Make Amazon Irrelevant

Amidst all the hype surrounding the predicted barnstorming Australian market entry of Amazon, it's easy for retail leaders to lose their cool and resort to such unproductive reactions as confusion, outright denial, hyperactive marketing and discounting, or any combination of the above.

Even worse than these reactions is the abject panic that unscrupulous digital media, agencies and service providers are trying to induce in the market in order to make a quick buck - succumb to this temptation and you've already tripped over the first largely empty brown cardboard box.

"But, really, should I panic?"

No. Really, no.

Like any problem in business, the arrival of Amazon should be greeted with a level head and a healthy dose of scepticism. But however you slice the market, there's no doubt Amazon's going to be gunning for more than their fair share and the competition will only heat up. So if I'm an Australian retailer in 2017, what questions should I be asking myself? Well, the same questions you should have asked yourself in 2016, and 2015...

What's my motivation?

The first thing we have to remind ourselves of is that, Amazon or no Amazon, for a retailer to not only survive but truly thrive in the modern world, they need to be bringing substantial, measurable value to the table; value which consumers can't easily find if their inconstant nature leads them to look elsewhere.

Gone are the days where simply sourcing and making a product readily available for a reasonable price is enough to make a handsome living. Already true before the advent of the internet, the spreading power of Amazon, T-mall and their ilk is proving the last nail in the coffin for even those little regional and niche retailers who are simply stacking the shelves with someone else's products and ringing up the till.

So, to carve out and appropriately fortify your own slice of the market, you need to go back to the basics about what helps your business deliver it's own unique brand of value to your customers and build as much as you can on those strengths to ensure you're the one in control.

Sounds complicated, and like anything in retail it can be, but I have a simple scoring exercise that can help you get a great start on this journey. First up, back to business school - here are five common value-drivers in the retailer-customer relationship:

1- Own/Unique Products:

Probably the single biggest driver of value (at least today) is when a business has the luxury of at once being the designer, manufacturer and exclusive retailer of it's own products. Assuming the products it produces are adapted to the market and recognised as being of appropriate quality, the truly vertically integrated business can take advantage of higher margins, a virtuous cycle of customer feedback going directly into product development cycles, and simply preventing anyone else from selling theirs or an equivalent product (patents and economies of scale can help here).

While this model may be relatively easy to set up in certain fields (fast-fashion with outsourced, but unique manufacturing springs to mind), the complexity of building the supply chain from design room to retail shelf increases dramatically with the sophistication of the product. Sure, Apple has mastered this approach; but how many other companies have?

2- Product Curation:

Something one might most readily associate with a high-fashion boutique, this concept can nonetheless be seen in categories as wide-ranging as discount homewares and holidays/travel. Here the value lies in the perceived expertise of the retailer to do whatever planning, discovery and research necessary to bring together related products that in some way work well together and are trusted to be of a minimum level of quality.

Substantial value can be built here, and can grow over time with brand reputation, but be acutely aware that your "curated" offering is only as good as the people and processes you employ, leaving you at risk of them taking this value elsewhere if they're tempted away by a better offer from a competitor

3- Service:

Particularly if you're in a niche where the products you sell are complex enough to require an extensive after-sales service system (think electrical goods or automotive for example), but also for products where things such as training and ongoing support or upgrades are relevant, having a well-functioning service offering delivers substantial value. Indeed, a business that is widely-recognised as providing fantastic after-sales service can build substantial barriers to entry into its market space, and fend off much larger, more generalised opponents.

However, be mindful of the cost to serve which, even with the best intentions, can quicky spiral out of control; leaving a business no choice but to disappoint its most loyal customers, and hence damage its reputation, by reducing its service offering.

4- Community:

Like-minded people tend to have similar needs and hence buy similar products. While "independent" social media gives the opportunity for people to digitally congregate around whatever idea or issue they like, well-executed social media strategies can encourage that community to be built around a retailer itself; the advice, support and all round "togetherness" that these community members can offer each other, all under the banner of your brand, may well prove to be the greatest driver of value there is, one day. (The jury's still out on that one, right?)

But beware, once properly up and running, an active, successful community of customers can take on a mind of its own, and exhert substantial "ownership" over your brand, its values and its direction - and the community's wishes on these issues won't necessarily correspond with yours, or indeed the financial/operational realities of running your business. Listen to, and work closely with the community and you stand to build a powerful symbiotic relationship - ignore it, or worse, anger it, and you do so at your mortal peril.

5- Brand:

This is still a big one, if you've trained your customers over years and decades that they can expect good prices and good service, you'll be able to ensure a core loyal following that will engage with you by default; but beware, because of the ubiquity and fickle nature of things such as social media, a retailer's brand alone as a driver of perceived value is in increasingly shaky ground (while manufacturers and primary producers with strong brands enjoy relatively higher consumer loyalty).

Due to the likelihood it's importance will continue to dimishish over time, Brand should only ever be considered a support to other value drivers - make the most of it while you can!

Who else can deliver that?

This is really just retail 101, and is by no means an exhaustive list (as always, your mileage may vary), but for the sake of this exercise, ask yourself which of the above drivers best represents the value you deliver to your customers. Got it? Ok, then score your business from 1 to 10 against the following criteria:

• How well established, consistent and strong is that value proposition?
• What about when compared to your existing (and future) competitors?
• How well do your customers recognise this added value?
• Do they respond to it by returning value to you (through loyalty for example, or higher prices)?

Honest, transparent answers to these questions are vital in evaluating the strength of your position in the marketplace. Furthermore, you must have a consistent mid to high score in each of these criteria and not excel in some and underperform in others, if not all your work might be for nought.

Why?

Well, for example, you may have a well established, consistent and strong value proposition, but this is worth little if your customers don't recognise it; likewise, your customers might be responding to your value proposition today by returning value to your business, but if you're not consistently ahead of your competitors, nothing stops them stealing this extra value, or indeed your very customers, away from you at short notice.

The drivers that can be employed to improve these scores are many and varied (and not all necessarily costly), and will obviously differ greatly from one business to the next. Much can be gained by simple changes to the way you communicate and engage with your customers (make sure they know what you're worth!), or ensuring consistency in how the "value" is delivered across channels and locations. Your job as a retailer is to constantly measure and improve as you go.

Don't just deliver products, deliver value

Amazon, by virtue of it's scale, presence and resources has already been and will certainly continue to be the death of many a complacent retailer; but by doubling down on your primary value driver, and doubling up by adding others to your arsenal as you go, you can build a market position that will enable you to stay at least one step ahead.

What about you, what things have you found have created a unique relationship with your customers that provides you a secure position in the marketplace?