Amazon is disruptive, perhaps ruthlessly so. Charlie Rose interviewed Amazon CEO Jeff Bezos for a 60 Minutes segment that aired this past Sunday, and credit unions can learn a lot from a business model whose motto appears to be adapt or die. Here are just three takeaways.
The Customer Is King
Amazon’s customers influence its decisions and processes. For example, the company involves customers in internal decision making and even crowdsourced the selection of its first TV show, Alpha House, to customers. It uses more delivery trucks than planes because its 96 distribution centers worldwide cover a significant swath of the planet. People want their purchases quickly, so Bezos constructs distribution centers in as many backyards as he can.
Credit unions are member-driven institutions, so listen to your members as much as possible. Ask them about the big stuff like branch growth or services, but don’t stop there. They don’t need to select the color of the carpeting, but they can give you valuable insight on general branch design, promotions, and rewards. You might not have the operating budget to open a branch in every member-desired location, but smaller, alternative branches or personal teller machines (PTMs) can satisfy members’ wants without denting the credit union’s budget.
Efficiency In The Unexpected
In case you missed it, Amazon is testing a drone delivery method that would bring you your packages in 30 minutes or less, just like they’re pizzas. It takes time and money for workers to pack, ship, and deliver that used copy of Catcher in the Rye. Drones, on the other hand, are autonomous and efficient. They don’t waste time. The new strategy is contingent on new Federal Aviation Administration regulations and smarter technology that will mitigate flight or landing accidents.
In its centers, Amazon stores Swiffers next to encyclopedias and books on Buddhism next to Mrs. Potato Heads. Why the odd placement? Because, says Amazon vice president Dave Clark, Those two things are optimized for utilizing the available space. The method has helped Amazon double the amount of goods it stores in its centers from five years ago without adding square footage.
Anything can be made more efficient. Encourage members to use PTMs and remote channels for basic transactions. Ask all staff from executives to the front line how and why they use certain products and services to find the inefficiencies in your organization. If you find it’s too difficult to do this in an unbiased way, consult a third party for assistance.
Everyone knows Amazon is a retailer, but did you know (before you read this blog) that it produces a TV show, sells its own designer clothing, and offers access to its own large computing infrastructure to companies and institutions such as Netflix and the C.I.A.? According to Bezos, in the beginning Amazon aspired to own a forklift; now you’d be hard-pressed to name a handfull of things it doesn’t sell.
As Callahan & Associates reported in its third quarter Trendwatch, the mortgage environment is changing to favor purchases and consumer lending is growing. But don’t neglect opportunities in micro and non-traditional lending. These loans carry greater risk, but larger margins. Done moderately and smartly, they can be a great way to grow the balance sheet and expand member relationships.
Another area in which credit unions can differentiate themselves is through consultative services. As more consumers conduct their banking online and through smartphones, credit unions have the chance to become personal consultants that understand how every product and service the credit union provides can benefit each individual member. Yes, shoppers can buy a car online, but doesn’t it make sense to take it for a test drive and have a mechanic look under the hood, first?