“There is no way back! Don’t try to fight gravity”, said Werner Vogels, chief technology officer at Amazon.com. It was his advice to retailers attending the conference ‘What’s Going On In (R)etailing?!’, last week in Vogels’ former hometown Amsterdam.
Vogels started his presentation pointing at Amazon’s extreme focus on the consumer, which is the basis for all decisions made in the boardroom. “I remember the opposition by our buyers after the decision was taken to allow third parties to sell their stuff via our website”, Vogels recalled. “They are competitors, selling their stuff sometimes at even lower prices! were the complaints.”
Still Jeff Bezos and friends decided to allow third parties to use Amazon.com as a sales platform. “Because the customers want it”, vogels said. “A wise decision, as in the fourth quarter of our latest business year, 34 per cent of our business went via third parties! If we hadn’t done this, others would.”
So the customer is always right. But when it comes to the Chinese customer, this doesn’t completely hold true at Amazon.cn. Chinese shoppers are known to be keen on bargaining prices. On markets, in stores and increasingly also online. Several large Chinese webshops, like Taobao and the Alibaba-subsidiary Tmall, offer shoppers a functionality to bargain prices.
Doing this, they listen to the needs of Chinese customers. Amazon in China however, does not give the Chinese what’s in their shopping DNA. When asked if Amazon in China considers offering Chinese shoppers the bargain button they long for, Vogels said immediately “No way! Why offering this functionality, as it only drives down the prices?”
In his answer, Vogels sounded like the Amazon buyers opposing third party vendors to sell via Amazon.com. “If we hadn’t allowed third parties in, maybe Amazon.com would have disappeared”, Vogels said in Amsterdam. Amazon has experience with allowing online shoppers to bargain prices, but this is not a feature available to Amazon’s Chinese clientele.
According to Wilbert Kragten, managing partner of the brand consultancy BSUR in Shanghai, TaoBao is building a strong reputation in service and product credibility. Strong assets which combined with the bargaining button may well make this online marketplace the favourite place to shop for Chinese customers.
“Amazon has a good reputation for its product sourcing and it gives deep discounts”, Kragten says. That may do the trick as well. Still, most Chinese would prefer to bargain prices. And if Amazon.com does not allow them to do so, other Chinese webshops most surely will