The New Retail Brand Frontier: Disruptive Innovation
Amazon is that rare company that's managed to deploy all three forms of disruptive innovation. First, from the outset, Amazon has consistently beaten its competitors on price and convenience (low-end disruptive innovation). Without the overhead costs of brick-and-mortar stores, Amazon can sell the same goods at a lower price, and deliver them right to consumers' doors.
Second, Amazon's Reviews feature, which allows consumers to both provide and read feedback on all types of goods, represents a form of high-quality innovation. Previously, consumers had little access to information regarding the quality of the products they saw on store shelves.
Today, consumers expect an appraisal of most items — from books to electronics to washing machines — by way of fellow consumers who have already tested these out. This feature provides consumers with a better shopping experience than what was previously offered by traditional retailers. Finally, through newer products such as the Kindle, Amazon is creating entirely new markets in the electronic books space and beyond.
While market share for Amazon and other e-tailers continues to grow at a high rate, traditional retailers and the broader economy have remained fairly stagnant. In order to remain viable, brick-and-mortar retailers must offer something unique that, at least for now, can't be approximated online. For example, retailers may want to focus on providing top-notch customer service or transition to selling goods that people still prefer to purchase in-store, such as apparel, home décor, or food — items people like to see, touch or taste themselves.
Like most disruptive innovations, e-commerce isn't going away. Traditional retailers must find a way to weather the storm of expanded online offerings and a slow-growth economy, otherwise many may find that their future New Year's celebrations are numbered.
Ebrahim Busheri is managing director, emerging growth group, at Manning & Napier Advisors, an investment management firm.