Four Ways to Ride the Wave of Amazon’s Retail Disruption
While many traditional retailers are struggling and looking for the silver bullet answer to declining sales, online retail is seeing record growth. Amazon.com is perhaps the biggest disruptor in retail since Walmart and is a ‘prime’ example of a company dominating in e-commerce.
While brick & mortar retailers are trying to compete by investing in e-commerce, online retailers are expanding into brick & mortar. Seems counterintuitive. Yet, even Amazon sees a need and opportunity in gaining a presence in brick & mortar as evidenced by their Whole Foods acquisition.
So, why are successful e-commerce retailers jumping feet first into the fray of brick & mortar? This omni-channel retail reality was THE topic of discussion at the annual Shopper Insights & Action Conference held in Chicago. A host of speakers, from founders of digital retailers and media companies to industry execs and consultants, provided insight into today’s business reality and the real benefits in taking e-commerce from virtual to physical. Within these benefits exist lessons for traditional retailers, namely how to fight fire with fire and better position themselves to compete. There is also wisdom for those of us who partner with retailers -- the manufacturers who want to sell their products at these retailers as well as the marketing, strategy, data and insights organizations who provide their services to retailers and manufacturers alike.
It’s a story of how to prepare for change and pro-actively embrace the future. But, even more so, it’s a tale of taking risks to forge a new path toward success. Here are four ways to ride in the wake of Amazon’s disruption and come out swimming:
1. Be Experience Focused and Medium Agnostic.
Warby Parker founder, Neil Blumenthal, recounted his company’s move beyond digital as another way to create and curate customer experience. The fundamentals of access, price, value and service remain but, for a group of customers, brick & mortar is a vital touchpoint and provides further reassurance and engagement. Blumenthal rejects the fear of one channel stealing from another. In fact, Warby Parker has found that many customers go back and forth between online and offline and each channel drives traffic to the other (and vice versa) while the integration of the two serves to push customers further down the purchase funnel. Data has shown that when a store front is opened in a new market there is an initial drop in online sales in that market. However, within a matter of months, digital sales actually increase which Blumenthal attributes to the impact of “social purchasing.” Customers are sharing and showing their experiences and word-of-mouth prompts new customers to check it out.
Convenience, speed and no-hassle ease of use are hallmarks of the online experience but for a different customer group the ability to hold and handle, try on in person and talk to staff on site is invaluable. And, while Warby Parker customers may browse in-store, they could ultimately purchase online, or vice versa. So, for Blumenthal, store fronts are an extension of the marketing investment and another way to control the experience for customers. Brick & mortar sites are not viewed as, or treated as, a competing channel.
Implication:
For retailers and manufacturers, consider new ways to bring the benefits of the different channels into the customer experience. Don’t be bound by the confines of the channel and instead think of it as improving the experience at all touchpoints. In brick & mortar, this may look like mobile integration or digital kiosks in-store where out-of-stock and special orders can be quickly completed. It is investment in new ways of purchasing such as in-store pick-up and self-checkout.
In e-commerce, how can a product or service be brought to life for your customer? Instead of a thumbnail package front image without any surrounding context, invest in “unboxing” videos showing a real person opening and trying your product. This brings scale and perspective as well as a tangible proxy of endorsement.
2. Focus on Access over Ownership.
Ok, so a first step is a complementary channel strategy and controlling the customer experience at all touchpoints. What’s next? Well, your experience needs to be differentiated and not just the same-old-same-old. To be a copycat of others or, worse yet, to live in the murky middle between the value and efficiency players and the higher-end, experience-focused specialists is not a good place to be. Just look at Radio Shack and Toys ‘R Us who occupied a rather milk toast space in retail and are now shuttering their store fronts.
Steve Dennis, a former exec at Nieman Marcus Group, summed this up well with his comment “physical retail is not dead, but boring retail is.” Dennis encouraged organizations to reimagine remarkable. Remarkable retailers are selling more than goods and services, they’re selling access. They’re giving customers back something that seems to be in shorter and shorter supply. They’re giving back the luxury of time.
