Time, Revisited
Last year, when Jeff Bezos sent his final Amazon shareholder letter, we wrote that value, as measured by time, seemed to be the value creation unit that Amazon cared about the most—and that brands, perhaps, look to that framing as the next, possible thing to copy.
In that shareholder letter, Bezos wrote:
“Customers complete 28% of purchases on Amazon in three minutes or less, and half of all purchases are finished in less than 15 minutes. Compare that to the typical shopping trip to a physical store – driving, parking, searching store aisles, waiting in the checkout line, finding your car, and driving home. Research suggests the typical physical store trip takes about an hour. If you assume that a typical Amazon purchase takes 15 minutes and that it saves you a couple of trips to a physical store a week, that’s more than 75 hours a year saved. That’s important. We’re all busy in the early 21st century.”
While we spent time exploring why Bezos might have chosen time as his unit of value, we overlooked one aspect: discovery.
For Bezos and Amazon, time savings has to be up to 20X more than the alternative of driving to the store. Because a store offers more opportunities to discover new things. Stores are superior to Amazon in this way.
For Amazon, this matters from a pure market share perspective: getting people to buy singular items from Amazon, or to build their lists on Amazon, means the consumer has smaller lists for brick and mortar visits. Over time, the hope is this habit builds and reinforces itself: smaller lists mean less frequent trips, and less frequent trips mean more frequent purchases on Amazon. So on and so forth.
This dynamic also matters for brands selling DTC, but for a different reason: the DTC channel has to offer something—or some combination of things—that is likewise powerful enough to beat retail’s draw of discovery.
Time savings is, perhaps, one of those things.
We’re reminded of this topic because of a chart that Neil Saunders shared this week on planned and unplanned purchases and what those figures looked like at certain retailers.
At Trader Joe’s, for example, consumers reported that roughly half their purchases were fully planned. 30% were partially planned (roughly defined as planning to buy from the category, but not a specific brand) and another 20% were completely unplanned (no plan to buy from the category or brand).
In this example, if you’re a brand that lives in a category carried at Trader Joe’s and you have a high percentage of DTC customers who shop at Trader Joe’s, your focus is different than Amazon’s. You won’t be trying to remove the Trader Joe’s trips from your customers’ behaviors. Buy you do probably want your DTC customers topped off on your product before going to Trader Joe’s. You want to remove your category from the list—planned or not.
Otherwise, given that half a basket at Trader Joe’s is unplanned, there’s a pretty good chance that your product is getting replaced with a competitor on that next trip.
When that happens, it doesn’t mean your customer quit your brand or gave up on your product. It means the combination of immediate physical availability and a strong discovery engine runs so hot that it’s just easier for the customer to buy there.
One way to beat that?
If Amazon’s a guide, you can obsess over time. The less time it takes to buy from you, the less time there is to discover new things elsewhere.