As I sift through recent retailer earnings reports and reflect on the various (largely excellent) sessions I’ve attended at the inaugural ShopTalk conference in Las Vegas, it’s impossible to ignore the elephant in the room. That elephant is, of course, named Amazon.
Story after story–presenters and panelists alike–are quick to remind us of Amazon’s tremendous growth, the staggeringly large percentage of online revenue they account for and the dampening effect their strategy has on pricing, store traffic and other measures of competitiveness.
Apparently it sucks to be us.
So unless we want to totally ignore this harsh reality, we have a couple of decisions to make.
The first is to decide whether we will accept it and focus instead on the things we can change. From where I sit, I see way too many brands knee-deep in denial and choosing a path that involves a lot of whining. Ugh, so much whining.
The second decision is whether we will try to out-Amazon Amazon. There is plenty of advice on how to counter the Amazon effect. Most of it is terrible.
It’s terrible because it suggests that retailers with higher costs than Amazon can possibly win a price war. It’s terrible because it pre-supposes that merely offering free shipping or “buy online pick-up in store” is enough to counter Amazon’s dominance in product assortment and delivery convenience. It’s terrible because it’s based on a hope that Amazon will follow the same profit and investment calculations that long-established retailers do. It’s terrible because even if some of these efforts manage to gain some traction it presumes Amazon won’t respond aggressively or find some other way to grab market share in their areas of focus.
So, in virtually all cases, the decision to take on Amazon directly is a decision to lose. It’s a decision to invest a lot of time, resources and energy in the vain hope that it will work for you and hurt them. It’s a decision to set a pile of money on fire.
The only decision then is to double down on (or lean into) those things that make your brand more relevant, more remarkable, more sustainable and more profitable.
For retailers that still garner most of their sales from their physical stores that means appreciating and nurturing the unique advantages of brick & mortar locations: personal service, product presentation, merchandise curation, social experiences, instant gratification and the like. It’s about complementing the in-store experience with a well integrated online offering. It’s about understanding how digital (and, increasingly, mobile in particular) is the new front-door for your brand and working to make that experience as compelling and customer-centric as possible.
It is possible that your business may shrink in the process? It is. Is it possible that you will get a lot of heat on why you aren’t taking on Amazon more directly? Of course. It’s also possible you will be a hell of a lot more profitable than the path you are currently on. You also stand a far better chance of being in a business a few years from now.
You aren’t going to build a wall and get Amazon to pay for it.