How Retailers Can Best Compete With Amazon

Jeff Bezos, CEO of Amazon.com, would probably take offense to the title of this article. Why? Because as Bezos says, “Do not be competitor focused; be customer focused.”

He’s right. It’s more important for retailers to focus on making their own customers happy. You don’t simply compete with Amazon by competing with Amazon, but rather by providing your customers with compelling reasons why they should shop with you instead of Amazon. (See more in my Amazon Effect video.)

So why should consumers shop with you? The specific answers will differ for each retailer since each defines its own unique retail strategy, technology solutions and supply chain capabilities. The overall concepts of strategy, technology and supply chain will be the same for all retailers, however.

Now, the key question essentially becomes the following: How can retailers compete with Amazon by defining their unique positioning on these three concepts and present a compelling reason for consumers to shop with them?

1. Strategy: This is about the right operations strategy. Each retailer needs to uniquely define how it’s going to compete with Amazon for their customers’ attention by addressing what I like to call the four pillars of retail success:

  • great prices;
  • awesome selection;
  • best-in-class convenience; and
  • personalized experiences.

Each brand must define a compelling strategy in which consumers will select them over Amazon based on offering better prices, selection, convenience and/or experience.

2. Technology: This involves enabling your operations strategy to work effectively and efficiently. Traditional ERP-type technologies drive operations from store sales and/or sourced products. This isn’t only inadequate, it’s inefficient.

No retailer is satisfied with its sales forecasting, merchandise planning and allocation methods. Consequently, excessive inventory expenses and working capital — along with high store out-of-stocks and fulfillment lead times — are limiting margins and upsetting consumers.

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Comments
  • Guest

    Small businesses can not do any of these things. You can’t offer great prices when you don’t have the volume, you can’t set up distribution centers to reduce shipping, you can’t buy expensive software. So how do small businesses compete?

  • J. Tompkins

    Thanks for your feedback. For small businesses, it can be more about how you differentiate yourself. If you have no way to differentiate yourself on price, selection, convenience or experience, you will not attract customers, and thus you will not be a small business but you will be out of business. That is the point, maybe you can’t compete on price or reduced (free) shipping or have sophisticated software, but if not, then you need to find a something that makes you different — maybe customization, maybe in personalized experience, or in other special ways to encourage folks to shop with you. This is the strategy piece. Define the strategy and let this strategy drive the business going forward. You need a compelling strategy regardless of size.

    J. Tompkins

  • Richard Chrz

    I think learning your customers "Needs" and why they are needs is the most important place to start, Once you have learned what makes their business a bit more efficient, you can work on ways to take care of them. I think it is also important to come into this slowly, don’t find there needs and try to say I can make that super simple for you, Little bits at a time, stand behind what you are doing without wavering and eventually they will want your company to take on a lot more. I compete against amazon and other companies on line and from afar, I am rarely the low bidder, but since I have taken the time to go listen, I am mean really listen, I have been able to forcast what they need, Make sure that I am not creating more work on their end and make it seem effortless on there side and I have started to slowy gain some of that business.