Amazon Discouraging Out of Network Returns Not a Customer-Friendly Signal
With the departures of Dave Clark, Jeff Wilke, and Jeff Bezos in the last 5 years, Amazon lost some of its greatest and most reliable builders.
In their place, have come the optimizers.
I’ve been a student of marketplace dynamics for a long time, and one of the key components of any marketplace at scale is a set of carrots and sticks. One of my friends Todd Lutwak formerly of eBay taught me this long ago.
The carrots are designed to incent certain behavior in the marketplace, and the sticks are designed to penalize or discourage certain behavior.
It’s through this lens that I analyze a new report from the Information that Amazon is going to be charging one dollar for certain types of returns made through the UPS store.
This extra fee will only apply when there is an equivalent Amazon-sponsored dropoff location like a Whole Foods or Kohl’s the same distance from the customer as the UPS Store.
What do I think about this?
Overall, I feel this kind of thing is inevitable with Amazon, and to the extent it helps them reduce their returns costs which must be massive, then that’s great.
I suspect Amazon feels since this fee is on the back-end of the process, it is not likely to cut down on new item purchases.
I also don’t think Amazon is truly considering all the customer’s workflow here. Just because a UPS store is as close as a Whole Foods, penalizing the customer for going to the UPS Store might be bad for the customer. What if the customer has other business at the UPS store and doesn’t want to make two trips?
What does it mean about Amazon?
Previously, Amazon used to be in a mode where the more convenient we can make it for the customer, the better. Well, forcing the customer to choose the option that does not penalize them does not make it more convenient for the customer.
Jeff used to say it’s always Day 1 invention or Day 2 eventual decline. In my opinion, we are well into Week 1 at Amazon because now the optimizers have taken over from the builders.
Another way of putting this -- the optimizers have taken over the retail business. And to some extent AWS right now (although the economy has forced this more than anything).
Healthcare is an interesting bet. Can they scale it enough so that it can be material?
Grocery remains a pipe dream at the moment.
New bets that are not dependent on the Prime flywheel may need to be spun out quickly in order for them to get any valuation reward from these investments.
