Amazon.com shocked the retail industry during its fourth-quarter earnings call when CFO Brian Olsavsky announced: “So, we’re currently working on evolving our Prime free two-day shipping program to be a free one-day shipping program.”
Since Amazon’s announcement, hundreds of e-tailers and their distribution partners have been working hard to figure out how to match the e-commerce juggernaut.
The solution will come from brains and not brawn.
Add Distribution Partners
One way to compete with Amazon is to add local distribution partners that are able to stock, sell and distribute products in a timely manner. A big attraction for Amazon’s acquisition of Whole Foods was the 472 stores the grocery chain had in 2017, which could serve as a pickup point for the products Amazon sells online.
Online retailers can seek out distribution partners among existing retailers as a place to receive their packages, creating a new revenue stream for some of the retailers currently struggling while providing digital-only retailers with a physical place for customers to receive their products. Any place for digital retailers to enable their customers to physically engage with their products, even if it’s only to pick up their packages, is a positive step forward in creating a more holistic product experience.
Use Machine Learning
The addition of distribution partners save time, but only solves the "last mile" problem created by Amazon’s one-day shipping. A second problem for digital-only retailers is ensuring that they have the right product mix near the right customers. A solution to this problem can be reached through the use of machine learning and predictive technologies. First, digital retailers need to segment customers according to their journey, including purchase patterns, seasonality and geographic location. Then, retailers can utilize these predictive technologies in order to determine which products to store at which distribution facilities in which locations during which seasons, reducing supply and distribution costs while increasing the range of products which can be delivered in less time, which will delight customers.
Amazon is an amazing company which has single-handedly revolutionized the retailing industry. That said, Amazon isn’t all things to all people. There are millions of people who don’t buy from Amazon and have no intention of doing so because convenience and cost aren’t the most important factors for them. And most of these people buy from other online retailers.
Therefore, instead of trying to match Amazon’s one-day free delivery to Prime members, digital retailers should focus on how they’re better than Amazon in other areas — e.g., product, service, customer service … the list is endless.
In the race to reduce costs, retailers selling commodity products are doomed (and have been for many years). There can only be one Amazon. But even in today’s world where we want everything yesterday, convenience can only go so far. Exclusivity and experience trump convenience for all but the most basic and commodity products.
Let’s look at books. A few years ago, I was sure that we’d be experiencing a decline in printed book sales due to the move to digital reading (or worse, no reading at all of anything longer than a tweet). Well, guess what, physical book sales in 2017 were higher than in 2016, and in 2018, they were higher than in 2017. Furthermore, independent (i.e., non-chain) bookstores grew by 35 percent between 2009 and 2015.
The VCR didn’t kill the TV, and the golden era for TV is now, not 30 years or 40 years ago, despite chord cutting.
So if you have a differentiated product offering and are intelligently and effectively using technology and distribution, you’ll survive Amazon’s teleporting instant delivery, too. I promise.
Shai Cohen is the vice president of sales at Curve, a sales prediction solution that allows companies to accurately forecast sales and products to increase revenue and optimize profitability.