It was never a question of if, but when. Anyone tracking the retail industry knew the day would come for Amazon to open… ahem… a brick-and-mortar storefront. Now Amazon’s familiar slanted smile logo will hang from a shingle in Manhattan right down the street from Macy’s flagship Herald Square store, just in time for the holidays.
The announcement isn’t as much “news” as it is final confirmation that shoppers crave the in-store experience — not just crave, but demand it. Even though online revenues continue to grow at a steady pace, it only accounts for 10 percent of total retail sales. If you believe, like I do, that Amazon’s move into physical retail is essential for its long-term growth, then traditional retailers, who have been unceremoniously left for dead by short-sighted industry pundits, will be formidable players in the future landscape of retail. The road to the type of world domination that Amazon seeks goes over a leased line in a town near you.
Aside from the chuckles that surely emanated from the top floor of brick-and-mortar retailers when the news broke, this is a critical topic to follow in the months and years ahead.
Later this year, Amazon will trot into unfamiliar territory, having to manage a lot more than its website and distribution centers. In-store labor management, merchandising assortment decisions, local marketing mix and other traditional physical retail tasks will not fit too neatly into Amazon’s legendary operations model.
This suggests that, for the first time ever, Amazon will actually be playing from behind. While Amazon tinkers with its first physical store this holiday season, traditional retailers will be fine-tuning their rapidly improving flexible fulfillment programs that have had over one year of run-time in various trials and pilots and have proven to be successful with consumers. Amazon will be figuring out revenue per square foot while traditional retailers will be trying to nail same-day delivery. The shoe is definitely on the other foot in yet another example of the disruption that is occurring in retail.
At the center of this, of course, is the customer. Today’s customer wants choices and doesn’t really care if a particular retailer only sells stuff online. Information is everywhere and is accessible on a multitude of devices throughout the path to purchase. An increasing number of products are available via both online and offline channels at retailers of all shapes and sizes. Leading retailers will embrace the opportunity to provide their customers with what they need, when they need it, and via the delivery mode of their preference. Tomorrow’s best retailers will also effectively leverage technology to optimize their footprint and assortments, capture the attention of the shopper, provide the most information, and give the best options for timely fulfillment.
Due to the proliferation of mobile in shopping, traditional retailers have dangerously exposed flanks. Shoppers are literally standing in their stores right now with their mobile devices in hand looking for information to assist with their trip. Retailers have been excruciatingly slow to adopt technology to engage shoppers in-store to meet this demand. It is this crack in the doorway that Amazon is looking to bust through with a Mack truck. Squeezing in alongside them are Google, Facebook and other tech titans who have the added luxury of not having to change their business models to take a material chunk out of the retailer’s hide. (Advertising dollars are abundant in-store, and drop straight to the bottom line in this very thin margin industry).
For traditional retailers to survive, it is absolutely imperative that they win on digital in their stores. Amazon has a penchant for putting all the chips on the table and taking home the pot. It won’t be long before it operationalizes an effective in-store experience and scales up.
All of this boils down to the following trillion-dollar question, literally: Will Amazon figure out brick-and-mortar before traditional retailers figure out digital? What do you think?
Pete Coleman is EVP and GM of StoreMode for Point Inside. He has held various sales and sales management positions in the information technology industry over the past 15 years. He can be found on Twitter at @StoreMode.