —for theU.K., Germany, France, Italy, Spain and Japan. With the expansion of Kindle Fire HD 8.9” to Europe and Japan,Amazon also announced a lower price on Kindle Fire HD 8.9” in the U.S., with the Wi-Fi version starting at $269 and the 4G version starting at $399.
Amazon Publishing, the publishing arm of Amazon.com, announced that it will start paying authors their royalties monthly, 60 days in arrears — allowing authors to receive payment more frequently than the twice-a-year industry standard.
Amazon acquired Goodreads, a leading site for readers and book recommendations that helps people find and share books they love. Goodreads members can discover new books by seeing what their friends are reading or by using the Goodreads Book Recommendation Engine; share ratings and recommendations; track what they have read, and list what they want to read.
Amazon Web Services (AWS) announced the launch of Amazon Redshift, a fast and powerful, fully managed, petabyte-scale data warehouse service in the cloud for a fraction of the cost of a traditional data warehouse.
AWS launched AWS OpsWorks, an application management solution for the complete lifecycle of complex applications, including resource provisioning, configuration management, deployment, monitoring, and access control.
AWS announced Amazon Elastic Transcoder, a highly scalable service for transcoding video files between different digital media formats. Amazon Elastic Transcoder manages all aspects of the transcoding process transparently and automatically, providing scalability and performance by leveraging AWS services.
AWS announced AWS CloudHSM, a new service enabling customers to increase data security and meet compliance requirements by using dedicated Hardware Security Module (HSM) appliances within the AWS Cloud. The CloudHSM service allows customers to securely generate, store and manage cryptographic keys used for data encryption in a way that keys are accessible only by the customer.
AWS has lowered prices 31 times since it launched in 2006, including 7 price reductions so far in 2013.
Q1 2013 Financial Reports
Below are the following financial reports for Amazon.com for the quarter ending March 31, 2013:
Consolidated Statement of Operations for the quarters ending March 31, 2013 and March 31, 2012.
Supplemental Net Sales Information for the quarters ending March 31, 2013 and March 31, 2012.
Consolidated Statements of Cash Flows for the quarters ending March 31, 2013 and March 31, 2012 and Year-Ending December 31, 2013 and December 31, 2012.
Consolidated Balance Sheets for the quarter ending March 31, 2013 and Year Ending December 31, 2012.
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Amazon.com website traffic measured by unique visitors is tracked by Compete.com (see below) has steaily increasing since March 2012, and peaked at 138.3 million unique visitors at the end of December 2012 due to Christmas shopping, but has since declined to more normal levels. At the end of March, Amazon.com reached 129.7 million unique visitors.
Amazon.com Unique Visitors, Rank by Unique Visitors and Competitie Rank by Unique Visitors as of March 31, 2013 (Click Image To Enlarge)
What's Costing Amazon.com
Although Amazon's net income for the quarter ending March 31, 2013 declined significantly from the same quarter last year, profit margins were higher in Q1 2013 than Q1 2012 -- 26.56% vs. 23.95%, but the following operating expenses as a percentage of net sales were much higher in Q1 2013 than Q1 2012:
Fulfillment costs -- 11.18% (Q1 2013) vs 9.82% (Q1 2012).
Technology and content costs -- 8.61% (Q1 2013) vs. 7.17% (Q1 2012).
Marketing expenses -- 3.93% (Q1 2013) vs. 3.64% (Q1 2012).
Amazon.com is subsidizing a portion of the cost that it charges customers for its Kindle Fire tablets, but hopes to recover that cost by charging for its Prime service offerings and incremental sales from apps, digital music, hardcover and digital books, accessories and other retail products. According to several experts, this strategy seems to be working, but the exact amount that Amazon.com is making from post-tablet sales revenues and services is not known.
The Potential of Amazon's Cloud Computing
As an inducement for customers, Amazon.com is absorbing a significant amount of shipping costs on some orders meeting a certain amount, but this is costing the company in the bottom line. Amazon.com has also made extenive investments in its technology infrastructure in order to keep pace with its cloud computing services, increased sales volume and higher inventory carrying costs needed to fulfill orders.
According to Quartz, a digital research firm, Amazon.com now generates $2.4 billion in revenues from its cloud computing services, which Amazon refers to as Amazon Web Services. However, at the present time, Amazon.com does not charge customers for storing digital content on its cloud service. Apple, on the other hand, charges for storing digital content purchased outside Apple's ecosystem. The addition of MP3 Store for the iPhone, could eventually generate incremental revenues for Amazon.com if iPhone users start downloading digital content from Amazon.com, since there are no cloud storage costs. Amazon.com carries a lot more music and book titles than Apple iTunes, and that is a huge inducement.
Courtesy of an article dated April 25, 2013 appearing in TechCrunch, a press release dated April 26, 2013 issued by Amazon.com and
THE STYLISH EYEWEAR PURVEYOR OPENS ITS FLAGSHIP STORE TODAY. COFOUNDERS NEIL BLUMENTHAL AND DAVID GILBOA SHOW US THE MAGIC BEHIND 121 GREENE.
Warby Parker stormed the retail glasses industry in 2010 with a novel way to sell its affordable, stylish specs: online. Hundreds of thousands of sold pairs later, the boutique glasses purveyor is today opening the doors to its brick-and-mortar flagship store, at 121 Greene Street in NYC's SoHo neighborhood.
The Warby Parker storefront at 121 Greene Street in New York City (Click Image To Enlarge)
Front door entrance to the new Warby Parker store on Greene Street in the SOHO district of New York City (Click Image To Enlarge)
Warby Parker rapidly built a thriving e-commerce business through an innovative model that eschewed costly expenses, such as brand licensing fees, and sold product directly to consumers, allowing the company to sell glasses for as low as $95 a pair.
Warby Parker cofounders Neil Blumenthal and Dave Gilboa in the new Greene Street store (Click Image To Enlarge)
But cofounders David Gilboa and Neil Blumenthal tell Fast Company their brand has had a brick-and-mortar presence almost since its inception. Their first retail location? Blumenthal's apartment.
"We literally would invite people to come to the apartment and we’d lay the glasses on the dining room table. We thought it was going to be this sub-optimal experience, and it ended up being something really special."
They eventually opened up a showroom in New York City and set up displays within several smaller boutique retailers across the country, including The Standard hotel chain's Los Angeles and Miami locations, where guests can visit Warby's kitschy, '60s-themed "Readery" kiosks.
What you see when you walk in. Hopefully you see it even clearer when exiting (Click Image To Enlarge)
Custom terrazzo flooring embedded with the Warby Parker logo. Partners & Spade dreamed up the store's design conceit (Click Image To Enlarge)
Books by 14 partner publishers in Warby Parker's lobby remind you just how bad you need to be at this place (Click Image To Enlarge)
But Blumenthal and Gilboa have sprinkled the flagship store with an extra dusting of retail magic, taking a few cues from their neighbor across Greene Street: the Apple Store.
"What I think Apple did tremendously well when they launched retail was not to focus on how to shove as many products into the footprint as possible. It was really focused around creating a magical experience. That's what we've tried to create here."
When you walk into 121 Greene, you'll find rolling library ladders, a photo booth, reading materials from Warby-approved independent presses, and mirrors upon mirrors, so you'll never have to travel far to peep a glance at your bespectacled self.
