Monday, July 27, 2009

Lessons from Laura

Laura Ries is the daughter of Al Ries.

Al Ries is the co-author of a break through book in my life from about 20 years ago, "Positioning".

Together they work together and Laura has a blog that she keeps up to date on a regular basis.

Last week, one of the best known customers for customer serivce was bought by one of the best known internet retailers and Laura wrote this:

Why the shoes don't fit at


With its purchase of Zappos for $847 million, Amazon will get free shipping but is it the right acquisition for the e-commerce giant?

Zappos is a tremendous brand. With its unique and memorable name and its focus on footwear, Zappos has become the #1 seller of shoes on the Internet with sales of $840 million and a 40% one-year sales growth rate, as reported in 2007. Zappos is a classic success story.

Founded in 1999, the Las Vegas-based company got into the mind first. Zappos focused on footwear with a simple offer of free shipping and free return shipping on all orders. Much like Amazon did with a focus on books, a memorable name and a discount of 30% on all books.

There is a great advantage to being first in the mind. You gain credibility, generate PR and establish authenticity. Amazon did it books. Zappos did it in shoes. eBay did it in auctions. YouTube did it in video.

When you are first in the mind, any company that tries to copy your success faces an uphill battle. The second, third or fourth brand in a category has little news value, little credibility and is never seen as the real thing.

For years, Amazon has tried to break into the shoe business with its brand with dismal results. A me-too brand launched by even the best company in the world has little chance for success. Just ask Coca-Cola about the failures of its me-too brands like Fruitopia, KMX, Mr. Pibb, and Surge, to name a few.

In general, acquisitions can be a great thing for a company that wants to intensity its focus and its domination of a category. Buying another company and then merging its business into your own business results in a stronger brand with greater market share. It’s what happened to Chemical Bank did when it bought Chase. They even changed the merged company’s name to Chase since it was the stronger of the two brands.

A company can also buy another brand to give it distinctive multiple brands in one category. Coca-Cola bought Glaceau to get its hands on Smartwater and Vitaminwater to go along with its Dasani brand.

Acquisitions or mergers, on the other hand, can be dangerous when they are used to expand a company into a different industry in which it doesn’t have experience or credibility. Some examples are AOL/TimeWarner and Citicorp/Travelers.

I believe the Zappos acquisition is the wrong move for the book giant. Amazon is the Earth’s biggest bookstore, a position it owns in the mind. But since its incredible success in books, Amazon has expanded into many other categories and tried to become Earth’s biggest-anything store. This strategy rarely works with consumers.

Consumers buy specific things like books, computers, shoes, drugs and toys. Consumers don’t sit down to buy anything.


Despite expanding to sell everything from auto parts to home furnishings to apparel to drugs and to groceries, Amazon still gets the majority its $19 billion in sales from books/music/movies.

Amazon has had great PR with its Kindle book reader and should continue to pioneer other concepts connected to its core position.

The Zappos purchase goes in exactly the opposite direction. Books/electronics are quite different from shoes/fashion. One brand that does both, or one company that tries to conquer both, is likely to have a tough time.

To think Amazon can buy Zappos and leave it alone so that it remains vibrant, cutting edge and whimsical is foolish. It will never happen. Amazon might keep the Zappos name, but they will fold it into the Amazon way and system thereby losing that special Zapponess. Did Toys R Us feel like Toys R Us under Amazon? I think not.

Amazon should keep both its feet books and electronics. Too many feet in too many shoes isn’t a good thing for any brand.

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