The initial excitement over the entry of American e-retail giant Amazon to our shores has quickly soured, four days after the Amazon Prime Now service launched last Thursday (27 July).
We all know the sordid details by now, thanks to a thousand exasperated social media posts.
Customers could browse but they could not order. Amazon could not sell, ostensibly because it could not deliver, or keep to its promised two-hour delivery window.
Media reports indicate that Amazon is relying on third-party delivery providers and not its own fleet. Instead of apologising to Singaporeans, it “maintained that it continues to meet its delivery promise on orders within the designated two-hour delivery window,” according to The Business Times.
How did it all go wrong? To understand the fuss about Prime, we must look back to 2005, when it was first launched for the US market.
The history of Amazon Prime Now
Amazon Prime is a membership subscription service (originally for US$79 per year) that guarantees deliveries within two days. It later encompassed other benefits such as Prime Video (a selection of free movies and TV shows in the larger Amazon Video e-shop) and more recently Prime Now (free two-hour shipping from a smaller group of products in the Amazon e-store).
Back in the early 2010s, Amazon opened up a world of possibilities. Strategic board games, Blu-ray movies, lightsabers, jeans, kid’s clothes and many more items that were either overpriced locally or simply not sold here, were now available at the click of a mouse.
Since Amazon was not delivering to this part of the world, my friends and I signed up for a host of “middlemen” sites like Vpost and Borderlinx which would provide a US address to collect our purchases and then ship it to Singapore.
We must have been among many Singaporeans using the same methods because in 2013, Amazon announced free shipping to Singapore for most of the goods in its Amazon Global Program (a smaller selection of the items available on the main website and mainly goods sold directly by Amazon instead of those offered by third-party vendors). We are still the only country in this region to be eligible for free shipping from Amazon.com US.
So when Amazon Prime Now finally launched here, making Singapore the first country in this region to have it, I was absolutely thrilled – but not for long.
What went wrong?
There is little excuse for Amazon’s pure performance at launch. This is a company where decisions are determined by data and analytics. Amazon knows our individual shopping preferences, can predict what we will be interested in buying or which movie we are likely to be interested in.
That this same company could not have predicted the surge of interest among Singaporeans is a hard pill to swallow.
Then there was its promotional offer of a $20 discount off every new customer’s first purchase if they paid by Visa. Since delivery is free for a shopping cart of at least $40, Singaporeans aimed for that amount to get what was effectively a 50 per cent discount.
Many of my friends created multiple Amazon accounts and redeemed the Visa20 promo code multiple times.
On Sunday morning, when Amazon Prime Now went back into service (it went off service again by about lunch time), I saw a banner which said that there were fewer than 1000 Visa20 redemptions left. By Monday, Amazon’s banner said the promotion was fully redeemed.
Amazon’s strategy in launching Prime Now before the main Prime service is also questionable. If it had launched Prime Now as one of the privileges of the subscription-based Prime membership, it would have a smaller pool of customers to work with. By choosing to offer Prime Now for free during a promotional period (with no end-date) to all consumers here, it has made a costly mistake.
Not enough choices
But the biggest disappointment of Amazon Prime Now for me has been its poor selection of goods.
For example, when I searched for “AA battery” I found Amazon’s Alkaline ($23 for a pack of 48) and Panasonic Alkaline batteries ($11.90 for a pack of 18) but none of the three commonly found large-pack alkaline battery brands: Duracell, Energizer and Evolta.
I found Milo and fresh milk but these were not cheaper than what I saw at the Fairprice outlet. In fact, I noticed that the “buy two” bundles at Fairprice typically offered much better prices than Amazon, even when the single purchases were competitive in pricing.
What about electronics? I found no phones from Apple, Sony or Oppo and only a handful of models from the other brands such as Samsung, Huawei and Xiaomi. Among the laptops, I could find only entry-level laptops and none of the premium ones like my Lenovo Thinkpad X1 Carbon. Why is this the case?
I spoke with a few industry contacts who explained that they were afraid Amazon would cut prices drastically on their products. Brands can only set the recommended retail price (RRP) but cannot stop retailers, offline and online, from selling below the RRP.
If a product is selling much cheaper on Amazon, the other retailers might stop ordering that product and therefore affect the overall sales of the brand’s product. At this point in time, brands would be wary of antagonising the big boys such as Courts and Challenger.
If Amazon is serious about Singapore, it will eventually overcome these teething issues and become a force to be reckoned with.
But I do not think that this is a foregone conclusion as retailers here such as Fairprice, Cold Storage, Courts and Challenger have built a huge presence with competitive pricing and large selection of goods. Will the relatively small Singapore market be worth the investment for Amazon?
Amazon has potential to shake up the retail market in Singapore. But judging from its performance so far, it has failed to deliver and owes Singapore consumers an apology for putting us into a state of consumer-frenzy – for nothing.
Guest contributor Oo Gin Lee was previously the tech editor of The Straits Times.
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