Literary themes abound: The look of the store is inspired by a library. Books on Warby Parker's shelves are color-coded--eggshell, kelly, cerulean, crimson, and aubergine. And the cofounders combined the name of two early Jack Kerouac characters, Zagg Parker and Warby Pepper, to name their company (Click Image To Enlarge)
Warby Parker eyewear is prominantly displayed on well-lit shelves for close inspection and test wearing by customers (Clik Image To Enlarge)
Blumenthal and Gilboa say the store is an early testament to where the retail industry is headed.
"The future of our business and all retail is going to have some online and some offline component. The world doesn’t have to be black and white."
The store's high ceiling has four rolling ladders attached to the walls. Here's the view from a top one of the ladders (Click Image To Enlarge)
Sunglasses and optical glasses--men's and women's--are mixed throughout the display around the store (Click Image To Enlarge)
The store sells books, too. Warby Parker teamed up with 14 publishers to display selected books from their catalogs on 14 different shelves. Shown here are Melville House Books (Click Image To Enlarge)
COMMENTARY: What was inevitable that Warby Parker would have to open retail stores. Eye vision examinations, filling eyewear prescriptions and fitting glasses requires a lot of personalized service. You cannot do this online. It's a real hassle for Warby Parker customers to have to go to an optometrist to have their eyes examined and obtain a prescription for their lenses, then have to provide this information to Warby Parker so that the lense prescription can be filled. A store provides a completely new customer retail experience that you cannot get from an online store, no matter how well designed your online store is.
Having a brick-and-mortar eyewear store fills another very useful purpose -- it provides an additional level of convenience for existing Warby Parker customers. Warby Parker probably sold a lot of eyewear to customers living in New York City, and having a local store to serve those customers, and future customers, will be very good for business.
The New York store will doubtless increase Warby Parker's operating expenses. Retail space is very expense in New York, and you have also have the added cost of store clerks and an on-premise optrometist.
Warby Parker's original strategy was to disrupt the present retail eyewear industry, but it now appears to have taken a 180 degree turn in that strategy. Only time will tell whether operating real stores will economicaly feasible without disrupting its original strategy.
Courtesy of an article dated April 14, 2013 appearing in Fast Company
How low will Amazon’s tablets go? We’re now hearing that a $99 Kindle Fire 7″ tablet is in production, and will be shipping this year. At a price that low, the Kindle Fire would be able to more easily compete at the tail end of the Android-based tablet market – an area which is today dominated by low-cost tablets out of China, often sold at the sub-$100 price point.
According to what we’ve heard, the $99 Kindle Fire HD will also still sport a TI processor like the rest of the lineup, and will have a 1280×800 resolution, like today’s Kindle Fire HD 7″ does.
This report follows an Amazon announcement made earlier this month about reduced prices on its Kindle Fire HD 8.9″ devices. The Wi-Fi-only version will now cost $269, down from $299, while the LTE version dropped from $499 to $399. It also follows news of a forthcoming carrier billing dealthat’s about to go live - something which hints that Amazon is now scaling up and becoming more aggressive with its product line up.
Amazon CEO Jeff Bezos unveiled the new Kind;e Fire HD 7-inch and 8.9 inch tablets on September 9, 2012. The Kindle Fire HD 7-inch tablet with 16 Gigs of storage is $199.00. The larger 8.9-inch tablet with 16 Gigs of storage is $269. (Click Image To Enlarge)
Typically, a price drop signals one of two things – that the manufacturer or retailer is attempting to clear out inventory ahead of a new model, or that it just wants to sell more of the item, at a faster pace. According to other industry experts with visibility into tablet usage trends we’ve spoken with, the Kindle Fire HD 8.9″ is not Amazon’s most popular model – the 7″ HD tablet is.
Today, the Kindle Fire HD tablet is priced beginning at a reasonable price starting at $199, while predecessor the older Kindle Fire (non-HD, 2n generation) s an even lower $159.
While a $99 price may seem extraordinary, IDC Research Director on tablets, Tom Mainelli, says that such a thing actually sounds reasonable. His firm just put out an updated tablet marketshare forecast this week, stating that this year tablets running Google’s Android operating system would overtake the iPad for the first time. The Amazon Kindle Fire, of course, uses its own forked version of Android.
Mainelli explains that Amazon’s competition isn’t just the iPad, it’s all these low-cost tablets running Android. Over Black Friday and the holidays in particular, you could get a $199 HD tablet from Amazon, the slightly cheaper non-HD version, or you could buy a $99 (or even in some cases $79) Android tablet from relatively unknown manufacturers in places like Walgreens, CVS, Bed, Bath & Beyond, and elsewhere.
“The infrastructure is definitely in place for Amazon to go even lower. If they can sell the product at roughly what it costs to build, that fits their long-term vision to make money selling you content on that device. It’s entirely possible – physically possible – to create a device that costs $99, particularly at the scale that Amazon would do it.”
Android tablets prices across the board are coming down, too, which also lends credence to this possibility. For example, even HP recently announced a $169 Android device. Everyone in this space is beginning to attack the sub-$199 price point, given that Apple has staked out the high-end of the market at $329 and up.
So if the game is becoming “how low can you go?”, Amazon is in a good position to compete here, as it’s historicallybeena low-margin business. It doesn’t care what it makes from tablets right now – it’s about getting consumers a device which connects them back to the Amazon ecosystem, where they will spend on other Amazon products and services.
Mainelli also points out that the TI – the processor brand that Amazon uses in its current Kindle Fire devices – has been getting out of the chip business. It was even rumored last fall that Amazon was in advanced talks to buy TI. That never ended up happening, but what that story points to is that Amazon has deep ties with the chip maker, and could have easily cut a deal where it agreed to buy up TI’s remaining remaining stock for cheap. That could help Amazon now deeply discount its tablets retail prices.
“We sell the hardware at our cost, so it is break-even on the hardware.”
Amazon could break even at the $99 price point, and get its tablet into more people’s hands by doing so, pulling them in to its ecosystem.
For what it’s worth, Amazon denies that such a price drop will be happening. A company representative told us.
“We are already at the lowest price points possible for that hardware.”
For that hardware, maybe.
COMMENTARY: A lot of mobile device experts predicted that Amazon.com would lose money on the original Kindle Fire 8.9-inch tablet when it was introduced to the media in New York on September 28, 2011. It now turns out that Amazon is breaking even on the hardware at its current price of $159.00 (originally $199.00).
Amazon CEO Jeff Bezos took a huge gamble when he launched the original 8.9-inch Kindle Fire tablet at a price of $199. Many mobile experts predicted that the Kindle Fire would lose $50 per table, but it now appears that the risk Jeff took was worth it, because he more than likely broke even on the hardware, but he generated substantial incremental profits from selling accessories, extended warranty contracts and apps off the ecommerce giant's site. In a blog post dated October 2, 2011, I wrote about Amazon's increasing returns strategy, and it now appears that I was correct in guessing that Amazon was still make a profit from selling the original Kinddle Fire.
It now appears that Jeff Bezos believes that there is a huge virtually untapped market for a 7-inch tablet priced at $99, and he is willing to gamble once again, that he can still make money. If the rumors of an Amazon $99 tablet are true, then Jeff Bezos is the master of the increasing returns strategy.
Courtesy of an article dated March 20, 2013 appearing in TechCrunch and an article dated September 7, 2012 appearing inTech-Thoughts
The man responsible for Amazon’s mobile shopping strategy talks about app design, shopping habits, and how to make it easier to act on your impulses.
