First resort

A recent survey of online shoppers shows Amazon gaining share as the starting destination of choice.

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Many point to the importance of being the default option on a popular operating system. For example, Apple's podcasting and mapping apps have massive market share despite not being seen as the best options in their categories because they are defaults on iOS.

But just as important are people's mental shortcuts. When I was at Amazon, we obsessed over being the "site of first resort." When it comes to search, Google is the site of first resort. When it comes to ordering a ride share, Uber is the service of first resort.

For us at Amazon, being the site of first resort for an online shopping trip was an obsession. This is why it was so critical to expand out from books to other product lines quickly. We didn't want to cement ourselves in shoppers' minds as the site of first resort for buying books but nothing else.

It's also why both Google and eBay were seen as existential threats. Both offered the potential of offering much larger selections of products than us and potentially stealing that coveted mental bookmark spot in the user's mind. If more often than not, a shopper couldn't find a product on Amazon but instead could find it on eBay or Google, slowly they'd habituate themselves to beginning their search on those services.

Of course, earning the mantle of online shopping default relies on more than selection. I don't know if Amazon offers more SKU's in its catalog than eBay and Google today, but it offers a superior customer experience end to end. Google and eBay don't handle fulfillment themselves, and post order customer service is dicey if something goes wrong. Amazon is the gold standard there, and that's part of what shoppers have come to rely on when they start their online shopping there.

A few years back I was in a wedding party, and I had to purchase a specific shirt to match the other groomsmen. I could only find it at Barney's, and the local outlet didn't offer it in my size so I ordered it from their website. The package was stolen from our apartment lobby, so I wrote Barney's customer service asking for a replacement shipment. They refused and asked me to take it up with UPS or FedEx, or whoever the shipper was. If it were Amazon, they'd have a replacement package out to me overnight on the spot, no questions asked. Needless to say, I'll never order from Barneys again, but it's amazing to think that Amazon's customer service is superior to that of even luxury retailers.

In hindsight, thinking Google might surpass us in shopping seems farfetched, but there was a time eBay had surpassed Amazon in market cap and was growing their sales and inventory in a way that inspired envy in Seattle. It turns out there was more of a ceiling on the potential of auctions as a shopping format than fixed price shopping, but in the moment, it was hard to see where that shoulder on the S-curve would be.

Prime Day

More than 90 years ago, holiday shopping found its official start the Friday after Thanksgiving, eventually becoming Black Friday, the biggest shopping day of the year. Over the years, Amazon has helped make Black Friday even more of a global online shopping phenomenon. Next week, Amazon turns 20 and on the eve of its birthday, the company introduces Prime Day, a global shopping event, offering more deals than Black Friday, exclusively for Prime members in the U.S., U.K., Spain, Japan, Italy, Germany, France, Canada and Austria. On Wednesday, July 15, new and existing members in the U.S. will find deals starting at midnight, with new deals starting as often as every ten minutes. They can shop thousands of Lightning Deals, seven popular Deals of the Day and receive unlimited fast, free shipping. Not a Prime member? To participate in Prime Day, Amazon customers can sign up for a 30-day free trial of Prime at amazon.com/primeday.
 

Amazon is creating its own shopping holiday. Economists and retailers have long debated what would happen if there were two Christmases a year instead of one. Would that just move consumer spending around or would it increase the share of the pie? Amazon doesn't have to worry about that here because they're just focused on their own revenue, and if this shifts retail spending share to them, all is good.

It can be dangerous for a retailer to become dependent on sales, but Amazon is a special case. Restoration Hardware has a twice a year sale on its towels, also on its lighting. Customers feel a bit silly buying those items from them any other time of year. Criterion DVDs go on sale at 50% off from time to time. To buy one at any lower discount feels like you're leaving money on the table.

Amazon has such a large catalog of items, and the items it puts on sale are so random, that it's immune to creating artificial seasonality with its sales. Its customers buy from them so often that it's not practical to wait until items go on sale to shop there.

Besides, the core of Amazon's value is everyday low pricing, so most customers feel like they're getting a great deal on most everything purchased there anyhow. A bunch of random deals on Prime Day are just gravy. And if this goes off well and becomes an annual occurrence, it may drive more people to join Amazon Prime, even better for Amazon because of the loyal customers Prime memberships create and the increase in shopping volume and frequency from that cohort.

Why you should buy wine from Costco

Jon Thorsen on why you should buy wine from Costco:

Costco's average margin (per their financial filings) is about 12 percent. Costco has stated that the highest margin they will take on a non-Costco brand is 13 percent and they strive to keep it closer to 10 percent. On private label items (Kirkland Signature) they will go up to 15 percent margin but of course the price is still lower than other brands because they cut out the middleman. It's an amazing business model—their stores average about $160 million each in annual sales. Their total revenue is around $90 billion and they make several billion in net earnings, yet investors complain because they think their margin is too low and they pay their employees too much!
 

