Amazon seems to consistently lead innovation or new initiatives that will help the company continue to dominate through disruption. Last week it was all about disrupting the insurance comparison sites and the insurance world.
All this success has made Jeff Bezos the richest man in the world! Does the growth of Amazon and other online retailers signal the end of traditional brick-and-mortar retail?
The answer is yes and no. Yes, traditional brick-and-mortar retailers that make shopping more difficult, offer sub-standard products at higher prices, and have little to entice shoppers into their stores and don’t concentrate on the experience will probably struggle. However, brick-and-mortar retailers that can offer consumers something of value better than other competition can still prosper. There are plenty of examples of successful retailers that are posting like for like growth that is better than comparable sales from prior years.
The first criterion for success in the age of Amazon is for retailers to offer consumers something they value — i.e., decent products or services at fair-value prices and to provide a shopping experience that's convenient, simple and delivers on an experience. If it's easier for consumers to get the same product at a lower price expediently delivered, consumers are going to buy from Amazon or others rather than go to a shop.
But just meeting that first criterion is not enough. In addition to offering something of value, successful retailers must give customers a strong reason to come to visit their store. For example, if the store is reasonably convenient, and on top of that, the shopping experience is fun and personal, then consumers may be motivated to go to a physical store rather than shop online.
Unlike online shopping, the store still offers the opportunity to touch and feel product and provides pleasant social interactions. Data shows that consumers will continue to shop in stores for these reasons, much in the same way that cinemas have managed to survive in the age of Netflix (think at seat food service, IMAX, 5-D surround experience).
Some shoppers are always going to value trying on items in-store rather than the hassle and hit-and-miss experience of buying clothing online, even with free delivery and free returns. However, the instore experience must be great; there must be the right stock; the dressing rooms must be available; and the sales people have to be engaged and helpful. Retailers that are cutting costs and reducing staff can make store experiences less enjoyable and hasten the exodus to Amazon or its competitors.
Exclusive brands can also build loyalty. People have been proclaiming the death of brands for the last several decades, but strong brands are surviving and continue to command premium prices. This requires constant attention to brand building. Brands that resonate with consumers and brands with which consumers identify command strong loyalty and repeat purchasing.
There's no question that Amazon has raised customers’ expectations and demands. Customers want good products at fair prices, and they want the shopping experience to be hassle-free. Retailers that offer leadership strategies and can provide consumers with something they value better than the competition are performing well. There's room in the market for successful retailers to compete effectively. All Amazon has done is raise the bar on what it takes to win.
Does the growth of Amazon and other online retailers signal the end of traditional brick-and-mortar retail?