Sam Hall doesn’t just eat his own dog food, as the Silicon Valley saying goes. He also orders it on his mobile phone.
As vice president of mobile shopping at the world’s largest online retailer, Hall is in charge of making sure it’s easy, and very fast, to shop on Amazon using its apps and mobile websites. His mantra is that people should go from “wanting to buying in 30 seconds,” and Hall is a compulsive tester of the process, using his phone to buy basketball hoops, dental floss, shampoo, and even a gorilla costume for Halloween.
Sam Hall, Head of Amazon Mobile Shopping Strategy (Click Image To Enlarge)
Mobile shopping is still a sliver of overall retail, and of Amazon’s revenue. While the company doesn’t divulge details, analysts think that maybe 8 percent of the company’s $61 billion in annual sales come from phones and tablets. But Hall’s domain is growing as more people use smartphones and tablets. Amazon runs a slew of mobile apps, including the basic Amazon Mobile shopping app. There’s also Flow, which pulls up price information (and a chance to buy on Amazon instead) for any product you aim your smartphone’s camera at.
Amazon is tight-lipped about its operations and plans, and Hall is no exception. MIT Technology Review spoke with him about his work.
What’s the big thing on your mind these days?
I spend most of my time worrying about how we continue to invent, on behalf of our customers, newer, faster, better, easier ways that they can shop on their mobile phones and tablets.
You’ve said Amazon wants to shorten the time between wanting and buying an item to less than 30 seconds. How short can it get?
We believe that customers want the time from wanting to buying to be as close to instant as possible.
How do you do this, technologically?
We are very, very focused on making sure our experiences are fast. That every page loads quickly—from the time you press the icon on your phone to the time you see a search box, it’s very, very quick. For instance, we focus on input. We know one of the hardest things about shopping on a mobile device is just inputting what you want.
What is an example of how you design for that?
When you’re typing in something in the search box, we put up search suggestions very, very quickly. Earlier this week, I ran out of razor blades. I use Gillette Fusion razor blades. I was able to type “gil” and one of the first few suggestions that came up was Gillette Fusion razor blades. I only had to type the first three letters of what is probably a 26- or 27-letter title to quickly get to that item.
Some researchers are working on software that tries to actually anticipate what a person wants. Is Amazon involved in this type of research?
What I can say is, we have a search team that focuses specifically on the very fastest way we can get customers from typing in what they want to the detail page of what they actually want.
What are the most surprising things you’ve learned about people’s shopping behavior on mobile devices?
I think people tend to assume there are certain categories that do better on mobile than others, but the reality is, customers are buying everything on their mobile phones. We’ve sold, believe it or not, engagement rings, bicycles, razor blades, jeans, dresses. People buy the whole variety of what Amazon has.
Another recent observation that’s been interesting is that one of our busiest days happens to be on Christmas Day, for mobile phones and tablets in particular. My theory, at least, is you open up all your presents, you didn’t get what you want, and you’re able to quickly buy what you really wanted for Christmas.
COMMENTARY: On August 30 2013, Amazon.com CEO Jeff Bezos claimed that Amazon held a 22% share of the tablet market. According to several mobile experts, Amazon sold between 5.5 and 6.0 million Kindle Fire tablets in Q4 2011, and according to BGR sold another 12 million units in the year 2012 (not confirmed by Amazon). Amazon's entry into the tablet industry, has given Apple, the market leader, a run for its money. In 2011, Steve Jobs called the Samsung Galaxy Tab, a 7" tablet, "dead on arrival." That prediction proved to be wrong, and on October 23, 2012, Apple responded to the threat by Amazon and other 7-inch tablet producers, by introducing the iPad Mini, it's own 7-inch tablet.
Amazon has always recognized the importance of making its website mobile-ready and providing online shoppers with the ability to shop via moble devices that make the Amazon shopping experience a pleasureable and user-friendly experience. The introduction of the Kindle Fire has not doubt left an inprint on Amazon's mobile ecommerce business, ranking it No 2 right behind Apple.
Online shopping has become increasingly popular over the past decade. In 2011 Amazon.com will hit $2 billion in sales through smartphones and tablets worldwide; that's up 100% from $1 billion in 2010, according to Internet Retailer's new industry guide, The Mobile Commerce Top 300. That puts Amazon at No. 1.
Citi Analyst Neil Doshi estimates that Amazon is generating $3 billion to $5 billion in annual sales from mobile devices. The company’s net sales totaled $61 billion in 2012, which means that mobile sales will equate to 5 percent to 8 percent of total dollars spent on Amazon.
Among the top 10 companies on this list, both Apple and Amazon had the largest percentage of mobile-only (smartphone or tablet) users in comparison with their entire digital reach. Nearly 35 percent of U.S. visitors to Apple properties and 22 percent of Amazon traffic came strictly through mobile.
Compare that to Microsoft, who had just over 5 percent of its users accessing its content via mobile-only. Important to note that comScore’s mobile numbers reflect iOS and Android users only.
The average company in the Top 100 grew its reach by an average of 38 percent when adding mobile-only users statistics. The biggest movers were Groupon (up 223%), Zynga (111%) and Pandora (183%).
comScore will update the new rankings every month. Check out the full list here.
Jeff Raider and Andrew Katz-Mayfield, the co-founders of a new startup called Harry’s (Click Image To Enlarge)
BY GOING ONLINE TO ELIMINATE THE MIDDLEMEN, WARBY PARKER CHANGED THE EYEWEAR INDUSTRY. NOW, ONE OF ITS CO-FOUNDERS HOPES TO DO THE SAME FOR RAZORS.
When Andrew Katz-Mayfield recently found himself spending 20 confusing minutes and $20 in the razor aisle at his local drugstore, he started thinking about how to remove the frustration (and the big spend) from the experience. Katz-Mayfield also happens to be a childhood friend of Jeff Raider, a co-founder of the online eyeglasses retailer Warby Parker who took a similar approach to simplifying the process of trying and buying glasses.
On the Harry’s website, customers can spend $15 for the Truman kit, which includes the Truman handle, three blades, and a tube of cream (Click Image To Enlarge)
Or, they can spend $25 for the Winston, a slightly more luxe version of the razor (Click Image To Enlarge)
And now, 18 months and a great wooly mammoth logo later, we have Harry’s, a startup hoping to add a dose of charity and value to the shave industry. The company worked with an 80-year-old razor manufacturer in Germany and a stateside industrial designer to develop a handle, which is inspired by antique pens and butter knives. Online, customers can spend $15 for the Truman kit, which includes the Truman handle, three blades, and a tube of cream developed with a local cosmetics studio, or $25 for the Winston, a slightly more luxe version of the razor. Replacement blades go for $2, and a single razor can be had for as little as $10.
Harry’s blades are made by a 90-year-old company in Germany (Click Image To Enlarge)
Their technique produces blades that are incredibly hard and sharp--and rare to come by, in the US (Click Image To Enlarge)
Similarly to Warby Parker, there’s a social responsibility angle, too--for every razor you buy, Harry’s will donate one to an organization that helps people “look good and feel good.” Right now, it’s a nonprofit that helps soldiers reintegrate to life outside of a warzone.
A worker at the plant in Germany (Click Image To Enlarge)
A stateside industrial designer developed the Harry’s handle, which is inspired by antique pens and butter knives (Click Image To Enlarge)
Will the online-only, high-value business model translate to a lower margin product, like razors? Warby’s approach was so successful because it broke a long-standing monopoly with an innovative service model--in other words, it was a pain in the ass (and wallet) to buy glasses, and Warby offered a way to sidestep both the inconvenience and the cost by selling direct to consumers.
