The Silver Bullet to Beating Amazon -James R. Wallen

Amazon is Dominating:

·   66 Million Amazon Prime Members, $6.4 Billion in Subscription Fees,

·   ~$136 Billion in Revenue in 2016,

·   2.1 Billion Monthly Unique Visitors,

·   Amazon accounted for 53% of E-Commerce Growth in the U.S. in 2016,

·   Amazon accounted for 43% of all On-line Revenue last year.

It’s not Fair!!!

In 2015 Amazon surpassed Walmart as the most valuable retailer in the United States and they operate in 14 additional International markets. In October 2016 they announced plans to build convenience stores with curbside pick-up and opened the first Amazon Go Store in December. In 2013 Amazon announced a partnership with United States Postal Service to deliver on Sundays and are currently testing to find the solution to Drone Delivery. They produce their own products like Echo, Kindle, Fire TV and Music Unlimited. Amazon operates more than 70 fulfillment centers with 90,000 employees that are paid 30% higher than traditional retail jobs.

Traditional Retailers are saddled with thousands of stores, where they either own the property or are tied into long-term leases. They are staffed with thousands of associates, fixtures, registers, management, electrical bills, security and human resources that go along with Brick and Mortar locations. Consumers then use those stores for “Showrooming,” which is to try on, look and feel the merchandise; only to then purchase it on Amazon later, or even worse, they buy it from their mobile device right there while they are in the store. With Amazon capturing almost all of mobile shopping sales growth, this nightmare is becoming the norm.

There are always exceptions, and luxury brands for the most part have been able to defend their spaces and brands by keeping to the exclusive nature of their brands; and as many Merchants that I have met with termed it, “Keeping an elegant experience.”

The Silver Bullet

My favorite acronym KISS – It’s the customer! 

Don’t overcomplicate things; the retail challenge hasn’t changed in a century. Have the right product, in the right place, at the right time and for the right price. What Amazon has going for it is that you can literally find anything, for the cheapest price, and they created the 2-day shipment standard - (delivery time for the top 30 digital retailers is 4 days). 

After reviewing the top 50 innovations in retail, I find myself at a loss, much in the same way it seems we have lost the point of view of the average consumer. Highlights of New Technologies: Virtual/Augmented Reality so that people can enjoy the shopping experience without leaving their own home with a headset, “personalization,” any number of which technologies are supposed to use algorithms, previous purchase history and segments to market and guess what you want, drone delivery, wait time/que management texting, facial recognition software, etc. How many of these deliver the basics of what the consumers are truly looking for? 

The Basics

·     Omni-Channel Inventory

·     In-Store Pick Up

·     Store to Store Shipping/Fulfillment

·     Unified Pricing

·     Mobile Check Out

·     Enhanced Loyalty Program

Imagine…

King Soopers (The Local Kroger Brand Grocer) unveiled curbside pick-up at our local store last month. It is free for the first 3 visits, then a nominal fee after. If grocers were to do this correctly, they could do it for free and actually at a lower cost. If every grocery store were to reduce the number of facings per product by half, they could effectively reduce their retail store square footage by approximately half. The other half of the store would become in essence a distribution center where product gets picked/packed and then instead of shipped; it is placed in the consumer’s vehicle for curbside-pickup. All of the costs associated with Retail Square Footage would be cut in half. In grocery, the average store already carries almost every food item you could want, they have an optimized supply chain for perishables that Amazon can’t compete with yet, and their time to delivery would be immediate instead of 2 days.

It seems that the answer to the dilemma of what to do with our already saturated retail commercial real estate problem lies in the customer experience above. Use our stores for showrooming, but capitalize on the ability to fulfill from stores, but take out the cost of shipping from the equation. Regardless of shipping being paid for through memberships or margins, it is still a cost of goods delivered, and if retailers can convert stores partially into mini distribution centers that don’t ship but are there for pick-up…they have a more effective equation.

Amazon generates over $1 Billion a year in advertising revenue and has been investing in a robust platform to capture more ad revenue in the coming years. Most of that advertising is coming from product placement on other product pages!!! You heard me correctly, if you are selling something on Amazon, your competition is paying to have their products displayed on YOUR product page. This is the weakness that retailers need to capitalize on. When was the last time you went to a product page on Amazon and scrolled down as far as you could? It is a never ending page of crap, but starts with “Frequently Bought Together, then Sponsored Products Related to this Item (You can scroll to the right here for usually ~40 pages), Customers Also Bought, Sponsored Links, Special Offers, Compare to Similar Items, Product Description, Video’s, In-Line ads, Customer Q&A, Reviews, Etc.” You get my point, Amazon has been so concerned with being able to provide everything, that they have made the user experience horrible for anyone trying to find something specific. As Amazon invests more and more in trying to capitalize on capturing Search revenue, you should let them. Just make sure that consumers come to you to buy!

Stop Guessing

The primary systems that retailers use to determine what products to carry, in what quantities and at what price are Assortment Planning Tools, Merchandise Planning Tools, Price Optimization, Supply Chain Solutions, etc. The biggest miss in retail is that all of these tools currently calculate based on implied intent. If your stores are stocked with the items that you believe are in highest demand by size, color, style; especially if they are mini-distribution centers, it will be imperative that you stock them with the right products. If you are using the same algorithms that you currently use to send mass marketing e-mails to your customers…the outcome won’t be good. 

Of the 1200 marketing e-mail messages I received from retailers during the Holidays, 97% of them promoted products that had zero relevance to me. The other big advantage that retailers have is personal access to the customers. Take every opportunity to find out from them what they are looking for, at what price, in what size, in what color, etc. Then use that information to better plan your business.

And your engagement needs to work! The second most valuable Retailer in the world has “Out of Stock” alerting available on their web-site. The ability for someone to request an e-mail or TXT when a product that they are looking for comes back in stock, seems pretty basic right? However, when a site that sees more than 280 million monthly unique visitors can’t get it to work, there is obviously something wrong! If you sign up to receive an alert for an out of stock product and the product comes back in stock…you don’t get an alert.

Most retailers have a Customer Experience department or Executive in their org chart responsible for UI/UX, but I am curious if that person ever actually goes through the customer experience. Most IT departments are just trying to keep up with project demands that are dictated to them one off by other departments. The result is a disjointed customer experience that just plain sucks. I was speaking with the Chief Marketing Officer for a Large Retailer and he told me the story about how he refused to take the job unless he was able to spend the first 6 months in the stores just getting to know the customers and what they are looking for. That is the way we need to value our customer experience, whether it is on-line or in-store, if we are to morph into true Omni-Channel Retailers.

Retail is detail folks, let’s make this happen!