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Kynetic CEO Michael Rubin: We Owe All of Our Success to Amazon

Kynetic CEO Michael Rubin says that they owe all of their success to Amazon. “I owe all of our success to Amazon because we are such a big believer in what they were doing, a completely differentiative business model,” Rubin said. “What we’re doing is really all about vertical commerce.”

Michael Rubin, CEO of Kynetic which also owns Fanatics, Rue Gilt Groupe, and ShopRunner and is one of the largest privately held companies in the United States, recently discussed how his companies have become so successful in an interview with Jim Cramer of Mad Money:

What I See is How Much Opportunity There is In China

What I see as an entrepreneur is how much opportunity there is in China. When I went there it’s one of those things you had to see to believe it. We had 45 million people watch our preseason basketball game. Think about that, 45 million people watching a preseason basketball game! That’s like half of a Super Bowl rating. That’s home rabid the basketball fans are in China.

So for me, I think we have nothing but growth opportunity in China. We’re just launching Fanatics there. It’s a massive opportunity and we think we could build a multi-billion dollar business there. I couldn’t be more bullish on the opportunity.

I Owe All of Our Success to Amazon

Fanatics is a really exciting business. I’ll break this down really simply for you. I had a core belief that Amazon and Alibaba we’re going to control ecommerce everywhere in the world. So if you have that belief, you’ve got two options, completely differentiate yourself or go out of business. I’m not a guy who wants to go out of business so you’ve got to completely differentiate yourself.

People say all the time, “How do you feel about Amazon?” I owe all of our success to Amazon because we are such a big believer in what they were doing, a completely differentiative business model. What we’re doing is really all about vertical commerce. We design, develop, and sell directly to the consumer most of the products that we have, so it’s a completely different business. Think about it like an H&M or a Zara, but in the sports license business and mostly online.

Kynetic is All About Verticality

We’re designing the jersey, well actually in the case of the jersey, Nike designs the jersey, but going forward we’re actually gonna manufacture the jersey and sell directly to the consumer. But I’ll tell you, just over the Super Bowl specifically, we sold two and a half million units of Eagles merchandise. Two and a half millions units of Eagles merchandise within a few weeks after the Super Bowl and we design those products, we manufacture those products, we ship them directly to the consumer.

Because of the verticality, the consumer gets a wider assortment of merchandise, they get anything they want, they get it more quickly, and the leagues and teams make more money. We are also using that data to better communicate with the fans, so it’s a win-win for everyone.

If you really think about the sports license business and if you think about the sports leagues, what a league wants and what a team wants is to have the best marketing brand in the world. Nike is this incredible brand, but they don’t wake up every day and go to bed every night thinking about how do I maximize every sale in the licensed sports business. So what the leagues did was smart, they said let’s split this from one set of rights to two sets of rights. Let’s work with Nike to be this incredible marketing partner and then really use it to drive the Nike brand and the NFL brand. At the same time let’s work with Fanatics to drive transactions. Now you’ve got two companies instead of one really growing the business as much as possible.

We Made the Businesses What They Are Today

For us, the truth be told and people ask this all the time, “Was eBay smart for selling the businesses? First, eBay was very focused, they didn’t want to be in the owned inventory business. Number two, these were teeny companies. When I bought Fanatics back from eBay it was a 250 million dollar company. It’s going to do $ 2.3 billion dollars this year. It has a completely different strategy. When we bought back Rue la la from eBay it was a $ 200 million business, then we bought Gilt and now it’s close to a billion-dollar business. ShopRunner didn’t have $ 100 million in transactions and next year it’s going to do three or four billion dollars in transactions.

We took these businesses, we’ve developed the strategies, we’ve evolved them, and we’ve made them into what they are today. And Here’s the most exciting thing, we’re just getting going.

My Loyalty is All About Who Makes Us the Most Money

Other than the Sixers my loyalty is all about who makes us the most money, so I’m very easy to swap teams. If I own the Panthers I would be rooting to destroy the Eagles. I mean I love Jeffrey, he’s my buddy, but business is business and sports is sports. You’re there for one reason which is to win. I actually always laugh when people come up to me before a game and say, “Hey good luck.” I wish I could tell them good luck, but I’m like for the next three hours I hope you die. I love you before the game and I love you after the game, but there’s no love during the game.

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NYU Stern Professor Scott Galloway: Amazon is a Monopoly that Should be Broken Up

NYU Stern Professor Scott Galloway says that Amazon is a monopoly that should be broken up. “When one company can take down the price of any other consumer company, almost by a third, just with press releases, I would argue that the markets are no longer competitive. The key to this great system we call capitalism is that no one player has too much power,” stated Stern.