The product design aims to hit a sweet spot between great design and affordability (Click Image To Enlarge)
The head is replaceable, while the handle is designed to last (Click Image To Enlarge)
Harry’s faces more of a hurdle when it comes to the market for shaving tools, of which there are plenty of affordable options at every drugstore in town. They’re also not the first to take razors online--you may have heard of Dollar Shave Club, a site that made a viral splash last year. says Katz-Mayfield says.
“They had a really funny video and it struck a chord. But they’re a retailer, and we actually design and manufacture our own products.”
The razors are nicer than the drug store brand, but not hugely expensive (Click Image To Enlarge)
Replacement blades go for $2, and a single razor can be had for as little as $10 (Click Image To Enlarge)
The profit margins on razorblades certainly aren’t as high as eyeglasses, but Raider and Katz believe there’s room for innovation, mainly in terms of the brand experience. Gillette might be as cheap, and Dollar Shave Club might be as convenient, but neither boast the design quality or social responsibility angle. And eventually Harry’s may take the brand offline and into barber shops and pharmacies. Katz-Mayfield says.
“We’re not trying to build a website. We’re trying to build a brand that will be distributed in lots of different ways over time.”
Harry’s also developed its own cream, with help from a local cosmetics company (Click Image To Enlarge)
COMMENTARY: I like Harry's business model very much because razor blades are replenishable items, and unlike Warby Parker, don't require eye exams and lens prescriptions, and this means a quicker sales cycle and lots of repeat sales. If Netflix can do it with movies-by-mail, RedBox with movie kiosks, and Warby Parker with eyewear, why not Harry's in replacement razor blades. Gillette the global leader in replacement razor blades has a commanding 80% market share, so there is plenty of room for industry disruption, but I think they will need to provide overnight service to keep up with the demand for instant gratification that razor blades command. This is never going to be a volume busines, but their uniqueness and quality German made razor blades provides just enough differentiation that some customers who want high quality at an affordable price are will to part with their money.
WHY DOES THE NEW EBAY LOOK A LOT LIKE PINTEREST? ENVY? MAYBE. BUT PHOTO-FORWARD CONTENT IS REALLY JUST A GREAT WAY FOR USERS TO WINDOW SHOP.
If your browsing habits are anything like my own, you stopped going to eBay half a decade ago. It’s not necessarily that my penchant for old stuff has diminished--in fact, I’m more interested in vintage furniture and electronics than I’ve ever been before. It’s just that. I mean. It’s eBay. It’s a relic from the Geocities era.
eBay’s new Feed turns your homepage into an endlessly tiled board of discovery (Click Image To Enlarge)
eBay VP of Design Marie Floyd Tahir tells me.
“When eBays of the world first came online, the transaction needed to work. That was the bar. It was like, oh my god, I can get this thing! I actually got my item! We’re so far from that now.”
The Internet was far from that bar, but eBay was not. The world had cell phones and social media, yet eBay had the same search-and-sort format it always had. So with that in mind, just over a year ago, Tahir and her team set out to give eBay its biggest homepage facelift since launch.
eBay provides users with overlays of hot or popular items superimposed over tiled images of other items. (Click Image To Enlarge)
The most significant change is that they’ve instituted a new feature called the Feed. Fans of Pinterest will find it familiar. You put in a few key terms--like “Rolleiflex cameras” or “Dom Perignon”--and eBay will generate a custom, interest-centric, endlessly scrolling board of images for you to explore. Adding, deleting, and customizing these items (with a dauntingly specific list of categorical parameters) is extraordinarily easy. Better still, you can preview how new search terms will look, and everything is downright instantaneous to implement.
You choose what you’d like to see with extreme specificity. No niche is too small, and then you can even refine topics within that niche (Click Image To Enlarge)
Notably, once your interests are set, this feed greets you every time from eBay.com. Maybe that doesn’t seem like a revolution, but contrast this with the eBay of yore: The site was essentially a search bar, supported by a few thumbnails of recently viewed items. It wasn’t just generally unattractive, it was unappealing, forcing the user to initiate the conversation anew each time.
“We [always] supported buying and selling in a transactional way. But the inspiration and discovery seemed like untapped potential areas. Walking down the street and seeing something in a window and have it catch your eye--that’s the real-world experience we want to, not emulate, but make better.”
Taking their feed for a spin, I immediately found eBay to be a more inviting platform. I was welcomed by a variety of things I actually like--vintage Pyrex, classic Eames furniture, and old cocktail shakers (still searching for that perfect shaker, btw, if you have any suggestions), rather than a bunch of old offers that I’d already passed on or had already expired. I was discovering more, more quickly, simply because eBay stopped hiding their best goods behind a UI curtain.
These interests form a collection that you can delete or modify with a click (Click Image To Enlarge)
Of course, while I thought that I was discovering more, more quickly, that was a bit of an illusion, or at minimum, a mental hack. Tiled images are more effective for discovery than lists because theyslow your eye down, forcing it to zigzag through content, like reading a book, rather than enter an endless free-fall, like on Twitter. Part of the effectiveness of the feed is merely in that it gets me to actually look at the images eBay had all along. They really are forcing customers into a routine more akin to window shopping.
As a result, whatever you consider Ebay’s best goodies to be are no longer hidden behind a search bar (Click Image To Enlarge)
Even still, the design is only as effective as the infrastructure. Interest in Charles “Eames” flooded my feed with suggestions, not from eBay artificial intelligence or a reliable cross-referenced database but from eBay users who have spam-tagged every piece of old furniture with every midcentury modern designer in existence. So I was still left sorting through quasi-customized content, which can be a frustrating half-step away from true personalization.
And from experience, I can attest, the platform really does suck you in by forcing your eyes to zigzag around the page and take more time to explore the images than they would on a simple list (Click Image To Enlarge)
The other problem is that in photo-forward design, the design is only as beautiful as the source photography. This works on Pinterest, as people share the most beautiful studio-produced thumbnails and the service is generally beautiful as a result. But on eBay, their source photography--at least for vintage items--inevitably consists of someone using a flash in front of a dusty, wrinkled curtain. Seriously. I knew eBay photography was bad, but I had no clue just how bad until my feed so eagerly showed me.
To see more details, you simply click on the image and a low information density lightbox appears. Consider it your pricetag buffer between window shopping at the shopping counter (Click Image To Enlarge)
“It’s an issue we’ve been improving upon. In the two years since I’ve been here, we’ve rolled out policies to get rid of the graffiti--where items like camera kits are blasted with a number of different logos. We’re making strides, but it comes with time, as [user] attitudes to photography change.”
So does that make eBay’s photo focus a mistake? Is the change “too soon” for a company so steeped in Internet tradition? I don’t think so. A more visual eBay can only offer sellers more incentive to sell visually. Besides, so far, users with the Feed activated visit eBay more often, for longer and buy more items than eBay users who don’t. Assuming that Feed cohort doesn’t simply include eBay’s most active users to begin with, it seems like things are working out better already.
COMMENTARY: They say that "imitation is the biggest form of flattery," but in eBay's case, it is obvious that the auction giant does not consider Pinterest a potential threat. Pinterest could easily change its business model to challenge eBay in the online auction space, but this would be a dramatic step for the king of pinning, so the change over to a Pinterest style, is more for cosmetic reasons and it could even be a form of a pre-emptive strike. eBay's new look could be a response to rumors that it is losing some sellers to Pinterest and that its site has become boring, and this is obviously not good for business. The change to the Pinterest style is good for online window shopping, and for now, that is the principal reason for the change.
