Doubling down on digital in the age of Amazon

Amazon, now open in a hemisphere near you. Since Amazon’s finally launched in Oz it’s time for another visit.

Not to oversell it but Amazon’s arrival is one of the biggest potential disruptors to Australasian retail in recent times – even if the Australian store launched with a slightly damper bang than expected. Strangely given the brand’s reputation, a surprisingly large number of retailers don’t seem to realise what’s headed their way, or don’t seem to care that ASX-listed retailers lost billions of dollars of value on the back of Amazon’s announcement in May. It’s Amazon; it’s big. Maybe it’s OK to be a little bit concerned and to do something about it?

 

The Warehouse goes all in on digital

A couple of weeks ago major NZ retailer The Warehouse laid out its plans to combat the Amazon invasion, specifically, by throwing a lot more resources at digital commerce. Acknowledging that the competitive landscape is even more intense than before – and only going to get more so - the company is doubling down on digital:

The Warehouse is now experimenting with artificial intelligence, as a way to improve customer experience, while improving delivery innovation innovations such as an express delivery trial and testing a chatbot at Noel Leeming. More.

In addition, the business also had to invest for the future to create a mobile-first platform to build personalised offers, digital capabilities and ecosystems to respond to customer needs. More.

Which is exactly what we’ve been saying physical retailers need to start doing in order to remain competitive.

 

Lessons from e-commerce

On the e-commerce front, online powerhouse Mighty Ape is preparing to meet Amazon head-on, continuing to focus on experience, supplier relationships and speed of delivery to keep its hold on the local market. The company is also planning to list products on Amazon Marketplace to grow its Australian base, highlighting an interesting opportunity for local retailers to build business on the back of an otherwise-competitor.

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Mighty Ape has had a lot of experience countering Amazon with a local flair:

  • Amazon offers fast shipping to the US but relatively slow and expensive shipping to this end of the world; Mighty Ape offers next-day shipping for a few dollars and slightly pricier same-day shipping to main centres.
  • Amazon Prime comes with a raft of special and upgrade offers that largely don’t apply here; Mighty Ape offers Primate for unlimited shipping, free upgrades, special discounts and early access to sale events.
  • Products listed on Amazon can ship from 3rd parties, and there’s a risk that goods will be less than legit; Mighty Ape has stock on hand (a new 10,000sqm warehouse is set to open in January), will let you order from suppliers, and ships directly.

If you're in Auckland and you need a gift ASAP, who would you choose? 

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Physical retailers in NZ are online, but progress has been patchy. The Warehouse and Briscoes have had online shopping for years, but Farmers and Kmart have only recently opened their online doors, product selection is still limited and stock management seems a bit hit and miss. While Farmers will let you check in-store stock online (fantastic!) Kmart customers have been complaining about online orders being cancelled after payment is processed because there’s no stock available (uncool!) Communication between online and physical channels is obviously still a work in progress.

If retail brands’ strengths are clearly offline rather than on-, wouldn’t it make sense to concentrate on creating a more relevant and rewarding in-store experience rather than trying to beat Amazon at its own game? Offer online shopping certainly, but don’t be fooled into thinking that’s all you have to do to stay competitive. Chucking half of your catalogue on a storefront and hoping nobody orders the stuff you don’t have in stock isn’t going to cut it.

 

Real-world digital has real-world benefits

Amazon’s potential breadth of product is staggering; it may have started with books, but we’ve seen the US business diversify across categories online and in the real world. If you can’t compete on range (and good luck with that) or price (ditto) then make it your business to help customers find what they need rather than leaving them to get their online browse on.

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For most physical retailers that is going to mean optimizing the instore experience through smart staffing, merchandising, experiences, and yes, connectivity. The idea is not just to get people into stores, but to make store visits so rewarding people can’t help but come back and shop again. If you’re a QSR you might encourage dine-in with premium menu items; if you’re The Warehouse you might direct nearby shoppers to on-sale items from their online wish list. If you're Kmart, embrace the memes.

There are some very cool things you can do when you add digital tools to retail:

  • Present personalized offers to customers via mobile and connected signage
  • Update in-store stock online so customers can see what’s on the shelf before they come in
  • Allow in-store trialing and ordering of items that are out of stock
  • Offer free in-store pickup for online orders to maximise up- and cross-sell opportunities when customers do come in
  • Promote free home delivery for in-store purchases, especially for heavy or bulky items or at times where store traffic is especially heavy
  • Connect your loyalty program so you offer rewards people actually want, when they’re actually in a position to use them
  • Make shopping a friendly experience; give associates connected tools to help them recognize and deliver personal service to customers

And take a leaf from Mighty Ape’s book. Be sure to build those supplier relationships so you can get products to people without making them wait for it – after all, why wait when you can hop online and buy what you want without even leaving the store?

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Minimizing time to fulfilment is going to be a key differentiator vs Amazon, and there’s nothing faster than getting your hands on something in an actual store. Especially if it’s something you want now, and you’ve received a message from the store telling you where to find it and what promotions are currently available for it. Oh, and would you like to redeem your rewards points? And by the way we have a sale event on this evening, drop in for a chance to win even more stuff you like.

 

Competing with Amazon, in a nutshell

If you’re a physical retailer with limited online experience or capability, don’t worry about matching what Amazon is doing. Instead find ways to integrate digital into your stores so you can do what Amazon doesn’t do – creating an essential in-store experience that gives customers what they need and keeps them coming back. 

And maybe do it before Amazon does...