Let me state the obvious: the retail bubble has burst. There’s no other way to say it when retailers are closing stores and filing for bankruptcy at a record pace. But there is life left in retail, as evidenced by retail experimentation from disruptive e-commerce brands like Amazon. As a kickoff to a series of thought leadership material that we’ll be sharing on the crisis in retail, we wanted to start the conversation by looking at the current dynamics at play.
Recently, Jeff Bezos referred to “Day 1” and “Day 2” companies in a letter to shareholders. In his opinion, Day 2 companies are in stasis, characterized by irrelevance, decline, and eventually, death. Day 1 companies, alternatively, are ready to experiment, accept failure, and most importantly, are customer-obsessed. Relationships between brands and customers have to be established, but also sustained and nurtured (the core tenets of loyalty marketing) – something that declining brands have clearly failed to do. At rDialogue, we know that customer-centricity and relevance is key to survival for any company, not just a retailer.
In our hyper-busy, always-on rat race society, any time saved, even those few moments in the evening, is precious. Time is the new loyalty currency and brands that save consumers time are rewarded accordingly. Gone are the days of popping into Publix and CVS to pick up last minute ingredients for dinner or dishwashing liquid. With Prime Pantry, AmazonFresh, Dash Buttons, and Subscribe & Save, Amazon has made it easy and even cost effective to shop online without the wait or hassle of shopping elsewhere. They’ve eliminated the friction in buying retail. Amazon isn’t the only brand doing it. Kroger and Walmart are following suit.
What does that mean for the retail store? Well, it’s about the experience. Think about the shopping experience of past decades. You’d go to a department store, walk up to the counter, and receive exceptional service, or perhaps a store associate greeted you before you even reached the counter. Sure, that level of hands-on, dedicated service still happens in luxury stores, but the white-gloved “How might I help you, ma’am?” vibe is not right for all brands. For the Lowes, Targets, and Amazons of the world, it’s about the balance of saving customers time while also inspiring them and paying it off with a satisfying shopping experience. In the future, stores become one-part showroom, one-part distribution center.
Consider Ikea—a showroom that is seemingly miles long. After meandering for hours and pondering if you could live in only 250 square feet, you find yourself in a warehouse. Everything you dreamed of buying is right there. And you must pass through a veritable candy store of low-priced housewares before even getting to the furniture. Ikea’s in-store experience provides what its e-commerce websites cannot: inspiration.
There’s even new research that points to an important link between physical and online stores. When the brick-and-mortar stores close, online sales suffer. Crazy, huh? Recently, my co-worker Jodi, was at Home Depot. She couldn’t find braces (the kind for bookshelves, not teeth). When she opened up the mobile website, it recognized that she was in-store. After searching for braces, it knew which aisle in that specific store to direct her to. It also offered to let her buy it online. This is a perfect example of why it’s imperative that traditional retailers recognize the link between the physical and online aspects of their stores, and flex their omni-channel muscles.
While traditional retailers flounder and close up shop, e-commerce brands like Bonobos and Warby Parker and of course, Amazon are moving into the brick-and-mortar space. But why? While the majority of consumers shop online, they do still prefer to shop in physical stores. Opening a retail space allows e-commerce brands to engage with consumers in an entirely different way.
Known for its razors, Harry's got into the brick-and-mortar space through Target, but also by opening Harry's Corner Shop. Styled to mimic a classic neighborhood barber, the Corner Shop offers your typical services like haircuts and beard trims—and all the products used are Harry's. The space works because it takes a familiar, intimate concept and allows the customer to experience Harry's products first-hand. And they're not the only e-commerce brand taking its in-store experience to the next level.
Amazon raised more than a few eyebrows when they announced Amazon Books. Nothing beats touching (and smelling?) and skimming books before buying them. Amazon Prime members receive the same discounted prices in-store as they do online. Non-prime members? Not so fortunate. Then came Amazon Go. Though it’s still in a beta-phase, this store is poised to change the way we shop even further. Walk in, grab what you need, and walk out. No lines, no cashiers. Technology does the heavy-lifting.
In this day and age, it’s truly the survival of the most innovative and customer-focused when it comes to the future of retail. It’s still too early to tell definitively whether Amazon will save or ruin the industry. But what’s plain to see is that they’ve changed it for good. Things will never be the same, and other retailers would be smart to look to Amazon for inspiration—or risk falling too far behind.
Now that you’ve got the introduction to our thoughts, stayed tuned over the coming months as we examine the changing state of the retail space, the near future, and what can be done to stay afloat as it evolves.
“The common question that gets asked in business is, ‘why?’ That’s a good question, but an equally valid question is, ‘why not?'” – Jeff Bezos