Founded in March 2010, Pinterest is still relatively young as a company and seems to be growing by the minute. During 2012, it grew from 20 employees to 100 as its user base went up from 9 million to about 40 million. This makes it the largest social media platform in users per employee.
Click Image To Enlarge
There are many interesting numbers behind this chart:
With 400,000 users per employee, Pinterest has almost twice as many as the second largest company Facebook, with 249,000 users per employee.
Pinterest also has the lowest number of users, 40 million.
Facebook, with 1.06 billion users, is the largest social media platform.
LinkedIn has as many users as Twitter, but while Twitter has about 900 employees, LinkedIn has 3500.
Google+ is not in our chart since Google will not reveal how many of its employees that work specifically on Goggle+.
However, when compared on the basis of number of active users, Facebook, Google+ and Twitter are the dominant social networks as of January 2013. Pinterest still has a long way to go before it can challenge any of the other social networks or eBay for that matter.
Click Image To Enlarge
Why is Pinterest gaining so much popularity? One main reason could be that it is an exclusive club. It’s not like other social network sites that you just join, you need to get an invitation and there’s an actual waiting list. Another reason could be that it’s full of pinboards with eye-catching pictures and also the clean design could be an add-on.
Click Image To Enlarge
eBay's Q4 2012 Earnings Call Report
On January 16, 2013, eBay reported its Q4 and full-year 2012 earnings, with revenue for the fourth quarter ended December 31, 2012, increasing 18 percent to $4 billion, compared to the same period of 2011. The company reported fourth-quarter net income on a GAAP basis of $751 million, or $0.57 per diluted share, and net income on a non-GAAP basis of $927 million, or $0.70 per diluted share. Net income was up 22 percent for the quarter.
For the full year, revenue increased 21 percent to $14.1 billion, compared to 2011 when revenues for the year were $11.6 billion. The company reported net income on a GAAP basis of $2.6 billion, or $1.99 per diluted share, and net income on a non-GAAP basis of $3.1 billion, or $2.36 per diluted share. eBay says that it enabled more than $175 billion of commerce volume (ECV) in 2012, representing growth of 18 percent. ECV is the total commerce and payment volume across all three business units consisting of Marketplaces GMV, PayPal merchant services net total payment volume, and GSI global ecommerce (GeC) merchandise sales.
PayPal’s active account growth accelerated to 15% and ended the year with approximately 123 million registered accounts. PayPal added nearly 2 million accounts a month in the fourth quarter, representing the company’s fastest active account growth rate in years.
Payment volume increased 24 percent, producing revenue growth of 24 percent, thanks to merchant and consumer adoption coupled with geographic expansion. PayPal’s mobile payment volume reached nearly $14 billion in 2012, up more than 250 percent over the prior year, as more consumers used their smartphones and tablets to pay online.
eBay CEO John Donahoe commented on its mobile revenues.
“Mobile continues to rewrite the commerce playbook, and we continue to be a mobile commerce and payments leader. eBay mobile finished the year with $13 billion in volume – more than double the prior year – and PayPal mobile handled almost $14 billion in payment volume, more than triple the prior year. In 2013, we expect each to exceed $20 billion.”
Pinterest does not report its revenues, but they are very small. It has a long way to go before it can match the firepower of an eBay.
A baby boomer is a person who was born during the demographic post-World War II baby boom between the years 1946 and 1964, according to the U.S. Census Bureau.The term "baby boomer" is sometimes used in a cultural context. Therefore, it is impossible to achieve broad consensus of a precise definition, even within a given territory. Different groups, organizations, individuals, and scholars may have widely varying opinions on what constitutes a baby boomer, both technically and culturally. Ascribing universal attributes to a broad generation is difficult, and some observers believe that it is inherently impossible. Nonetheless, many people have attempted to determine the broad cultural similarities and historical impact of the generation, and thus the term has gained widespread popular usage.
Baby Boomers - Born between 1946 and 1964 (Click Image To Enlarge)
Baby Boomer Facts and Figures:
Size of the Boomer and Senior Markets
77 million people were born between 1946 and 1964, which is defined as the baby boomer era (U.S. Census).
The first baby boomer turned 65 on January 1, 2011.
An American turns 50 every 7 seconds—that's more than 12,500 people every day (U.S. Census).
The senior age group is now, for the first time, the largest in terms of size and percent of the population in the U.S. This age group grew at a faster rate than the total population between 2000 and 2010, according to a 2010 Census brief.
More people were 65 years and over in 2010 than in any previous census. Between 2000 and 2010, the population 65 years and over increased at a faster rate (15.1%) than the total U.S population (9.7%).
By 2015, those aged 50 and older will represent 45% of the U.S. population (AARP).
Baby Boomers make up 35% of the American adult population (Scarborough).
By 2030, the 65-plus population will double to about 71.5 million, and by 2050 will grow to 86.7 million people (U.S. Census).
In 2050, the number of Americans aged 65 and older is projected to be 88.5 million, more than double its projected population of 40.2 million in 2010.
Wealth of Baby Boomers and Seniors:
The 55+ age group controls more than three-fourths of America's wealth (ICSC).
78 million Americans who were 50 or older as of 2001 controlled 67% of the country's wealth, or $28 trillion (U.S. Census and Federal Reserve).
Baby Boomers control most of the net worth of American households and they account for 40% of total consumer demand.
Boomers and seniors have seen a decrease in their median family net worth, however they still have a net worth 3x that younger generations (Economic Policy Institute).
Boomers' median household income is 55% greater than post-Boomers and 61% more than pre-Boomers. They have an average annual disposable income of $24,000 (US Government Consumer Expenditure Survey).
The 50+ have $2.4 trillion in annual income, which accounts for 42% of all after-tax income (U.S. Consumer Expenditure Survey).
Adults 50 and older own 65% of the aggregate net worth of all U.S. households (U.S. Consumer Expenditure Survey).
Spending Habits of Adults 50+:
Baby Boomers outspend other generations by an estimated $400 billion each year on consumer goods & services (US Government Consumer Expenditure Survey).
In 2009, spending by the 116 million U.S. consumers age 50 and older was $2.9 trillion, up 45% in the past 10 years (Bureau of Labor Statistics).
Baby Boomers account for nearly $230 billion, or 55%, of consumer packaged goods sales (Nielsen).
In 2010, adults 45-years-old and older outspent younger adults by $1 trillion annually.
Americans over 55 spend 50% of all vacation dollars in America (ICSC).
55-64 year olds outspend the average consumer in nearly every category, including: food away from home, household furnishings, entertainment, personal care, and gifts (US Government Consumer Expenditure Survey).
Women over 50 spend $21 Billion on clothes annually (US Government Consumer Expenditure Survey).
Baby boomers take great pride in the appearance of their homes as 27% have had landscaping done in the past year and they are 21% more likely than all American adults to have spent $10,000 or more on home improvement in the past year (Scarborough).
The NAHB predicts that the aging in place remodeling market to be $20-$25 billion. That's about 10% of the $214 billion home improvement industry.
96% of baby boomers participate in word-of-mouth or viral marketing by passing product or service information on to friends (ThirdAge and JWT Boom).
