The Amazon Effect on Physical Retailers: How Not to End Up Like Sears

As Jeff Bezos expands the Amazon.com empire, its dominance is impacting consumer behavior as well as legacy business models across more business sectors than we could have originally imagined. It’s been referred to as the Amazon Effect.

One notable ripple of the Amazon Effect has been felt by traditional retailers. The profound impact has been twofold. The first lesson to be drawn from Amazon’s spectacular success in transforming e-commerce is the imperative for these companies to accelerate their own e-commerce programs. If people buying even light bulbs online through Amazon Prime is not a wake-up call, then nothing will be. Secondly, traditional retailers must re-imagine their physical retail spaces in response to the changes in shopping behavior wrought by Amazon Prime and modern technology.

Evolution often happens slower than it should, but here the sense of urgency isn't overblown. Retailers can no longer drag their heels; otherwise they risk huge damage. As a cautionary tale, one need look no further than Sears, which ignored the Amazon Effect and has struggled mightily to get shoppers back.

For those that have seen the light, Kroger serves as great inspiration. The grocery chain has embraced the mission of creating personalized customer experiences to drive top-line growth. Kroger has created a data technology infrastructure integrating customer signals, including purchase history in an omnichannel context. By so doing, Kroger is copying the Amazon playbook by gleaning new insights to craft personalized offers.

To loosen the grip of the Amazon Prime stranglehold, traditional retailers have expanded to offer click-to-ship. Walmart now offers free two-day shipping for those spending at least $35. For those who prefer click-to-pickup, parking areas have been altered to make this service convenient and quick.

The artificial intelligence-driven ability for retailers to create these real-time, always-on consumer signal feedback loops has opened the door to sculpt more engaging and useful merchandising schemes at a ZIP code level. Rather than settling for the relatively impersonal one-size-fits-all approach, retailers now can tailor individual stores by making crucial decisions on layout, lighting and overall aesthetics according to their customer data. Now you could have two different Kroger locations two miles apart that feel like two distinct stores.

Retailers can also bring the latest in video technology to bear on store shelves by offering dynamic pricing and visuals to increase affinity. For example, the skincare section on the store shelf lights up triggered by consumers’ mobile apps. This seamless journey is leagues beyond what has been previously passed off as innovation — receiving an offer on your phone but then getting frustrated because you can’t find the item in-store, the result of ineffective merchandising.

And this is just the beginning. In early January, I attended the PSFK Future of Retail event and was genuinely impressed by some of the new innovations on display, namely Pinterest’s p-commerce, HERO’S video chat for e-commerce shoppers, and Amazon voice technology.

Pinterest has proven itself as the leader in discovery shopping innovation. It touts a sophisticated personalization tool based on visual curation. In the first 100 years of retail,  window shopping was a major trigger to get people into stores. Pinterest is developing an offering that has the chance to replicate that same human desire, but now on a fully personalized, yet scaled manner to bring the emotions of discovery and desire into shopping. This is more evidence that Pinterest, which has been quietly going about its business, is on the cusp of giving Amazon a run for its money.

HERO has built a very cool application for retailers to bridge their physical and online stores by repurposing in-store floor reps, with downtime, to video assist shoppers in the e-commerce realms (desktop or mobile) in real time. Stores are seeing amazing lifts in conversion due to the integration of this technology.

Voice technology is going to play a more important role in shopping and navigation in physical stores. Alexa is being piloted in the whiskey aisle right now in New York and Northern California liquor stores to help shoppers sort through a complex category currently exploding with choices.

Transformation in all industries is unavoidable in today’s data-driven, technology-led world, but if a retailer can embrace change as a strategic imperative, it can actually enhance creativity, dedication and morale both within its corporate culture and, most importantly, with its customers.

Joe Lampertius is executive vice president, practice lead, shopper marketing at Momentum Worldwide, a global brand experience agency.