We need to talk about Amazon

Amazon is big and only getting bigger, so how exactly are less resourced retailers supposed to meet its constantly evolving challenge head on? Is that even possible? Just consider what the company’s been up to recently.

 

Groceries on the Go

Amazon Go caused quite a stir when it debuted last year, and, while Amazon’s still sorting out some teething problems, the concept presents some interesting possibilities for the future of connected retail.

 

Australian expansion - she’ll be right?

Amazon is continuing to expand its markets, and Australia will get to see how it copes with the Amazon Effect later in 2017. While Amazon has had a basic presence in the country since 2012, bringing more of its arsenal to Australia will also bring increased competition for a far wider range of local retailers. Of potential concern is the fact many of these retailers are going to be caught on the back foot, as Australia’s Commonwealth Bank found out: Almost a third were unaware they were coming at all and, of those who did know, only 14 percent currently have a business plan in place to be able to compete with Amazon.”

 

Trying before buying

This month saw Amazon announce Prime Wardrobe; a new service that will let customers order clothes online to try on at home for 7 days, return (for free!) for any reason, and receive a discount depending on number of the items kept. We know one of the compelling reasons for visiting brick and mortar stores is to get your hands on (and arms into) the actual products – so with Amazon offering the same experience from the comfort of your home, will that mean even fewer visits to local clothes stores?

Amazon is expected to pass Macy’s as the US’s largest apparel seller this year, according to Cowen & Co. Its clothing and accessory sales are expected to grow nearly 30% next year, to $US28 billion.

 

Will Amazon kill Walmart?

Possibly the biggest retail news of the year is Amazon’s plan to acquire Whole Foods for almost $14 billion. A massive play by any standards, this will firmly cement Amazon’s presence in the physical retail market (in certain demographics, admittedly). Time will tell how exactly the relationship plays out, as Amazon obviously has a wealth of both on- and offline experience to leverage, and Whole Foods has a well-established brand, hundreds of stores and a loyal customer base. If Amazon brings more than just its grocery plays to the market, it could start competing directly – in the real world this time – against one-stop-shop megabrands like Walmart and Target.

 

Can Amazon be stopped?

Let’s think about Amazon’s rise for a moment. Leaving aside the company’s undeniable resources, the thing Amazon is most famous for is disruption. Amazon’s e-commerce growth brought with it a fundamental change in retail expectations. It led the way in online retail, and there’s a reason it’s still a poster child for the power of personalized recommendations. It set the pace and had the competition – on and offline – scrabbling to catch up, which isn’t necessarily a bad thing. We’re now seeing a new type of retail, where creating responsive customer journeys and delivering value to individuals is hugely important.

Retailers are building engagement, loyalty and customer relationships, not simply moving units through constant sales and cut price promotions. And while not every retailer is attempting to emulate the Amazon ideal, many have embraced cognitive technology, advanced CRM, personalization and – yes – mobile marketing for improving customer experience in and out of stores. Amazon is giving customers what they want before they know they want it? Better get on board…

So do we really want Amazon stopped? Is it the radical re-imagining of retail that people object to, or is it the fact the company is in such a strong position it seems unassailable? Whether it eats the world or not remains to be seen, but there’s no denying its shadow looms large over the industry.

And yes, Amazon is financially imposing, with a very lucrative services business apart from its retail arm. It is in a position to remain competitive without relying on high product margins, so competing directly with it on price is probably not going to be the wisest move for smaller retailers (ie, pretty much everyone). Instead, it’s the Amazon-era expectations that offer the biggest opportunity for everyone else to shine. Create better experiences, give customers what they need, and if you’re in daily face-to-face contact with your customers, add the personal touch that Amazon isn’t exactly famous for.

It’s hard to find any justification for not personalizing retail if that’s what customers react most favorably to – and that may just be Amazon’s lasting legacy.