Online Habits of Adults 50+:
One-third of the 195.3 million internet users in the U.S., adults aged 50+ represent the Web's largest constituency (Jupiter Research).
Two-thirds of Americans 50+ buy from e-retailers online (Pew).
89% of seniors 65+ have personal email and use it regularly (Nielsen).
72% of baby boomers have broadband internet in their homes (ThirdAge and JWT Boom).
36% of adults 50+ own a smartphone (Pew).
44% of smartphone owners age 50+ access the Internet or check email daily from their device (Pew).
Adults 45+ account for 34.7% of current tablet users (comScore TabLens).
From 2004 - 2009, the number of seniors age 65+ actively using the Internet increased more than 55% (Nielsen).
27.4 million people age 55 and over engaged in social networking with nearly 19 million of those people using Facebook (comScore).
Adults 50+ spend an average of $7 billion online annually (SeniorNet).
72% of adults 55-63 and even 47% age 73+ shop online (Forrester).
41% of internet users 50-64 and 27% age 65+ say they watch videos online (Pew).
The Internet is the most important source of information for baby boomers when they make major market purchases, such as automobiles or appliances (Zoomerang).
42% of all travel industry purchases happen online, and adults 50+ account for 80% of all luxury travel spending (Pew Internet and American Life Project).
82% of adults aged 50+ who use the Internet research health and wellness information online (Pew Internet and American Life Project).
The top four online websites for people over 60 are Google, Facebook, Yahoo and YouTube (AARP).
In order to be effective in marketing to today's Baby Boomers and Seniors, marketer's must have a thorough understanding of how Baby Boomers buy, the Baby Boomer mindset and know that all Baby Boomers are no alike. Let's look at each element in this process.
Part I - Understand Why Boomers Buy
Over the last 20-to-25 years, smart marketer's have learned a few things about how Baby Boomers buy. Here are a few of these insights, which were published several years ago, and we think are worth sharing again.
Increased individualism - Baby Boomer and senior customers are less subject to peer influence than younger customers. Marketing Implication: Keeping up with the Joneses is not as important as it once was; thus advertising that invokes social status benefits doesn’t play as well in Baby Boomer and senior markets as in younger ones. Largely freed from worrying about reactions of others, Baby Boomer and senior customers tend toward greater practicality in buying decisions than younger customers. This increases individualization (autonomy) in behavior which makes it more difficult to predict what they will do in the marketplace.
Increased demand for facts - Baby Boomer and senior customers tend to be less responsive to sweeping claims in marketing messages as they age. Marketing Implication: Hyperbole turns them off. If Baby Boomer and senior customers are interested in considering a purchase, they want unadorned facts, and more of them, than they usually wanted earlier in life. Years of buying equip Baby Boomer and senior customers with knowledge of what to look for and what information they need for an intelligent purchase. However, they often don’t get to the point of asking for facts until a product has emotionally intrigued them.
Increased response to emotional stimuli - Baby Boomer and senior customers tend to be quicker than younger customers to reflect emotionally a lack of interest in or negative reaction to an offered product. Marketing Implication: Such “first impressions” are more likely to be permanent than among younger who are more likely to give a marketer a second chance. On the other hand, you can embed a positive first impression especially deep in the emotions of the older person — so much so that the Baby Boomer and senior customer is often more disposed to be a faithful customer than the younger customer.
Less self-oriented, more altruistic - Baby Boomer and senior customers tend to show increased response to marketing appeals reflecting altruistic values. Marketing Implication: This tracks with common middle-age shift toward stronger spiritual values in which concern for others increases. As altruistic motivations become stronger, narcissistic and materialistic values wane in influence. Marketers to Baby Boomer and senior customers must rethink their traditional egocentric appeals in marketing communications.
Increased time spent in making purchase decisions - As most people grow older, they experience changes in their perceptions of time, but also in its meaning and role in their lives. Marketing Implication: For example, Baby Boomer and senior customers often ignore time-urgency strategies in marketing — such as: “Offer good until —,” “Only three left in stock—etc…” Generally, “time is not of the essence” is a common attitude among Baby Boomer and senior customers, especially those who have retired.
See fewer differences between competing products - Because Baby Boomer and senior customers tend to be more highly individuated, and less influenced by external influences, perceptions of products are more internally shaped. Marketing Implication: They typically conclude that there is really little difference between products as may marketers’ claim. This contrasts with the tendency of younger customers to assert robustly the differences between a product they prefer and its competitors — even when clear differences don’t exist. In beer tasting tests, for example, young customers often cannot distinguish their favorite brews from others. Beer marketers can influence perceptions of beer taste as much as brew masters can.
See more differences between competing companies - Baby Boomer and senior customers tend to be more responsive to “companies with a conscience” than younger customers. Marketing Implication: From a self-interest perspective, they are also more attentive to warranty issues and a company’s reputation for honoring its warranties than younger customers.
With respect to making discretionary-purchase decisions, Baby Boomer and senior customers tend to : 1) Have a decreased sensitivity to price; 2) Increased sensitivity to affordability; 3) and, sharply increased sensitivity to value. Marketing Implication: Baby Boomer and senior customers have more complex ways of determining value than younger customers. Value determination by Baby Boomer and senior customers tends to be an existentialist exercise whereby they combine soul (spiritual) values as well as mind (intellect) and body (tangible) values into the value determination process. Not only does an item purchased symbolize some aspect of the customer’s being, the entire purchase experience can be a projection of the customer’s whole being.
For example, a person with a passionate concern for a favorite charity may more likely purchase a product from a company with a program benefiting the charity. To that customer, the product has a high Metavaluesindex; that is, an element of value unrelated to the product performance. Appraisal of Metavalues takes place mostly at subliminal levels of the mind because Metavalues tend to reflect deeply embedded, “background” emotional needs. Younger customers tend to reflect more transparent motivations. After a mature customer develops strong interest in a discretionary product purchase and determines that a brand has acceptable holistic value (basic plus Metavalues) affordability can easily become more important than price in the final decision.
The differences in customer motivations and decision processes between customers in the first and second half of life sometimes frustrate many marketers who have yet to figure out how to market to older customers. Until recently, this was not a matter of serious concern because the young dominated the marketplace. The young are easier to sell to and analyze. Now, with adults over the age of 40 in the majority, marketers are being compelled to figure out the values and behavior of older customers.
Part II - Understand The Boomer Mindset
In order for marketer's to connect successfully with today's Baby Boomer generation, marketer's must understand a Baby Boomer's thinking process -- more specifcally, marketer's must be able to look inside the Baby Boomer mind.
Motivations do not originate in the conscious mind - The conscious mind is the executive officer that, like a corporate CEO, makes decisions on needs that have been framed at lower levels. Neurologist Richard Restak states in The Brain Has a Mind of Its Own, “We have reason to doubt that full awareness of our motives may be possible.” Adds brain researcher Bernard Baars in In the Theater of the Brain, “Our inability to report intentions and expectations simply reflect the fact that they are not qualitatively conscious.” Marketing Implication: Answers customers give researchers about their motivations are often incomplete or off the mark simply because people can only speculate about their motivations at deepest levels of the psyche. Creators of product messages need to become more intimately familiar, than is typical, with the “hidden drivers” of customers’ behavior about which they have little explicit knowledge. These drivers tend to be stage-of-life specific. For example, young people generally have stronger outer-directed motivations relating to social status than younger customers. As they age Baby Boomer and senior customer’s motivations tend to be qualitatively more experiential and less materialistic than younger people’s motivations.