Scott Gallowy, NYU Stern Professor, recommended that Amazon should be broken up in an interview on Fox Business:

Jeff Bezos Lost the Value of Nordstrom Yesterday

I believe that Amazon from an investors perspective is probably a buy. Essentially, you had a company whose valuation may have gotten a little bit over its skis. Rising interest rates, the threat of a slowdown, and also the specter of regulation took this stock down. I think Jeff Bezos actually lost the value of Nordstrom just personally yesterday, his net worth declined $ 9 billion. I would argue from a strictly economic, business, and shareholder standpoint, Amazon has never been stronger. Whenever they bump up against any big tech companies they’re winning.

Amazon is Effectively a Monopoly

My issue is that when you have one company that controls 50 percent of all ecommerce, that small companies never get out of the crib and large companies are prematurely euthanized, who tend to be better taxpayers and employers. While it’s great for shareholders to have shares in a company that is effectively a monopoly, in a growing economy I would argue that we have a proud history of moving in on companies in terms of antitrust regulation and we’re at that point in the economy with Amazon.

Won’t the Markets Take Care of This?

Walmart was hauled before Congress when they were at 11 percent of retail and Amazon was only at 6 percent. However, I think a more apt analogy would be railroads or Ma Bell or even Standard Oil, where we decided that effectively the markets were no longer competitive. You now have a company where if it just puts out a press release saying that it will address health care costs, and we don’t even know if that means they are giving employees gym memberships or that meant that they are starting an HMO, on opening bell the healthcare industry sheds $ 31 billion in value.

Good for Shareholder, Good for the Company, Good For the Planet

When one company can take down the price of any other consumer company, almost by a third, just with press releases, I would argue that the markets are no longer competitive. The key to this great system we call capitalism is that no one player has too much power. In addition, I think if you broke up Amazon shareholders might benefit. If you spun AWS, soon after the spin the two companies in aggregate might be worth more than the two companies combined. So good for the shareholders, good for the company, good for the planet.

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SearchCap: Taking pitches for SMX West, Amazon ads skyrocketing, Google AMP & more

Below is what happened in search today, as reported on Search Engine Land and from other places across the web.



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Advertising on Amazon? Take our survey and win a ticket to SMX!

Five minutes of your time could earn you an All Access Pass to any SMX conference in the U.S.



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SearchCap: Take our Amazon survey (please!), SMX Advanced session recap & more

Below is what happened in search today, as reported on Search Engine Land and from other places across the web.



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Elite SEM acquires CPC Strategy with an eye toward growing its Amazon practice

The e-commerce-focused agency has more than 125 employees and a proprietary retail search advertising optimization platform.



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How to Win Some Local Customers Back from Amazon this Holiday Season

Posted by MiriamEllis

Your local business may not be able to beat Amazon at the volume of their own game of convenient shipping this holiday season, but don’t assume it’s a game you can’t at least get into!

This small revelation took me by surprise last month while I was shopping for a birthday gift for my brother. Like many Americans, I’m feeling growing qualms about the economic and societal impacts of putting my own perceived convenience at the top of a list of larger concerns like ensuring fair business practices, humane working conditions, and sustainable communities.

So, when I found myself on the periphery of an author talk at the local independent bookstore and the book happened to be one I thought my brother would enjoy, I asked myself a new question:

“I wonder if this shop would ship?”

There was no signage indicating such a service, but I asked anyway, and was delighted to discover that they do. Minutes later, the friendly staff was wrapping up a signed copy of the volume in nice paper and popping a card in at no extra charge. Shipping wasn’t free, but I walked away feeling a new kind of happiness in wishing my sibling a “Happy Birthday” this year.

And that single transaction not only opened my eyes to the fact that I don’t have to remain habituated to gift shopping at Amazon or similar online giants for remote loved ones, but it also inspired this article.

Let’s talk about this now, while your local business, large or small, still has time to make plans for the holidays. Let’s examine this opportunity together, with a small study, a checklist, and some inspiration for seasonal success.

What do people buy most at the holidays and who’s shipping?

According to Statista, the categories in the following chart are the most heavily shopped during the holiday season. I selected a large town in California with a population of 60,000+, and phoned every business in these categories that was ranking in the top 10 of Google’s Local Finder view. This comprised both branded chains and independently-owned businesses. I asked each business if I came in and purchased items whether they could ship them to a friend.

Category

% Offer Shipping

Notes

Clothing

80%

Some employees weren’t sure. Outlets of larger store brands couldn’t ship. Some offered shipping only if you were a member of their loyalty program. Small independents consistently offered shipping. Larger brands promoted shopping online.