So what does this have to do with buying wine? I believe the 10–13 percent margin is similar for alcohol. No wonder Costco is the largest retailer of wine in the United States. I talked to a local store manager recently and commented on how a local upscale restaurant was advertising a wine for $12 per glass and $46 per bottle. At the time my local Costco was selling this wine for $9.99 a bottle. He stated Costco's markup on that item was 12 percent, which would put their margin at just under 11 percent. This means that unless you're dealing with a special buy/closeout type situation, you really are not going to find wine much cheaper than at Costco.
 

The other nice thing about Costco is that in my experience their buyers do a fantastic job picking out high-quality products. If they stock it, you can be fairly sure it's good, unlike some of the other big chain stores. Since Costco is the largest retailer of wine in the United States, products tend to turn over quickly so there is quite a variety over time. The downside of this is that a wine you loved may be gone the next week, so if you like it you better buy a bunch.
 

I wish I could chat with the wine buyer for my local Costco and make some requests. And I'm with the author. We complain about companies like Costco and Amazon.com having margins that are too low, yet perhaps we should more often praise companies that generate so much consumer surplus for the world (as long as they compensate their employees fairly).

It's humorous to see the variation in wine selection from one Costco store to another. I was at a Costco in Novato, up north across the Golden Gate Bridge, helping to pick up supplies for a party, and saw half bottles of 2006 Chateau D'Yquem and a bottle of 2009 Screaming Eagle in their glass-case secured wine display. The Screaming Eagle was selling for $2149.99. You can likely deduce the average income of residents in the area (my local San Francisco Costco doesn't carry such fare, though given real estate prices in the city, perhaps they should).

Another useful tip from the piece:

One other note on Costco is that typically any price that ends in .97 is a markdown. Furthermore, if there is an asterisk on the label that means it is a closeout and is not coming back.

The TV to get (before it's gone)

Those who know me well know I'm really fussy about my A/V setup. I was dismayed to learn that Panasonic is exiting the plasma TV business. Pioneer stopped making plasma TVs a few years ago, though not before I could snag one of their Kuro plasma displays. They produced the most gorgeous picture out there, with the deepest black levels, and now, more than 6 years level, my set still produces a better picture than the latest LCD sets on the market.

LCD is all the rage for how thin the displays are, but once you have the TV hung or set up the width and weight of the TV contribute little to your viewing pleasure. The most salient advantage of LCD TVs over plasmas is their ability to cope with ambient light better, but if you're a video enthusiast you'll try to control light in any viewing room anyhow. In all other respects when it comes to picture quality, I prefer plasmas. The average consumer cares less about such things, and thus LCDs outsell plasmas by a healthy margin.

If you are the type of person who cares about getting a TV with the best picture quality, Panasonic's impending exit means it might be your last chance to grab the best mid-sized plasma out there, the best of the TVs that won't cost you the price of an entry-level sedan: the Panasonic VIERA TC-P60ZT60.  I had heard good things from a few A/V enthusiasts I trust, so I checked one out at a local electronics store this week while waiting to meet up with someone.

It lives up to the hype. The black levels were visibly deeper than those of the LCDs around it (though you do have to tweak the settings as electronics stores notoriously jack up brightness and contrast levels for TVs on the showroom floor, and those aren't the optimal settings for everyday viewing). Contrast ratio matters a lot for actual and perceived picture quality. I'm not a fan of current 3D technology in home TVs so I can't speak to that aspect of the TV, but for normal everyday 2D viewing the Panasonic is at the head of the class.

So if you're looking for a TV this holiday season, snag one of these before they're gone forever. Word on the street has it they're being discontinued in December. If you want an even bigger set, Panasonic makes a 65" version as well.

The soon to be discontinued Panasonic VIERA TC-P60ZT60

How to get 15% off of everything in iTunes

I interrupt my regular content flow for this commercial tip.

Every so often, Best Buy runs a sale on iTunes gift cards. Right now, they're selling all their iTunes gift cards for 15% off. No strings attached, no sales tax, nothing. I'm not sure how Best Buy can do this, if they buy the cards at a discount, or if they're using this as a loss leader (which doesn't seem smart in an age when online shoppers can just spearfish loss leaders without ever setting foot in a store) or if they receive any subsidy from Apple for this promotion (also seems unlikely).

Whatever the reason, it's a good deal for consumers like me who buy lots of apps for my iPhone and iPad or who occasionally rent movies through iTunes to watch on my iPad or AppleTV. Make sure to purchase the iTunes gift cards, not the App Store gift cards, as I think the iTunes gift cards can be spent on a wider range of products, not just all media but apps and books from the iBookstore (I'm not certain about that, but it's implied by the fine print).

15% off is nothing to sneeze at in these tough economic times. Best Buy doesn't run these sales often, but every time they do, I load up my iTunes balance.