Dear Retailers: Adapt, Adopt or Die
A few months ago, Amazon.com surprised the tech and retail worlds by announcing plans to acquire Whole Foods. For those of us who have been watching Amazon’s increasing dominance, this development is nothing new. In fact, I’m surprised it didn’t happen sooner.
Traditional brick-and-mortar retail outlets have long been struggling to figure out how to best integrate modern technology. Whether it’s mobile applications, e-commerce or even just online advertising, the prosperity of large retail outlets like Sears, Payless ShoeSource and Gymboree has been seriously undermined by the internet — to the point where many have been forced to downsize or even go bankrupt. Coupled with the growing influence and sheer logistical power of internet retailers, some may wonder why more stores haven’t ended up like Borders or RadioShack. But it doesn’t have to be that way. In fact, retail stores have plenty of resources at their disposal that Amazon simply does not … at least not yet.
With market volatility increasing every month, three real choices are open to retailers that are serious about long-term survival:
- They can do what they've been doing for decades, acting like nothing is wrong, in which case they’re doomed and Amazon will indeed be the death of them.
- They can engage Amazon on the battlefield of its choosing, namely e-commerce. This is another losing strategy because after over 20 years of perfecting its business, Amazon is the undisputed king of e-commerce.
- They can “skate to where the puck will be” and embrace new and emerging technologies like augmented reality (AR), the Internet of Things (IoT) and machine learning ahead of Amazon.
This third option bears detailing because it’s the only strategy that can possibly work.
Here’s the key insight: Retailer operations were disrupted by Amazon in the 1990s, but as the company grew, its pace of technology integration has slowed. As a result, Amazon hasn't yet been able to utilize modern technologies en masse and doesn’t yet understand how best to use them. This means that retailers have an opportunity to pair their physical stores and advertising channels with next-generation tools that can better connect with consumers. Companies that want to survive and thrive in our digital age must evolve the way their stores interact with consumers and enhance the customer experience by making shopping at brick-and-mortar stores simpler and more engaging than before. Amazon knows all of this and is racing to embrace these technologies before it falls behind.
By adopting AR and its contemporaries, retailers can leverage their media presence and even turn existing advertising channels into sales channels. If used effectively, every time a consumer sees an ad on television, in print or online, retailers can establish a connection in new and interesting ways. Retailers can also use AR and IoT to upgrade existing brick-and-mortar locations to drive more foot traffic with enhanced, digital store experiences. For example, by strategically offering deals and rebates, as well as gamified experiences, to an increasingly sophisticated, mobile-first customer base, retailers can drive traffic to their stores. Inside the store itself, special offers and technologies can also incentivize shoppers to spend more time in-store, increase basket sizes and purchase more frequently.
The good news is that Amazon doesn’t currently have retail-level infrastructure — hence the Whole Foods acquisition — so there’s a window of opportunity. The other good news is that retailers don’t need to be IoT or AR experts to adopt new tools in their stores because many startups, even more innovative than Amazon, have the expertise to help create this storefront of the future. Therein lies the choice: retailers can seize the window of opportunity to embrace emerging technologies that can put them ahead of e-commerce giants, or they can allow Amazon to catch up and overcome their last major strategic advantage. The time to make that choice is quickly running out.
Alex Hertel is the CEO of Xperiel, a company making the physical world digitally interactive, bringing the real world web (RWW) to life.
