First resort

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

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

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.

My backpack of choice

BBP is having a 50% off sale on their Hamptons Hybrid Messenger Backpack. It's a great deal at half off, or $49.96 rather than it's usual $99.95. If you walk and carry a laptop in your bag regularly, you can use the coupon code 50HAMPTONS through next Monday night, Labor Day weekend. I don't earn any commission if you purchase one of these, I'm just a fan, and this is a great deal.

BBP stands for "bum back pack" and refers to the way the bag rides, low on your back. The double straps distribute weight evenly across both shoulders, like Izzo's dual straps did for golf bags, and the low hanging position of the bag reduces strain on your shoulders and back. I've been carrying a laptop for as long as I can remember, and I've tried a variety of solutions: conventional backpacks, bike messenger bags, and laptop briefcases. Comfort was always a problem. Messenger bags and laptop briefcases put the bag on one side, and eventually that leads to asymmetrical strain on your shoulder, neck, and/or hip. Backpacks often caused me to lean forward to counterbalance the weight.

The Hamptons Hybrid solved my comfort and ergonomic issues and has been my primary laptop bag for over 7 years now. There are only two disadvantages. One is that it looks a bit strange to have your bag hanging so low, but when it comes to my back fashion is a lesser concern, and you can disconnect the double strap in the middle with one click and wear it messenger bag style or grab the fabric handle at the top and carry it like a briefcase. The other minor drawback is that the bag has a lot of padding built in and is heavier in its base configuration than, say, a messenger bag. But I appreciate the extra padding surrounding the laptop compartment. It feels very safe, especially when jamming it under an airplane seat.  With a lighter solution like a messenger bag I'd still purchase a padded sleeve to hold my laptop, bringing the naked walkaround weight up quite a bit.

As laptops grow lighter, or as some people transition to using tablets for travel, perhaps the need for a bag to distribute heavier weights diminishes. I think we're still a ways off from that day, though, and when I travel I still find the sum total of my laptop, chargers, and miscellaneous knickknacks to be uncomfortable to carry for long periods. I've had the same large Hamptons Hybrid for years now, and it's a testament to the enduring utility of the design that it hasn't changed one bit, as far as I can tell. Now that I no longer carry a 17" laptop, I'm grabbing the smaller and lighter medium size at this sale price.

Why Amazon wins

Okay, not an exhaustive list, there are many many reasons. But as with other great companies, it's often the negative experiences with their competitors that highlight their strengths.

I've bought a lot of items from The Impossible Project, a company started by some ex-Polaroid employees to try to continue producing instant film for traditional Polaroid cameras. I own a few Polaroid cameras, I love the beautiful-ugly analog quality of the photos they produce (even after it was co-opted by hipster culture), and I was thrilled that someone would fight to keep the film in production.

In the craziness of moving to a new city and starting a company, I lost track of one order I placed with The Impossible Project for two small items. It popped into my head the other day like random things often do, in that "Remembrances of Things Past" way, and I realized I'd never received the items. I went online to check the shipping status, and it was marked as delivered to our office a few weeks ago.

I wrote in to report the shipment missing, and a customer service replied that the company was in an awkward position because the shipment was reported as delivered, so the best they could do is give me a store credit for the price of the shipment less shipping.

A totally fair and reasonable offer. But from my perspective, I'm now down the shipping cost on that order, and it makes me a bit sad to feel distrusted.

This is after ordering a lot of their early test films, some of which came from failed test batches that produced unusable photos. To their credit, they offered ways to ship back the bad film to get replacement film, but the overhead of packaging and shipping up defective products is its own hassle and cost, and I'm almost certain there are some lemons among the batches of film I purcased from them but haven't used yet. I don't mind supporting small companies that are trying to do good things, and the internet and web have created an entire class of entitled, self-important customers who feel aggrieved even when free products don't serve their every whim. But The Impossible Project's products aren't cheap, and I've spent a lot of money with them, so this botched transaction with them feels like a cold reality check about my importance as a customer.

But perhaps it's just Amazon that's spoiled me. I've never had Amazon question any order I've reported as missing. Amazon will ship a replacement order for any damaged or missing item, no questions asked. Once, I reported an order for a DVD as not having been delivered and so they shipped me a replacement immediately. Then the original shipment finally showed up a week later, and now I had two copies of the same product, so I emailed them and asked if they wanted the original back. They said it was okay, just keep them both and save yourself the hassle of shipping the original back.

Amazon competes for your business for life, while other companies compete transaction to transaction. When I hit the 1-click order button at Amazon.com (and I do that a lot, at least twice a week), I do so with zero doubt that I'll get anything less than full satisfaction.

When I was at Amazon.com, the whole company was fixated on eliminating two of the most severe psychological roadblocks to ordering online: paying for shipping and worrying about the cost/hassle if the shipment went bad for some reason. They've effectively cut both of those issues down to size, the former with Super Saver Shipping and Amazon Prime, and the second with their "no questions asked" return/replacement/exchange policies.

And that is why for millions of customers, Amazon.com evolved from a convenient way to shop for long tail items to the preferred way to purchase anything and everything.