Tuesday, December 13, 2011

Amazon's Public Relations Problem

Amazon caused quite a stir this week with a new promotion.   They introduced a new "Price Check" smartphone app for consumers.  Individuals could visit a brick and mortar store, check the item's price on Amazon, and then receive a 5% discount (maximum $5 savings) if they purchase that particular item from Amazon.  Now, smartphone apps that enable consumers to check prices elsewhere have existed for quite some time.   Yet, this promotion by Amazon went one step further. It not only enabled price checking, but actually gave a discount to the consumer if they chose Amazon over the brick-and-mortar retailer in which they were shopping at the moment.   That extra step caused a backlash.  Small business owners and advocacy groups expressed outrage at the promotion almost immediately.  Politicians became upset as well.  Maine Senator Olympia Snowe issued a press release in response to the promotion:

"Amazon's promotion - paying consumers to visit small businesses and leave empty-handed - is an attack on Main Street businesses that employ workers in our communities. Small businesses are fighting everyday to compete with giant retailers, such as Amazon, and incentivizing consumers to spy on local shops is a bridge too far...   We should remember that our local restaurants, bookshops, and hardware stores are the economic engines in our communities.  I urge Amazon to cancel its planned promotion, and look for ways to partner with Main Street, not promote anti-competitive behavior that could shutter the doors of America's small businesses." 

What do we make of this situation?  At the end of the day, price checking via smartphones will not be stopped.   It has already begun to transform the way people shop, particularly for pricey electronics.  The prevalence of such price checking will only increase in the future.  Small businesses will not be able to put an end to that phenomenon.  On the other hand, Amazon may have underestimated the extent to which the discount would create a public relations mess.  While the firm states that they were focused mainly on competing with large retail chains, they ended up becoming portrayed as the enemy of small business.  I'm sure that they don't want to be seen in this fashion.  Moreover, the timing doesn't serve them well at all, given that they already face a growing controversy over the sales tax issue.   Given the anti-big business mood of many people at the moment, I'm surprised that Amazon didn't think through the way that this move might feed that sentiment.  Every large firm needs to consider how they might get caught up in that national mood these days.

In the video below, we hear the other side of the story.    Evan Newmark, a Wall Street Journal writer and former Goldman Sachs executive, defends Amazon and criticizes Senator Snowe.


Andrew Boysen said...

Stores should set up kiosks in their stores, allowing customers to purchase through Amazon, via affiliate links. The store would make more than 5% of the purchase (perhaps competitive with the margins they would receive anyway), while providing a great service to their customers. And customers might feel a sense of loyalty or urgency that will inspire them to purchase the higher priced item in the store anyway.

Matt Putvinski said...

Its called Competition and everyone else can easily do the same thing, they are just annoyed amazon thought of it first... Shocking the government would want to stall competition #sarcasm