Amazon: co-operate or compete?
I’m a Practicologist, and while I’m not a soothsayer, I do have a reasonably good idea of what’s coming down the track.
This last paragraph of my Retail Week column from October 2013 predicted fairly accurately how Amazon would begin to colonise retail:
“A move into multichannel retailing is highly probable, with bricks-and-mortar to enable its customers to ‘choose how they shop’… It has incredible opportunities to scale its business and remains a serious threat to a large number of established multichannel retailers.”
Since then, Amazon has begun to establish a physical presence with book stores, Amazon Fresh, its acquisition of Wholefoods and Amazon Go; in addition to same-day delivery.
This trend is only going to accelerate. So how should you respond?
Retailers tend to look at their traditional competitive set when thinking about their positioning, customer value propositions, range, marketing etc. This, I believe, is missing the point.
Market share is being taken by marketplaces. Just ask the CEOs of large US retailers such as Macy’s, Nordstrom, Neiman Marcus, JC Penney et al.
Amazon took 53% of all the ecommerce growth in the US last year, and 43% of total US online revenue, according to research firm Slice Intelligence.
Amazon’s value chain is far superior to most:
· It has a better logistics network and proposition than anyone else. Once you’ve paid for its Prime delivery service, why go elsewhere?
· It has a broader range of products than anyone else
· It has a better supply chain
· It has a stronger price proposition than anyone else
· It uses customer, product and pricing data more effectively than probably any other retailer; to the level that its ultimate objective is to send you something before you even know you want it!
· It has better overall customer service than most
Of course, it’s not only about Amazon. Alibaba’s Tmall Global will undoubtedly take share, in addition to the vertical and sector specific marketplaces such as Zalando in the fashion space.
Here’s a few tips to ensure your continued growth:
· Create a P&L line for the attribution of the web on your store business. That way you’ll invest appropriately in digital
· Offer click and collect, next-day delivery and free returns to give the customer what they want and expect
· Empower your people to do the right thing for customers
· More product searches start on Amazon than Google. So, while the latter is still hugely important, the former may need to become a channel to market for you
· Adopt a fail fast, test and learn culture. If you have to prove the business case for every initiative, you may not be around in five years’ time
· Segment your customers to offer more personalised experiences
· Re-think the role of stores and how to leverage digital to remove friction and deliver engaging customer experiences
· Become a service provider. Start by thinking of yourself as a customer service business that just happens to sell stuff.
Amazon will recruit 5,000 additional UK employees during 2017, at a time when many UK retail stalwarts are shedding roles. Whether you choose to embrace Amazon as a channel to market or address your value chain to compete, it’s crucial that every retailer has an Amazon strategy.
This article first appeared on Retail Week on August 21st, 2017. Read it here.
The article was reproduced on Linkedin on August 22nd, 2017. Like it here.