All of Wall Street – along with the rest of the world – closely followed Alibaba’s IPO. The company now powers 80% of all online commerce in the world’s second largest economy – and no one is watching more closely than Jeff Bezos.
Last fall, Alibaba set up a Silicon Valley investment team to look for deals that might provide competitive advantages when the company finally decides to challenge eBay and Amazon.com in the U.S. Tit for tat, Amazon is fortifying its position and aggressively working to dominate consumer mindshare.
Fire Phone, Fire TV, Prime Music, Prime Pantry and Sunday shipping are all designed to connect consumers in a single ecommerce ecosystem that knows and fulfills every need. Amazon’s aggressive investment in these initiatives produced a $126 million operating loss in Q2 despite revenue of $19.34 billion. Tellingly, the company’s Q2 earnings report predicts losses between $810 and $410 million in Q3. Collectively the thesis of these initiatives is clear: Amazon is beefing up its game to ready for a mega-battle with a new Godzilla-sized enemy–Alibaba.
To stay in the game, traditional retailers must respond – quickly. Conventional wisdom states that traditional retailers retain one enormous advantage in their battle against Amazon: the physical store. But, as price pressures have increased, retail war rooms have focused on deals and promotions. Halloween merchandise is up and the holiday promotions are already hitting inboxes.
No matter how many coupons they e-mail and social media contests they run, America’s retailers cannot play the same old game and expect to win and expect to beat Amazon in this escalated battle. The “promotional sales to earn customer loyalty” strategy will become unwitting collateral damage in the battle royale between the two digital giants Alibaba and Amazon.
The real opportunity – the only opportunity – is to let go of deals and embrace consumer data to make sales associates more helpful and stores more entertaining, and ultimately to save consumers time. By doing this, retailers can offer unique value to customers untouchable by the ecommerce giants.
The Power of Experiences
People don’t go to Tommy Bahama, Urban Outfitters and Bass Pro Shops for the best prices and widest selection. They go for experiences that Amazon can’t offer.
Experiences have measurable ROI. According to the CEO of Oxford Industries, which owns Tommy Bahama, the brand’s combination restaurant-stores generate two and a half times the sales per square foot of the chain’s 97 regular locations. Retailers are taking note. Urban Outfitters’ new 57,000-square-foot store in New York City offers a hair salon, coffee shop, record store, photography station and bookstore, among other services.
Until Amazon can program drones to show up at your home with coffee and some moody atmospherics, these experiences are exclusive to physical stores.
The Human Touch
According to Gallup’s recent The State of the American Consumer report, “The true differentiator in retail (and nearly every other industry) is the people who are responsible for delivering the brand promise….People are powerful, and they outweigh the combined effect of products, advertising, layout, technology and price.”
When consumers get the service that knowledgeable, passionate sales associates provide, they simply feel engaged and not surprisingly buy more stuff. This same Gallup report found that “engaged” shoppers make 44% more visits per year to their preferred retailers compared to disengaged shoppers. They outspend disengaged shoppers an average $373 to $289 when they visit their favorite electronics retailer. Face-to-face interactions are still invaluable – and unavailable to Amazon.
So here’s the trillion dollar question: can we keep human sales associates at the center of personalization and relevance? Can technology make human-to-human interaction even more valuable?
Data Meets Humanity
At the center of this omnichannel experience is data. Big data or otherwise, it’s all about a single consistent view of inventory (what products are where), a single view of the consumer (personalization equals loyalty), product and catalog data (what brand is this product? Is “Nike” the same as “NIKE”?) and location data (where the consumer and products are). We call these data collectively the “omnichannel user map”, and we need each part to build an experience that leaves shoppers thinking, “Wow, that was easy, better and cheaper—I feel valued by my store of choice.” If you create the map, you can create:
- A smarter pharmacy with insane levels of customer service. You show up, tap your iPhone in response to a beacon and an associate walks right over with your prescription. That same smart iPhone reminds you that you’re due to replenish your stock of razors, so you save yourself a second trip.
- Home goods stores where tech turns even the newest associate into a re-modeling expert. As you walk through the store, the associate’s tablet app brings together data on inventory, product reviews, consumer behavior and your preferences to recommend the best furniture, carpeting, wallpaper and appliances for you. Houzz and Pinterest are filtered through relevance directly into the associate’s hands—instead of pointing the consumer away, bring them closer to the retail experience.
- Clothing stores with intelligent signage that points out nearby relevant items—close enough to reach, hot enough to taste. Sales associates are clued into the same data, at the ready to bring items personalized to you to buy, or just the hottest stuff flying off the shelves today.
For retailers gearing up for this new marketplace, the goal is to optimize the human dimension of shopping in store. Deals and promotions will of course remain part of the equation, but alone they will not cut it. It’s the connected cycle of discovery, meaningful experiences, human interaction, and sales connected by data crunching that will make brick-and-mortar retail competitive with and massively superior to Amazon. Next to the experiences we can create in stores, Amazon’s personalization is actually rather impersonal.
RichRelevance provides personalization technology for the e-commerce sites of 36 of the Top 1000 retailers in North America as ranked in Internet Retailer’s Top 500 and Second 500 guides.
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