People use different brain sites and mental processes in answering researchers’ hypothetical questions than they use in real-life situations - Research respondents tend to draw more heavily on the objective sequential reasoning of the left brain than on the subjective emotional right brain in answering researchers’ questions. This bias is reversed in favor of the right brain in reacting to product messages and making buying decisions.Marketing Implication: We can improve research results by techniques that are more effective in defining customers’ implicit testimonies that have not been distorted by undue influence from left-brain processing. The recent trend toward studying customers in their natural living and shopping environments is justified by the finding that people process hypothetical information differently than they do real-life information. Researchers need to make more use of indirect techniques to get behind the curtains of consciousness.
Brain development is lifelong. How people mentally process information changes from one decade of life to the next - This alters how people view and connect with the external world (worldview). Language style preferences also change over time. For example, youth and young adults generally have a more assertive language style than Baby Boomer and senior customers. Marketing Implication: Product messages will be more effective when expressed in the stage-of-life language style of the core market to which you primarily address the message.
Adolescent brains are significantly inferior to adult brains in reading facial expressions - The older people are, the more skilled they generally are at reading facial expressions. Marketing Implication: Product messages depicting people should reflect awareness the core audience’s ability to read facial expressions. For instance, older people’s greater sensitivity to facial expressions means that facial expressions should bear authentic connection to the product and product message in Baby Boomer and senior customer markets. Younger customers will generally be more concerned with what people are doing than with what their faces are saying.
As midlife (40+) approaches, people increasingly draw on right-brain functions - They begin relying less on left-brain sequential reasoning and more on emotions – a.k.a., “gut feelings” or intuition. Marketing Implication: Product messages for people over 35 should have more affect (emotional toning) than product messages for younger people. Under 35, people tend to have a stronger reasoning bias, thus product messages generally should implicitly or explicitly promote concrete reasons for purchase.
Information entering the brain’s cortex (outer layers) is first processed mostly in the right brain - The right brain processes information as sensory images rather than as words and numbers. The left brain works in numbers and words. Marketing Implication: To arouse the strongest attention, product messages should be rich in sensory stimuli. Even though the right brain can’t process words, words can create sensory images, as every storyteller knows. The older a market, the more important it is to present a product in story form.
Emotion, not reason, is the final arbiter in decision-making - Initial responses to information entering the brain are visceral. Changes in body states (e.g., pulse, hormonal flow, saliva flow, body temperature, etc.) generate emotions. When a matter fails to generate emotions, a person will not take action on it. (Brain patients who have lost their emotional abilities while retaining full powers of comprehension and reasoning cannot make advantageous decisions in which they have a personal stake in the outcome.) Marketing Implication: A cardinal rule for developing effective product messages is go with the grain of the brain or “Lead with the right; follow with the left.” The only way to get into a person’s conscious mind is via the right brain. Again, the use of sensory images is a key to getting into the right brain.
The differences in customer motivations and decision processes between customers in the first and second half of life boggle many marketers who have yet to figure out how to market to older customers. The young are easier to analyze and sell to. Now, with adults over the age of 40 in the majority, marketers are being compelled to figure out their values and behavior.
Part III - Understand That Baby Boomers Are Not All Alike
A significant pitfall is to lump all boomer and older customers into the same group. The average Baby Boomer and senior customer doesn't exist. Behaviorists have discovered that no two people see anything exactly the same way. No view we have of anything can be fully congruent with anyone else's view because, like fingerprints, every brain is unique as are the five senses that connect us to the world outside our minds. However, there are stage-of-life values and motivators shared by us all.
Gender tends to predispose responses to voice-overs in broadcast advertising - For example, research tells us that male voices are more knowledgeable when describing technical attributes of a product, while female voices are more knowledgeable when describing a product with references to love, relationships and caring. Marketing Implication: Choose the voice to match the content and delivery style of a product message.
Pictures of people in motion arouse the brain more quickly than posed pictures -Marketing Implication: Avoid posed pictures like the plague. Motion conveys vitality. Posed pictures convey lifelessness. You should mostly avoid posed pictures in marketing to Baby Boomer and senior customers, although marketers commonly use posed pictures for that market.
Each experience we have prompts the brain to create clusters of neurons (brain cells) with predisposed responses to new but similar experiences - As the population of these dispositional clusters increases, a person becomes more habituated and reflexive in his or her responses. This decreases sensitivity to external influences, like advertising, making a person more autonomous. Marketing Implication: Dispositional clusters are the marketer’s equivalent of “hot buttons.” The older we are the more hot buttons we have. This is good news and bad news for marketers. First the bad news: It’s harder to change people’s patterns after the early adult years. Now, the good news: When a marketer hits a customer’s hot buttons, the deal is all but made. The challenge is learning what those hot buttons are. Fortunately, there is remarkable consistency in the general nature of hot buttons among people in the same season of life. Knowledge of the developmental attributes of customers in a given season will guide a marketer to connect with their hot buttons.
Initial determination of information relevance occurs unconsciously - When a person sees an ad, or a TV spot the right brain initially determines if it has personal relevance. The sequential reasoning processes of the left-brain only go to work on the ad after it has reached consciousness. The right brain conducts a process called information triage to reduce information flow to levels the conscious mind, with limited working memory (RAM) can handle. The primary criterion is relevance to a person’s interests. Marketing Implication: Imagine having a conversation in your office or at a social gathering when you hear your name come up in another conversation not far from you. Your brain was hearing the other conversation all along, but only when your name was mentioned did it see fit to alert your conscious mind to the other conversation. That’s what information triage is about. Creating product messages that survive information triage is the biggest challenge in marketing. It has become fashionable to complain about advertising clutter. However, the clutter problem is in the brain, not on a television screen or in a magazine. When a message has relevance to a person’s interest, the right brain will take note. When we talk about having a “double take,” we acknowledge the right brain’s ability to pick up in a nanosecond something that has relevance to our interests.
Increased price-sensitivity in nondiscretionary spending - As they age, many customers develop higher economic “literacy” and skillfully apply it to get the best price — an objective not to be confused with “getting the best value”. Marketing Implication: Bargains primarily reflect price factors while implicit in the term “value” are all attributes of the product, the purchase experience and the expected ownership experience. In purchasing “need” items, Baby Boomer and senior customers tend to be more bargain-minded, whereas in purchasing “desire” items, they tend to be more value-minded in a holistic sense.
Often project what seems to be contradictory behavior - We sometimes characterize Baby Boomer and senior customers as selfish and selfless, penurious and profligate, spontaneous and deliberate, and so on. These conflicting attributes lead some to characterize Baby Boomer and senior customers as contradictory — or at least, confusing in their behavior. Marketing Implication: However, Baby Boomer and senior customers are not contradictory in their behavior; they are sensitive to context in their behavior. For example, a Baby Boomer and senior shopper may appear needy in using cents-off coupons in a grocery store, after which she drives off in a Mercedes. This is not evidence of contradictory behavior, but an example of the rules of thriftiness applied to basics, and the rules of whole value applied to discretionary expenditures. In the first case, price is the common denominator in customers’ interest, in the second, there is no common denominator because each person calculates whole value in a unique manner.
We’ve learned that it’s about new rules, new mindsets and new processes. In short, it is about a new, authentically customer centric paradigm. New paradigms challenge the mind because the mind has a natural bias toward preserving the old ways; even when old ways cease working as they once did. But when pain caused by an old paradigm’s breakdown exceeds peoples’ threshold of tolerance, they begin warming to new alternatives.