Jennifer Fleiss, co-founder of Rent the Runway and leading force behind Walmart’s new incubator, Code 8, spoke about the success of selling access over ownership highlighting examples such as ride share over car ownership, Netflix over DVD purchases and even co-work spaces over purchased office space. Fleiss sees ownership as caretaking and stress while access is easy and freeing. Millennials, in particular, are driving this ‘less is more’ shift in consumer behavior.
Implication:
Revisit your retail business model and investigate your customers’ journey to identify opportunities to go from same-old-same-old to remarkable. Don’t just stop at addressing the low hanging fruit of customer pain points and frustrations. Take it further by looking for potential differentiators and ways to strengthen these to drive greater customer engagement. What are the ways in which you can re-imagine an offer of access over ownership? Loyalty programs might be a great place to start. Exclusives, memberships, ways to give customers time back … these have the potential to yield remarkable results.
3. Make it a Game. Generate Demand.
Another way to amplify customers’ experience and shift to more remarkable retail is game-ification. Andrew Blachman, COO of online retailer, Tophatter, shared their approach of “snackable shopping”. Referring to themselves as the anti-Amazon, Tophatter is a mobile retailer cross between QVC, game show and Las Vegas slot machines. Shoppers are presented with a variety of product “auctions” where they can bid against other shoppers in the hope of winning the deal. It’s not an efficiency play. It’s a discovery play. It’s not utility. It’s entertainment that generates demand as opposed to typical retailers who harvest demand. Blachman and the Tophatter team “want to turn shopping into a way to spend your time versus a way to save your time.” After all, snacking is bite size, fun and tasty. Might shopping be thought of in the same way?
Wait a second, you may be thinking. First you advocate giving customers access to help them get time back and now you are promoting an increase in their shopping time through game play. What gives? Although it may seem like a contradiction, it’s really not. The access being given in game-ified retail is the emotional thrill of the hunt. It is time given on their own terms not unlike the emotional pay-off achieved when playing mobile games like Angry Birds. It’s different time spent and likely more enjoyable time compared to typical modes of shopping.
Implication:
Game-ification principles can and should be applied to traditional retail to amplify the shopper experience. In physical stores discovery of new and novel plays a role in shopper excitement and merchandising to aid in this discovery is important. Limited time offers also tap into this “gotta get it now” mindset. But how can this be extended further? Consider integration of online and offline promotions and programs where shoppers find, collect, amass and redeem … where they can unlock increasing levels of your product, service or even deals.
4. Go Beyond Big Data and Dig Deeper.
More data is powerful and algorithms and machine learning will become table stakes. After all, who is amassing more customer data than Amazon? Big Data will continue to be the calling card that everyone will lean upon. But a competitive advantage going forward will be the ability to know your shoppers more deeply in order to anticipate needs. In short, what really matters is what you do with the data you gather and how deeply you can mine and understand versus simply having the data in-hand.
When asked what advice he would give to CPG brands, Warby Parker’s Blumenthal noted, “It’s not about big data, it’s about deep data.” And what we know about shoppers is they do not approach their decisions in a linear way. Shoppers are people and thus complex. They don’t always easily fall into the neat demarcations of our behavioral segmentations. As insights professionals, we need to embrace more System 1 approaches to learn in the modes of how people make decisions which is quickly, in-context and driven by what is seen, noticed and recognized.
Implication:
Learn in a broader context of who the shopper is and their needs and values. Go beyond brick & mortar in your customer journey research to a more holistic, omni-shopper vantage point. Understand the role both online and offline shopping activities play in the path to purchase. From a personnel standpoint, consider how to integrate resources and expertise under the umbrella of omnichannel and omnishopper insights. Don’t house your insights team within channel silos but rather integrate and cross-pollinate learning. And what about translating this learning to your organization? Modify your creative briefs to include a section for omni-channel shopper insights.
In summary, there ARE ways to compete and win in an Amazon disruptive environment. In fact, even the juggernaut of Amazon has some areas for improvement.
While Amazon appears to be winning on the end of the spectrum where efficiency and speed and price matter the most (and to whom they matter the most), it is not designed optimally for experience. And, as noted, experience does, indeed, matter! This encompasses relationship, high touch engagement, browsing and comparison shopping, trying on and discovery. Retailers, and the groups who support them, need to up their game on the elements of experiential, access, game play and deep learning in order to compete and win.
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