Electronics

10%

Larger stores all stressed going online. The few smaller stores said they could ship, but made it clear that it was an unusual request.

Games/Toys/Dolls etc.

25%

Large stores promote online shopping. One said they would ship some items but not all. Independents did not ship.

Food/Liquor

20%

USPS prohibits shipping alcohol. I surveyed grocery, gourmet, and candy stores. None of the grocery stores shipped and only two candy stores did.

Books

50%

Only two bookstores in this town, both independent. One gladly ships. The other had never considered it.

Jewelry

60%

Chains require online shopping. Independents more open to shipping but some didn’t offer it.

Health/Beauty

20%

With a few exceptions, cosmetic and fitness-related stores either had no shipping service or had either limited or full online shopping.

Takeaways from the study

  • Most of the chains promote online shopping vs. shopping in their stores, which didn’t surprise me, but which strikes me as opportunity being left on the table.
  • I was pleasantly surprised by the number of independent clothing and jewelry stores that gladly offered to ship gift purchases.
  • I was concerned by how many employees initially didn’t know whether or not their employer offered shipping, indicating a lack of adequate training.
  • Finally, I’ll add that I’ve physically visited at least 85% of these businesses in the past few years and have never been told by any staff member about their shipping services, nor have I seen any in-store signage promoting such an offer.

My overarching takeaway from the experiment is that, though all of us are now steeped in the idea that consumers love the convenience of shipping, a dominant percentage of physical businesses are still operating as though this realization hasn’t fully hit in… or that it can be safely ignored.

To put it another way, if Amazon has taken some of your customers, why not take a page from their playbook and get shipping?

The nitty-gritty of brick-and-mortar shipping

62% of consumers say the reason they’d shop offline is because they want to see, touch, and try out items.RetailDive

There’s no time like the holidays to experiment with a new campaign. I sat down with a staff member at the bookstore where I bought my brother’s gift and asked her some questions about how they manage shipping. From that conversation, and from some additional research, I came away with the following checklist for implementing a shipping offer at your brick-and-mortar locations:

✔ Determine whether your business category is one that lends itself to holiday gift shopping.

✔ Train core or holiday temp staff to package and ship gifts.

✔ Craft compelling messaging surrounding your shipping offer, perhaps promoting pride in the local community vs. pride in Amazon. Don’t leave it to customers to shop online on autopilot — help them realize there’s a choice.

✔ Cover your store and website with messaging highlighting this offering, at least two months in advance of the holidays.

✔ In October, run an in-store campaign in which cashiers verbally communicate your holiday shipping service to every customer.

✔ Sweeten the offer with a dedication of X% of sales to a most popular local cause/organization/institution.

✔ Promote your shipping service via your social accounts.

✔ Make an effort to earn a mention of your shipping service in local print and radio news.

✔ Set clear dates for when the last purchases can be made to reach their destinations in time for the holidays.

✔ Coordinate with the USPS, FedEx, or UPS to have them pick up packages from your location daily.

✔ Determine the finances of your shipping charges. You may need to experiment with whether free shipping would put too big of a hole in your pocket, or whether it’s necessary to compete with online giants at the holidays.

✔ Track the success of this campaign to discover ROI.

Not every business is a holiday shopping destination, and online shopping may simply have become too dominant in some categories to overcome the Amazon habit. But, if you determine you’ve got an opportunity here, designate 2018 as a year to experiment with shipping with a view towards making refinements in the new year.

You may discover that your customers so appreciate the lightbulb moment of being able to support local businesses when they want something mailed that shipping is a service you’ll want to instate year-round. And not just for gifts… consumers are already signaling at full strength that they like having merchandise shipped to themselves!

Adding the lagniappe: Something extra

For the past couple of years, economists have reported that Americans are spending more on restaurants than on groceries. I see a combination of a desire for experiences and convenience in that, don’t you? It has been joked that someone needs to invent food that takes pictures of itself for social sharing! What can you do to capitalize on this desire for ease and experience in your business?

Cards, carols, and customs are wreathed in the “joy” part of the holidays, but how often do customers genuinely feel the enjoyment when they are shopping these days? True, a run to the store for a box of cereal may not require aesthetic satisfaction, but shouldn’t we be able to expect some pleasure in our purchasing experiences, especially when we are buying gifts that are meant to spread goodwill?

When my great-grandmother got tired from shopping at the Emporium in San Francisco, one of the superabundant sales clerks would direct her to the soft surroundings of the ladies’ lounge to refresh her weary feet on an automatic massager. She could lunch at a variety of nicely appointed in-store restaurants at varied prices. Money was often tight, but she could browse happily in the “bargain basement”. There were holiday roof rides for the kiddies, and holiday window displays beckoning passersby to stop and gaze in wonder. Great-grandmother, an immigrant from Ireland, got quite a bit of enjoyment out of the few dollars in her purse.