Finally, we’ve learned that today’s marketplace is unlike any before faced before. Most of its adult members are in the years when the influences of what Maslow called self-actualization begin to show up in behavior. Until the New Customer Majority emerged, these forces had little noticeable influence on the marketplace at-large. Now however, such attributes of self-actualization oriented behavior as the following are widely evidenced in the marketplace:
Perceptions – more conditional, less absolutist (shades of gray vs. black and white)
Relationships– more autonomous, less dependent on sources (such as advertising) in making decisions
Social behavior – more individuated, less subject to “herd behavior,” less easy to pigeon hole into segments
Decision making – moreemotional (as in “gut feelings” or intuition), less “rational” in decision processes.
Courtesy of an article dated January 7, 2013 appearing in MediaPost Publications Engage:Boomers, an article dated February 4, 2013 appearing in MediaPost Publications Engage:Boomers, an article dated March 4, 2013 appearing in MediaPost Publications Engage:Boomers, and an article appearing in ImmersionActive
For building a suite of communications apps (instant messaging) that 300 million Chinese are talking through. That massive audience has flocked to Tencent's WeChat (or Weixin, as it's known in China), the Chinese Internet giant's suite of social networking plug-ins, in less than two years. Why? WeChat is less expensive, clearer, and faster than calling people on the phone. Late last spring, Tencent opened up its platform to other developers to create cool things for WeChat. Plus, Tencent's aggressive international rollout--rare for a Chinese company--has added millions of expats who can now communicate with folks back home, increasing its popularity. In America, WeChat is a top 20 free social networking app in Apple's App Store.
Tencent's WeChat messaging app (Click Image To Visit Site)
For unlocking our image obsession. A year ago, the social scrapbooking site was dubbed the fastest-growing web service in history. Where do you go from there? Up. Pinterest is now one of the top 50 most-visited sites in the U.S., and retailers are excited. The average purchase off a pinboard nets more than double those off a wall post or a tweet. Late last year, it simplified the process for companies to create pinboards. In January, it made its first aquisition, the recipe site Punchfork. Meanwhile, the Pinterestization of the web continues--a trend as hot as Pinterest itself.
For reinventing how news (and advertising) is shared. When he founded BuzzFeed in 2006, serial entrepreneur Jonah Peretti--who'd previously cofounded the Huffington Post--thought of it as a new-media mad-science lab. Social sharing was the next big distribution channel, he reasoned, and BuzzFeed was a place to create silly shareable content. The site is still brimming with listicles and cat videos, but over the past year, BuzzFeed has undergone a remarkable transformation: It's now also a serious news site and a pioneer in the world of social advertising.
For letting its community help fill the racks. Customer engagement proves profitable for Susan Gregg Koger and her husband Eric, founders of the virtual thrift shop turned e-commerce success story. Through its Be The Buyer program, products brought to market through customer voting sell twice as much. ModCloth took that to the next level in 2012 by letting the community actually submit designs too. Visit any of their social platforms, from Facebook to Twitter, and you'll see creative interactive campaigns and a commitment to user engagement.
For creating a socially-savvy e-commerce startup factory. The name is not an accident. For CEO Michael Jones and his partners, launching disruptive e-commerce companies means deep analysis of big bets. They also specialize in identifying the best social tools to create fans and turn them into customers and brand advocates. For example, Heather Lipner's Uncovet harnesses social data to make a virtual, personalized boutique for each of her 200,000-plus subscribers; Hello Insights helps companies use a data-driven approach to turn Pinterest users into shoppers; Dollar Shave Club's Michael Dubin created the viral marketing video of the year for his subscription shaving gear.
For evolving into the social commerce destination for design wares. Visit Fab's website, and you find something akin to a social network for the design-obsessed. In fact, Fab started off as a social network, so you could say social media is baked into its DNA. CEO Jason Goldberg and cofounder Bradford Shellhammer constantly reimagine Fab, which matured last year from three-day flash sales to dozens of online boutiques of design-centric products for such niches as foodies and pet lovers.
For proving that ads and great content can mix in social media. Last May, the image-heavy, meme-tastic social network entered the fraught world of social media advertising--but demanded that brands act like its users. That meant creating visual, beautiful, fun, shareable content. The response was impressive: By year's end, Tumblr had vaulted into the top 10 most-visited websites in America, with more than 80 million blogs that net more than 700 million visits and almost 18 billion page views.
For being the Match.com for startups. Venture capital was a who-you-know business, until AngelList made a mass introduction. Like online dating, its transparent network connects startups with accredited investors, and now even well-connected entrepreneurs are using it. Success stories include Uber, BranchOut, and GetAround--and its recent partnership with the private exchange SecondMarket lets any accredited investor put as little as $1,000 into a startup.
For speeding up the pace of software development. It's not just a social platform, it's a collaborative platform: Like a coder's wiki, it allows programmers to co-develop and share code. Facebook used it to build a bug-tracking tool; LinkedIn uses it to maintain its People You May Know and Skills & Endorsement features. GitHub also offers custom services for corporations, to let businesses collaborate on code internally.
For reimagining what conversation looks like online. Branch is a place where Twitter conversations go to live better. Where Twitter is an egalitarian free-for-all--anyone can butt in, uninvited, to any public conversation on Twitter, for better or worse--Branch fosters highly-curated conversation. Hosting a Branch is like holding a dinner party or a salon in a glass living room: anyone can watch, but only the chosen can participate. Unlike most other social networks, Branch isn't cloistered away inside its own domain or apps: Branch conversations can be embedded on other websites; chaotic Twitter conversations can be "Branched" into more serene Branch threads; and individual Branch comments can be Branched into separate conversations, as well.
Click Image To Visit Site
COMMENTARY: Tencent Holdings,which operates as QZone, has sharpened its focus on Southeast Asia’s mobile messaging space after it opened a joint-venture in Indonesia, the region’s largest country. The move is aimed at increasing the presence of its WeChatservice among the country’s 249 million population, according to Daily Social.
China's Top 4 Social Networks in 2012 (Click Image To Enlarge)
The Chinese Internet giant has linked hands with local company MNC Media to create ‘MNC Tencent’ with the express intention of taking the WeChat app — which recently passed 300 million downloads — to the next level, and establishing a pathway to promote other services.
The company has not provided specific market data, but Tencent previously identified Hong Kong, Taiwan, Singapore, Malaysia, Thailand and Vietnam as markets were it is seeing promising traction and has the potential for further growth.
China's Top 4 Social Network Demographics and Statistics (Click Image To Enlarge)
Tencent has been busy promoting WeChat in Indonesia through a campaign that has combined local meet-ups with celebrities, visible marketing campaigns and — as of last week — a broadcast TV ad campaign. Daily Social says that these efforts have seen its daily sign-up rate for WeChat hit an impressive 90,000 in the country.I
I love BuzzFeed, Science, ModCloth, Fab and GitHub. They definitely are on specific missions to solve a real problem or fill an interesting need in the marketplace. Not all of them are social networks, but do serve a social purpose. I didn't even know about Science, ModCloth and GitHub until I read Fast Company's post. Well worth checking these out.
If you are looking for angel capital, AngelList should be on the top of your list. If you get turned down, don't feel bad. About 97% of venture founders applying for seed capital get turned down. I got turned down at least three times.