VRM: The Amazon Example

One of the key issues tackled by Doc Searls in The Intention Economy is the lopsidedness of B2C relationships as they currently exist in the online retail and social space. For consumers to buy products online and to use (often apparently free) services like Facebook, there is no choice but to click “I agree” to standard terms and conditions. How many of us actually read the reams of legalese behind these contracts of adhesion? The one-sidedness of these contracts means that companies can currently treat us en masse as faceless consumers, rather than as individual customers.

In an opening chapter entitled The Promised Market Searls strings together elements of work and research currently underway to project how – in the not-too-distant-future – empowered, emancipated consumer might be more able to assert their own rights and desires online, and still be able to purchase & participate. I’ve written recently of a certain frustration with the seemingly endless futurology discussions going on in the publishing world, and it’s probably for this reason that I had to fight my way through the hypothesis in this chapter. However on subsequent reflection I’ve found that thinking about the way in which Amazon currently behaves as a customer through its Advantage programme sheds light on Searls’ suggestions and projections.

Searls suggests that in future consumers will be able to post the equivalent of  personal “RFP”s online – whereby the consumer (or rather, customer,) makes their intent to purchase public – and instead of the customer consuming valuable hours searching – vendors come forward to make offers for supply based on the terms of the RFP (terms which include the consumer controlling how much or how little of his or her personal data arising from the transaction or service relationship the vendor is able to access/ utilise). Customers could exercise such control through the use of a preferred “fourth party” relationship management agency chosen by them and not dictated by the vendor. Thus we could move from a world of  (poor) CRM systems to a world of VRM (vendor relationship management) systems.

What Searls describes as the future for individual consumers is in fact very close to the empowered relationship that Amazon currently enjoys with its many suppliers via Amazon Advantage (fondly referred to as Disadvantage by many sales executives who have to battle with the interstices of “vendor central” on a daily basis). Amazon’s website describes Advantage as  ”a self-service consignment program that enables you to promote and sell media products directly on Amazon.com”. Which of course is true, with the considerable caveat that suppliers participating in Advantage are not in fact selling direct to consumers – Amazon is still the supplier’s one and only customer. So although Amazon’s powerful predictive algorithms mean that the consignment stock required and held by Amazon is lean and quantities determined by a combination of actual and predicted demand from the end consumer – Amazon is the customer – and a highly empowered one at that.

Any supplier trading with Amazon via Advantage (and that includes most UK publishing houses and a significant portion of American publishers) has to meet all of the criteria specified by Amazon in order to be accepted into Advantage and must communicate online through formats and channels entirely prescribed and controlled by Amazon. Under Advantage, Amazon controls discount, payment days, physical supply criteria (charging penalties for failure to comply with these), EDI criteria and so on. Supplier performance is measured and reported on. Significantly Amazon also “owns” the data relating to the downstream purchase of the product including the usage data for e-products (although that’s a separate subject for later this week). Amazon’s status as a customer is a neat reversal of the role that individual consumers of services like Facebook, Twitter, Software (or even Amazon’s own customers for products) usually experience - where they are entirely at the mercy of the supplier’s terms and conditions with only the stark choice of “yes” or “no” to the “Do you agree…?” question.

Of course Amazon enjoys this position as an empowered customer by virtue of the muscle built up through investment, innovation and first player advantage, combined with formidable market share. Alone, an individual customer is never going to be able to exert the same kind of leverage over vendors in the market place as a giant like Amazon. However individual customers online are greater than the sum of their parts: making up a crucial market for retailers and service providers. Online, customers have a much louder voice, and a much greater ability to collect, organise and mobilise than offline. Searls posits that as online customers become more attuned to their lack of privacy and control – in particular of data that they consider personal – in current normative contracts of adhesion, they will require and elect to participate in VRM programmes that empower them as individual customers and not leave them as faceless, impotent consumers.

So? So Amazon provides us with a neat example of what it might look like if we, as individuals, could control our suppliers and set our terms of engagement. That’s going to be a very different online world to the one we trade in now.  Although I confess to frustration with the hot air generated by publishing futurology, it seems to me that the potential for the emergence VRM and online customer empowerment is one aspect of the future we’d all do well to work towards and plan for.

Tomorrow: Capturing the Castle