Guest Blog by Leela Rao-Kataria
When you’re not Amazon, the holidays are terrifying.
For consumers, the act of gift-buying flings you into a state of panicked, obsessive-compulsion where the 24-hour, several-day madness of searching for the lowest prices pits you against the furious elbows of other adrenaline-filled, piranha-like shoppers.
And if you’re a retailer, prepare to get eaten alive. From “pre-pre-pre-holiday” sales, to door-buster deals, to matching prices so low they make no sense—you’ll throw all hands on deck to get trampled by the holiday stampede, solely in the effort to attract more foot traffic. And after the dust settles, there’s still no guarantee you’ll come out ahead.
Unless you’re Amazon.
A Prime Ribbing
Amazon sits pretty as America’s poster child for online retail. It won shoppers’ hearts by making shopping (and gift shopping) simple, not scary. Not only does Amazon sell items from every product category under the sun—at severely discounted prices—it also delivers them with unprecedented speed and reliability.
Delivery matters. Of 500 respondents polled in a GT Nexus global survey, 70% said they’d received a package late at some point, and a majority emphasized that on-time delivery was crucial to them.
Amazon has allayed shipping concerns with cheap expedited shipping, detailed tracking information, and robust delivery options, including pick up at its Amazon Lockers.
The results speaks for themselves. Overall e-commerce revenue grows at a rate of about 14 percent year-over-year, while Amazon is growing almost three times faster. By 2012, it was the U.S.’s 12th largest retailer, and by 2017 it’s projected to be the second. And Amazon Prime members currently total 25 million in the U.S. alone.
But the most impressive thing about Amazon is its ability to taunt other retailers on their own turf.
It’s common to see consumers strolling down store aisles, opening their phones to look for reviews of a product via Amazon and to find the product to be cheaper there rather than on the store shelves, with low-cost or free shipping. Many times, customers even flat-out ask brick and mortar associates whether their products can be found cheaper on Amazon.
That’s the “Amazon Effect”—the spectral presence of the e-commerce giant even in tangible, physical stores.
The Holiday (Fighting) Spirit
This holiday season, spending is expected to increase 4.1 percent over last year. A National Retail Federation (NRF) study even showed that sales should reach roughly $617 billion, a whopping 19.2 percent of the industry’s $3.2 trillion in yearly sales.
Those statistics put retailers under a lot of pressure. On the one hand, there’s a brilliant opportunity to make up for what might have been a lackluster year. But on the other, a bad holiday quarter can ruin the whole year.
And then there’s Amazon, which will be sure to double down on both deals and fulfillment.
But retailers don’t plan on going quietly into the silent night. Here are 4 strategies retailers are using to combat the Amazon Effect:
- Increasing technology innovation: Big box retailers, according to Forrester Analyst, Sucharita Mulpuru, are working to catch up to Amazon’s technology. For example, Wal-Mart has gained online market share and recently announced plans to invest almost half a billion dollars more this year into its technology spend to improve its online profile and user experience.
- Improving in-store pickup: This is the biggest point of opportunity for brick and mortar stores to best Amazon. Short of waiting on delivery, Amazon Lockers in select regions is currently the only option the e-commerce giant offers, but consumers want more in an in-store pick up, especially around the holiday season when speed and convenience matter.
- Selling exclusive products: Amazon is great at selling mass-produced goods, but retailers can offer something different– unique, personalized, or hand-made products that seem to be more in demand with the rise of online shops like Etsy.
- Providing value-added service: Retailers can also distinguish themselves from e-commerce sites by bundling products with in-store services. For example, Claire’s offers free ear piercing when you buy a pair of earrings.
Jumping Down Chimneys
Retailers can thrive during the holidays by playing to their strengths and offering value-added, in-person experiences. But they need good infrastructure behind them.
The battle of e-commerce versus brick and mortar will soon give way to a more fluid, ambiguous model of online/physical omni-channel stores, fueled by agile infrastructure.
Retailers need to operate as smart networks, tying dynamically to consumers as well as their suppliers to keep up with retail innovations. When you’re not Amazon, things might seem rough, but there’s a whole world of innovative opportunity out there. You just need to seize it.
Leela Rao-Kataria is Marketing Manager, Retail Industry Solutions with GT Nexus