Guest Column - September/October 2011

Filling the Amazon Void

By Ira Ozer, CPIM

In April 2010 left the incentive fulfillment business, even though it was selling an estimated $250 million of merchandise awards annually for more than 20 incentive companies and loyalty program sponsors that had integrated with its product fulfillment API. When we reported on this last May (visit, it was unclear exactly why Amazon left and which companies would fill the void.

Although the incentive industry has been in existence for almost 100 years, most incentive agencies have never offered more than a few thousand merchandise award choices, with catalogs that were updated only occasionally and often in limited and rigid price points. Then Amazon came along and offered more than a million choices across most product categories, in all price points, and updated them in real time to reflect manufacturer price drops and deals. They offered direct integration to an incentive company's incentive software (the program Web site and points "front end") with its online fulfillment system (the awards "back end"). Alternatively, an incentive company could opt to use an intermediary to handle the technical integration and provide other supplier choices, such as individual travel, gift cards, other retailers, etc. There have been many other award innovations over the years, such as the proliferation of retail gift cards and branded Visa or MasterCard stored value cards that could be spent anywhere, but when it came to direct merchandise fulfillment, Amazon clearly changed the game. Then they picked up their ball and went away.

So where did the $250 million in incentive fulfillment business go? This is impossible to report on accurately, but from confidential discussions, it is likely that Amazon kept at least 40 percent of the business through its gift card, gift code and bulk product sales business, and the rest was divided among emerging exchanges, traditional incentive distributors, gift card providers and retailers that have entered the market.

Amazon left the direct fulfillment business to solve some issues and to devise a method that could work in accordance with their business model. A major innovation, announced in late 2010, is that they now accept American Express Membership Rewards Points as a currency, allowing millions of members in this popular loyalty program to shop at and pay with points. There is a cost for this service, as there is with other direct fulfillment vendors, such as Ticketmaster, because Amex values their points as desired to fit their business and profitability needs, which varies by vendor.

This policy remains consistent with the traditional incentive agencies' ability to value their award currency as necessary, but in this case, the participants are redeeming their award points directly at and not in their sponsoring company's branded incentive program Web site.

Andy Althauser, EVP of Bridge2Solutions (B2S), which as the largest integrator had the most share when Amazon left the business, explained that although it was difficult at first, they did not lose any clients and that Amazon's departure actually opened the door for new retail suppliers, such as Best Buy, and improvements that are transforming the business, such as Best Buy's ability to allow participants to opt for in-store pick-up and to provide mobile solutions. With in-store pick-up, customers benefit by avoiding shipping costs and also enjoy perks such as special parking spots and express check-out lanes. Mobile apps allow program participants to locate stores, view merchandise items, check inventory, add items to their wish lists and place award orders using their smart phones in real time. When in-store, participants can use their devices to scan merchandise items to determine their point costs. Althauser mentioned that mobile apps are projected to overtake online transactions by 2014 and that they drive engagement in real time. In addition, he explained that B2S data shows that consumers want choice and enjoy creating their own packages, such as ordering a DVD player, along with a few DVD movies, or a camera with a case and memory card. These packages are easy to order on the platform, even when components are fulfilled from multiple suppliers.

Citibank and Best Buy announced in August 2011 that they have partnered to launch a mobile rewards application for iPhone and Android devices, which allows participants in the Citi "Thank You" Rewards Program to redeem their points for Best Buy purchases using their phones and picking up their orders in-store. As quoted in their press release, Ralph Andretta, EVP of Loyalty and New Products at Citi, said, "There are millions of redemptions available via the ThankYou Rewards program outside of Best Buy, but Citi was excited to partner with the retailer which it sees as an innovative company like itself. This app demonstrates that Citi wants to be the best digital bank in the world."