Jeff Bezos (Amazon founder) certainly picked out the right name for his company. When deciding on a name, he wanted it to start with A, so it would come early on in alphabetical ordering. He landed on Amazon it represented something exotic and different, and of course staying true to its name the company is looking to become one of the biggest entities in retail.
Amazon recently posted their gravity defying 2011 full-year results, as bricks-and-mortar retailers looked on enviously. Amazon posted a 41% increase in sales to $8.1bn (£30bn) during the year. Amazon’s sights are set on becoming a top ten retailer, currently residing in 25th position up from 31st in 2010. RetailWeek predicts they will hit the top ten by 2014.
Amazon is investing in logistics and new products, to sustain continued rapid growth in the coming years. Due to this heavy investment, their actual operating profits were down 39% to $862million (£537m). It just shows how the successful businesses grow by investing at the expense of short-term profits.
So Amazon looks set to fulfil its offering ‘Earth’s biggest selection’, by continuing to broaden and deepen its product range. The only potential weakness is its lack of multichannel offering. However, this will probably be combated via the introduction of pop-up stores and collection lockers.
So with the e-giant putting ever more financial pressure on bricks and mortar retailers, what exactly can they do to compete with the big bad e-wolf?
Competing on price is just not a smart way to go, their price checking app will destroy those who dare, so the focus has to be on added value. It can be a winning attribute to getting and keeping consumer spend, such initiatives like M&S free bra fittings, or Ikea’s help with construction of flat-packs. Remember good value is more than just about price in the consumer’s eyes.
Service is also a key point here. Yes Amazon do deliver promptly (most of the time). However, what they do lack is that personal touch. Dixons the owner of PC World and Curry’s see exceptional customer service as the way forward for their business. Your brand has to sing its values through all that it does and who it touches along the way.
Your product range can also be a way of competing with Amazon, as stated earlier they are looking to deepen and widen their range, so how do you create differentiation I hear you ask. Well you can take a leaf out of Selfridges book and try exclusive products, offer the customer something that Amazon just can’t deliver at a better price. ECommera chief exec Michael Ross believes that retailers will increasingly become brand owners in order to offer customer something unique. Also because of how vast and varied Amazon’s ranges have become it can also be rather off-putting for a customer, with so much choice they appreciate a trusted retailer picking out the best ones for them and not sieving through 5,000 variations.
And you forgot about convenience, this can be a big selling point to the 24/7/365 consumer, being able to pick up their items at convenient locations and times is a sure fire winner. Click-and-collect is getting a lot of attention these days, why, because it works and consumers want it, for example House of Frasier’s click-and-collect now accounts for 40% of the retailer’s online sales and they recently opened two stores specifically designed for this channel.
The next one is something that here at Brandthing we’re fairly vocal about – BRAND. The long standing retailers have significant heritage and connection with consumers through its brand. This can be pretty critical when it comes down to product lines where consumers are looking for a name they can trust i.e. electricals.
Just remember if you want to compete with the big e-boys start with getting the basics right. One of Amazons fundamental strengths is getting the product delivered on time, yes it sounds simple but countless retailers flop and falter on this one, instead focusing their efforts on making a shiny new website or obsessing about mobile.
The thing about Amazon is, you can’t really see the product, you can’t reach out a hand and touch it, see the size in perspective rather than guessing what 186262x537838 would look like on your wall. Here is where bricks-and-mortar rules - the physical world. Allow customer to taste, touch and test and put those helpful minions to work pushing the company’s brand values through them, and the in-store design. Experiential retail can be expensive but the extra footfall through the doors can prove to be an investment well paid.
Rewarding customers that have loyalty is another great way to capture their hearts, but maybe going above and beyond rewarding with money off. HMV Pure makes use of the retailer’s connections with industry contacts to give customers rewards such as magazine subscriptions and cinema premiers.
Amazon is still a baby; it may be a giant retail eating baby, but still a new company comparatively to many long-standing outlets who have built relationships with suppliers. Retailers need to work with their established partners. Speaking on Amazons current venture into the chilled food category, John Giles divisional director of food supply chain research firm Promar International tells it better than I could: “Amazon can physically build a cool store and a distribution depot fairly easily, it is building relationships with suppliers that is key....In fresh food categories, such as meat and dairy these relationships can be challenging.”
The first rule of war is ‘know your enemy’. Ross (online retail consultancy eCommera) states that “[Retailers] need to be smart and apply more than standard retail thinking.” Ross claims that the way Amazon measures performance is radically different to tradition retail methods; perhaps there is something to be learnt from the e-giant. Think Differently.
And the moral of the story is, retail will suffer at the hands of the e-world and e-giants alike if they don’t adopt a value led approach over just pricing, and if they don’t invest in harnessing the positive truths within their brands to create believable differentiation over the online giants such as Amazon.
Have your say on the topic and add more to the list if you wish.
