Last night at National Mechanics, Refresh Philly and PhillyCHI cohosted an event featuring Jared Spool, user interface guru and principal at User Interface Engineering. Spool took the audience through his ten years of researching Amazon in a very charismatic presentation. He explained (1) why Amazon is able to have the lowest competitve pricing, (2) how they get the most user-generated content and (3) what you should consider when building an e-commerce site.

(1) Amazon sells its inventory on a about a 22-day cycle; then, pays for the inventory on about a 44-day cycle. This allows them to build interest on the 20 days between. Other competitors are not able to sell their inventory until about 64 days; thus, they rely on short-term credit and have to keep their selling price points higher.

(2) Amazon is the most successful online retailer because they sell the most product. Additionally, they get the most user-generated content in the form of reviews -about one review for every 1,300 sale. When your selling rate is about one every 24 seconds; that equates to a lot of comments. Additionally, they allow useful information such as how people rate the product with one star, two stars up to five stars. You can also click if a review was helpful or not. Then, when you click into a product's review page, they organize by what users rated "The Most Helpful Favorable Review" and "The Most Helpful Critical Review." I'm pretty sure you've been to Amazon and tried to convince yourself not to buy that product...I know I have, which is why I respect them for being so transparent with their negative reviews.

(3) In my post yesterday, I stated, "Design matters." When you are designing a site; it is so important to think about the user and how they will navigate and make decisions along the way. How do you build trust in the products you are selling? Is it easy to make the purchase on your site? Think about the tools you need to design with as well as the tools your customers need to get through your site. Amazon has listened to their customer base and understand that answering the question, "When will this product be delivered?" is essential so they show the answer in five different spots on the same page. They've been able to calculate what these small additions (or subtractions) make on their bottom line.

There is no argument, Amazon's business model has proven to be successful. Thanks, Jared!