It may be that those lavish days of yore are long gone, taking the pleasure of shopping with them, and that we’re doomed to meager choosing between impersonal online shopping or impersonal offline warehouses … but I don’t think so.

The old Emporium was huge, with multiple floors and hundreds of employees … but it wasn’t a “big box store”.

There’s still opportunity for larger brands to differentiate themselves from their warehouse-lookalike competitors. Who says retail has to look like a fast food chain or a mobile phone store?

And as for small, independent businesses? I can’t open my Twitter feed nowadays without encountering a new and encouraging story about the rise of localism and local entrepreneurialism.

It’s a good time to revive the ethos of the lagniappe — the Louisiana custom of giving patrons a little something extra with their purchase, something that will make it worth it to get off the computer and head into town for a fun, seasonal experience. Yesterday’s extra cookie that made up the baker’s dozen could be today’s enjoyable atmosphere, truly expert salesperson, chair to sit down in when weary, free cup of spiced cider on a wintry day… or the highly desirable service of free shipping. Chalk up the knowledge of this need as one great thing Amazon has gifted you.

In 2017, our household chose to buy as many holiday presents as possible from Main Street for our nearby family and friends. We actually enjoyed the experience. In 2018, we plan to see how far our town can take us in terms of shipping gifts to loved ones we won’t have a chance to see. Will your business be ready to serve our newfound need?

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Yext integrates local business listings directly into Amazon Alexa

Name, address, phone and hours, with more to come.



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Amazon Sets Sales Record on Prime Day 2018, Reports 100 Million Products Sold

Amazon has concluded its record-setting online shopping event this year. Called Prime Day, the 36-hour shopping period that ran from July 16 to July 17 was said to have surpassed Cyber Monday, Black Friday, and last year’s event. In a recent press release highlighting its success, the company didn’t disclose sales growth or exact figures but reported that Prime members bought more than 100 million products during the sales event.

According to CEO of Worldwide Consumer Jeff Wilke, Prime Day was an opportunity to reward its members with the best deals and exclusive access to Amazon’s new products. In fact, two of the bestsellers during the worldwide event included Amazon’s Fire TV Stick with Alexa Voice Remote and Echo Dot.

Aside from Fire TV devices, other Amazon products that made a killing were Kindle e-readers and the kids’ versions of the Fire tablet and Echo Dot.

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Snapchat and Amazon Could Be Teaming Up on a New Visual Search Tool

Snapchat is seeking to expand its horizons and utilize its camera to go beyond social media with a new visual search feature. This novel search capability and a team-up with Amazon could open a new revenue stream for the company.

According to reports, a new Snapchat version for Android smartphones includes a secret code for a new “Visual Search” feature. This new feature, dubbed Project Eagle, can allegedly utilize Snapchat’s camera to send a barcode or product image scans to Amazon. The retail powerhouse will then display the results of the product search.

The secret code was reportedly discovered by Ishan Agarwal, an app researcher. Agarwal then tipped off TechCrunch about his discovery. On their end, the company was quick to spot a source code in Snapchat that had a pop-up text with the lines — “Press and hold to identify an object, song, barcode, and more! This works by sending data to Amazon, Shazam, and other partners.”

The discovered code doesn’t really explain how the visual search feature will work. However, the application’s code enumerates the capacity to bring “reviews” and “sellers” to the surface, “Copy URL” of a specific product as well as “Send Product” or “Share” it with friends. These actions could be done through Snapchat Stories or simple Snap messages.

Project Eagle will undoubtedly change the way people see Snapchat. Instead of being just a social media app, it could become a clever tool for navigating retail. It can also provide the company with a new revenue source if it works out an affiliate referrals deal with Amazon.

This is something that Snapchat desperately needs at the moment. The company has suffered a loss of $ 385 million in the previous quarter, with its missing revenue pegged to be at $ 14 million. Snapchat’s stock also closed Monday at $ 13.65 per share, way below the $ 17 offering price.

Amazon is so far keeping mum about Snapchat’s visual search feature. It should be pointed out that there’s no definitive proof to indicate that the retail giant is working with Snapchat or if it’s just the end destination of the search results. As for Snapchat, mother company Snap Inc. just issued a “no comment” when asked about the rumored visual search.

One thing is certain though, a solid visual search feature could turn Snapchat into something more than a selfie aficionado’s favorite app. It could usher in a groundbreaking way for consumers to search for products to purchase.

[Featured image via Pexels.com]

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