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November 22, 2006

How Amazon Could Revolutionize Direct Response Marketing

Setting up the supply chain of a direct response marketing busines model has long been one of the chief impediments to building a successful direct response radio advertising campaign. After all, if you can't accept credit cards, process orders, pick, pack, and ship orders efficiently, then you can't very well advertise because you won't be able to meet the demand you generate.

But setting up that supply chain is a lot of work. It requires time and money be spent before a dollar of revenue is collected. And it often requires managing multiple vendors. So it hampers many would-be direct response marketers who are trying to enter the market for the first time with a great product.

Enter Amazon.com with a fascinating "new direction" for the company. Columnist Kevin Maney writes a column discussing Amazon.com CEO Bezos' plans to "create a platform" for entrepreneurs by essentially renting out their infrastructure on a per-unit basis. Writes Maney "so, with almost no start-up costs, anyone anywhere could become a retailer."

What makes this truly unique is that Amazon's platform will include physical distribution, not just payment processing and web presence. According to Maney, this is a first. "You could notify us to expect inventory from you, tell us when to pick it (from warehouse shelves), and we'll send it to any address. We've spent 12 years getting good at these things, so why should somebody else have to start from scratch?" says Bezos.

Maney's article goes on to illiustrate the possibilities of this approach in other industries, like sausage making or car manufacturing. GM has a lot of excess manufacturing capacity - what about renting that out to "dozens of niche-market car companies?". Or, "If I have a great idea for a new kind of sausage, I could use Hormel to make it, store it, and ship it while I sold it from a web site. I could create a company and never set foot in a rendering plant."

Amazon.com is evolving from "the world's biggest bookstore" to "the world's biggest fulfillment company", a classic evolution that leverages their "core competence". C.K. Prahalad and Gary Hamel would be proud.

Posted by Jeff Small at 11:07 AM | Permalink