How to Survive in the Age of Amazon
Almost every day Amazon.com makes some announcement about a new innovation or new initiative that will help the company continue to dominate the retailing industry. All of this success has made Jeff Bezos the richest man in the world! Does the growth of Amazon and other online retailers signal the end of traditional brick-and-mortar retail?
The answer is yes and no. Yes, traditional brick-and-mortar retailers that make shopping more difficult, offer sub-standard products at higher prices, and have little to entice shoppers into their stores will probably struggle. However, brick-and-mortar retailers that can offer consumers something of value better than other competition can still prosper. There are plenty of examples of successful retailers that are posting same-store sales that are better than comparable sales from prior years.
The first criterion for success in the age of Amazon is for retailers to offer consumers something they value — i.e., decent products or services at fair-value prices — and to provide a shopping experience that's convenient, simple and reasonably pleasant. If it's easier for consumers to get the same product at a lower price expediently delivered, consumers are going to buy from Amazon rather than schlep to the store.
But just meeting that first criterion is not enough. In addition to offering something of value, successful retailers have to give customers a strong reason to come to the store. For example, if the store is reasonably convenient, and on top of that, the shopping experience is fun and personal, then consumers may be motivated to go to a physical store rather than shop online. Unlike online shopping, the store offers the opportunity to touch and feel product and provides pleasant social interactions. Data shows that consumers will continue to shop in stores for these reasons, much in the same way that movie theaters have managed to survive in the age of streaming video.
Some shoppers are always going to value trying on apparel in-store rather than hassling with the hit-and-miss experience of buying clothing online, even with free delivery and free returns. However, the store experience has to be pleasant; there has to be the right inventory; the dressing rooms have to be available; and the sales associates have to be helpful, not pushy or, worse, absent. Retailers that are cutting costs and reducing staff can make store experiences less enjoyable and hasten the exodus to Amazon. Retailers that are mis-forecasting demand and continually having to "fire sale" leftover inventory are also barreling down the wrong road.
Exclusive brands can also build loyalty. People have been proclaiming the death of brands for the last several decades, but strong brands are surviving and continue to command premium prices. This requires constant attention to brand building. Brands that resonate with consumers and brands with which consumers identify command strong loyalty and repeat purchasing.
Finally, guaranteeing the lowest price can also drive traffic into stores. Amazon has low prices, but not the lowest prices in every category. Retailers that consistently offer the lowest price — even if it is with a catch, e.g., shoppers have to buy in bulk, shoppers have to treasure hunt to find the right style and size, or shoppers have to cope with less well-known brands — can still entice shoppers to their stores.
There's no question that Amazon has raised customers’ expectations and demands. Customers want good products at fair prices, and they want the shopping experience to be hassle-free. Retailers that offer leadership strategies and can provide consumers with something they value better than the competition are performing well. There's room in the market for successful retailers to compete effectively. All Amazon has done is raise the bar on what it takes to win.
Barbara E. Kahn is the author of "The Shopping Revolution: How Successful Retailers Win Customers in an Era of Constant Disruption," Wharton Digital Press, 2018.