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The Retail Industry Continues to Chase Amazon

Amazon’s long shadow is falling on the entire retail industry and retailers previously thought to be immune to the threat of ecommerce. U.S. fund managers are even rethinking their approach to consumer stocks by focusing on companies whose businesses cannot be upended by the ecommerce giant. Amazon.com Inc., once thought to be a place to buy books and household goods, is on track to become the largest apparel seller in the U.S. retail industry by 2017, taking over the number one spot from Macy’s.

Amazon’s push into higher-end clothing over the past three years adds to its dominance of e-commerce channels with nearly a 40 percent market share. This market share is larger than the next 21 retail industry leader sales combined, which includes Walmart and Best Buy. Amazon’s recent Prime Day event boosted its stock price to record highs and drove their market share to the point where they have now eclipsed Warren Buffet’s Berkshire Hathaway, Inc.

Scott Moore, a portfolio manager at Buffalo Funds, states that “the retail industry is a land mine, and you just don’t know who is going to be disrupted by Amazon. You are seeing money rotate into companies where investors feel comfortable that they won’t be Amazon’ed away”. Overall, actively managed large cap funds are now holding more restaurant, home improvement and leisure stocks – all sectors where Amazon does not yet compete.

Considering Amazon’s phenomenal growth, it behooves all parts of the retail industry to develop strategies to compete effectively this upcoming holiday season. Columnist Mike Sands has suggested some things to consider when formulating those strategies:

- Digital Partner -

1. Use data to know your customer better than anyone else. As popular as Amazon is, it doesn’t mean that it is everyone’s go-to online shopping destination. In fact, 40 percent say it is not their primary go-to. What does that 40 percent want instead? Sands suggests that retailers need to use their first party data to find out. Their own customer insight is often deeper and more precise than anything Amazon can obtain. Things like customer service, loyalty programs, marketing, promotions and direct customer interactions can provide valuable data to establish an advantage with their current customers. By maximizing this advantage, they can top Amazon with more relevant and intelligent product suggestions directly targeting their particular customer base.

2. Deliver omni-channel retailing experiences to make shoppers’ lives easier. Retail industry consumers don’t think in channels, and retailers shouldn’t either. Gone are the days when holiday shoppers had to choose between the convenience of buying online from home versus the assurance of handling the product in a store. Now they can do it all – and they leave a rich trail of data every step along the way.
• Consumers say they browse for holiday purchases most frequently from their desktops (36 percent), but the most frequent way they purchase is in stores (33 percent).
• About one in five consumers primarily browse for holiday purchases via mobile devices (smartphones and tablets) but just 8 percent use smartphones, and only 7 percent use tablets as their primary way to purchase.

With the power of durable customer profiles, retailers can take real-time action on any of these touch points and devices to enable seamless shopping. Holiday shoppers want highly personalized and genuinely helpful information everywhere they shop to make their lives easier during the busiest time of the year. Retail industry leaders with physical stores are especially well positioned to provide this convenience. They can use stores as flexible warehouses to provide Omni-channel shopping options like buy online and pick up in store, free shipping and easy returns – effectively serving customer needs and delivering the experiences they’ve come to expect.

3. Personalize digital advertising. The rise of ad blockers has been one of the most prevalent industry headlines over the past year. But, the reality is that ads do work, when they’re relevant. A survey showed that many consumers (43 percent) still say that digital advertising on websites or in mobile apps influences their holiday gift buying. The key to breaking through with digital advertising is to personalize ads based on what’s known about the customer and take action as soon as they are in the market. The one third of consumers who said ads help them get discounts or deals should be served ads that alert them to specials. The 27 percent who report that ads provide them with new gift ideas should be delivered advertising about new products. And because 48 percent of consumers surveyed say that digital ads annoy them, the retailer needs to make sure that ads are served at the right moment in the online shopping journey, not after the customer has already made a purchase.

LP Solutions

It’s clear that the retail industry needs to up the digital ante when planning strategies to take on Amazon this holiday season. The key is to serve the customer’s needs with relevancy. A recent survey indicated that 46 percent of consumers said that relevant deals and discounts will motivate them to buy this holiday season. Amazon does not have a monopoly on these; the power to deliver this relevancy lies within retailer’s own data. Retailers who use this information wisely can gain a comprehensive customer understanding that provides not just personalized offers or content, but also outstanding customer service and attention, which go a long way in driving loyalty.

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