Amazon's Ryder Riding Herd Over $8 Billion CE Business - Twice

Amazon's Ryder Riding Herd Over $8 Billion CE Business

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SEATTLE –

This month marks the 12th anniversary of

Amazon.com

’s CE business.

During that time, Jeff Bezos’ brainchild has grown from an online bookseller to a full-line virtual behemoth.

Living up to its namesake river, the company’s vast assortment now winds its way through nearly every consumer product category. But it is CE, along with books, that has become one of Amazon’s largest business segments, bringing in an estimated $7.9 billion last year in the U.S. alone.

It wasn’t easy. Amazon, like most early pure-play e-tailers, was initially shunned by manufacturers who feared the new distribution channel, forcing Amazon’s first CE chief Christopher Payne to develop a patchwork of two-step and, some suppliers surmised, transshipped distribution.

But thanks to the efforts of veteran CE successors Frank Sadowski (Silo, Sun TV) and Noah Herschman (Tweeter), Amazon’s array of authorized suppliers grew, along with its customer base and sales.

Today, Amazon’s CE VP Paul Ryder rides herd over an expansive electronics assortment spanning all categories and price points, while digital innovations such as Kindle, the company’s best-selling product; Instant Video, its content-delivery platform; and its new Appstore and Cloud Drive storage service, drive additional traffic and revenue.

Ryder, a former GE Appliance and Honeywell Aerospace exec who marks his fifth anniversary at Amazon next month, recently spoke with TWICE about electronics, e-commerce and the nation’s No. 4 CE retailer.

TWICE:

How’s business?

Ryder:

Still very positive and showing strong growth, although there are supply issues related to the tragedy in Japan.

TWICE:

What kind of constraints are you experiencing?

Ryder:

It’s deep in the supply chain and limited mostly d-SLRs, although we’ve also seen some delays with LCD panels. It’s a temporary issue, as Japanese production is restarting rather dramatically. The key issue now is energy supply, to ramp up LCD production. Based on my conversations with vendors in Japan, the constraints will continue through the summer but Q3 will be much better.

TWICE:

Summer is traditionally a sluggish time for CE, but many retailers are reporting a fall-off in business that goes beyond seasonal doldrums.

Ryder:

We’re still seeing strong growth across all categories, although we’re also seeing a shift to smaller stuff. Portable electronics like GPS, mobile, personal audio and Kindle are getting much more activity.

TWICE:

Let’s talk about some specific categories. TV …

Ryder:

Every category has some new, cool feature driving activity. In TV, we were very successful this past holiday season through now with 3D and smart models. There was also a lot of excitement around opening-price-point products. But we sell a true mix of models. If you look at it by screen size, the units we sell that are 46 inches and above tend to be advanced TVs, and eight out of 10 of our 55-inch and over best-sellers are connected or 3DTVs.

Those advanced capabilities are much deeper in the new 2011 lines, and are treated as features rather than an end unto themselves.

TWICE:

What about tablets?

Ryder:

We’ve had a dedicated tablet store for the last six to eight months. It’s been very active since day one and continues to gain momentum as more Android models get released. We mostly offer Android tablets although a whole host of platforms and models are available, including Windows-based tablets and iPads through affiliate retailers.

We have multiple stakes in this category, as we are also involved with apps. We asked ourselves ‘How do we participate in this new ecosystem?’ and so we launched our Appstore. It now has over 10,000 apps and we introduce new ones every day. We’re working closely with all vendors not only on how we can market tablets and distribute them, but also provide great content for them.

We also benefit from Kindle. Millions of customers are interested in e-reading, and when they come to learn about Kindle, some want more features, they want a multipurpose device, so that also leads to tablet sales.

TWICE:

Speaking of Kindle, Amazon is rumored to also be developing a proprietary tablet. True?

Ryder:

I’ll only quote my boss Jeff Bezos, whose comment on the subject was “Stay tuned.”

TWICE:

You also run a wireless store.

Ryder:

Yes, we’re a direct dealer for the four main carriers. We built a special-purpose website with a dedicated team that’s directly connected into their systems. Being an authorized reseller requires deep integration with the carriers for things like credit checks. It’s a daunting transaction, but we’ve worked hard to keep it clean and simple.

TWICE:

How has that business been performing?


Ryder:

We’re seeing very strong growth. Everyone has a smartphone now, so for us it’s about upgrades and service. The bulk of our business is in Android smartphones and the customers are very interested in the products. It represents a big purchase decision and a big commitment, so they do a ton of research online. We expect that category will continue to do well.

TWICE:

Have your hardware sales benefitted from the software support of an Appstore, VOD platform and cloud service?

Ryder:

I don’t know if there’s a synergistic effect on hardware; we don’t look at it that way. With Amazon Instant Video, we’re a big media and software provider and wanted to be there as we move from physical to digital media. We can now stream content through a wide range of devices, and we offer over 6,000 free movies and TV shows to our Amazon Prime members. It’s been great.

With the Cloud Drive, everyone can now have their music in one place and stream it from everywhere, rather than have their collections locked into separate devices. It supports our MP3 store, where we can do [99-cent album download] Lady Gaga promotions.


TWICE:

Do you own your own inventory?

Ryder:

The vast majority of stuff that Amazon sells is our own inventory. It’s about supporting the growth of the business, vs. drop-shipping. We position it as close to our customers as possible, to provide two-day shipping through Amazon Prime and a next-day upgrade for $3.99. Think about it — we have millions of SKUs and can get them to you tomorrow for $3.99.

We’re not thought of as a brick-andmortar retailer, but we do have lots of brick-and-mortar thanks to our warehouses.

TWICE:

Do you foresee a diminished role for brick-and-mortar retail as e-commerce continues to grow?

Ryder:

Many people have an old view of either-or. It’s both. The web has become a core part of our lives and shopping habits, but it is very complimentary to physical shopping. The Internet is a starting point for education, product comparisons and customer reviews, and manufacturers need to appreciate that it’s the first place consumers need to go.

Remember, we also have our own CE product [Kindle] that’s distributed through many stores, so we see it as a complimentary relationship.

TWICE:

But many manufacturers, and certainly physical retailers, still see e-commerce as disruptive, particularly when it comes to MAP policy.

Ryder:

First of all, it’s a misperception that the Internet has a lower cost structure. It’s just not true. Free shipping, brick-and-mortar warehouses and thousands of engineers represent significant overhead. We don’t have end caps, but we have our own costs.

Retailers are free to set our own prices, and we’ve had many discussions with vendors about it. We try to make our shopping experience simple, with no distractions. We want to provide a great shopping experience, as opposed to someone coming to a website and being unable to see the price of a product unless they click on something else. The customer thinks it’s a trick, and gets frustrated or confused, and our conversion rate with MAP treatment is lower. That’s not good for the customer or the vendor.

The Internet has been hyper-competitive from day one. We want to be competitive with market prices every day in order to deliver value and build long-term customer trust.

TWICE:

What’s your outlook for the holiday selling season?

Ryder:

The supply issues will improve, based on discussions with vendors, and we expect that customer interest and demand will continue to be strong through the balance of the year.

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