Amazon has risen to become the top eCommerce platform over the past 25 years. More than 197 million people worldwide log onto Amazon.com each month, and last year, Amazon accounted for more than one third of U.S eCommerce sales. Despite Amazon’s growth, studies indicate that we’re far from the end of brick-and-mortar retail shopping, with 85% of shoppers stating they prefer to make their purchases at physical locations.
People still like to touch, feel, and try the products they intend to buy and have the instant gratification of taking their goods home with them right away. Many enjoy the ambiance of a well-designed store and the personal service they get from friendly, knowledgeable sales representatives. In fact, one survey found that more than 70% of consumers would rather shop at an “Amazon store” than the online Amazon marketplace.
With Amazon entering the physical retail space, many are left wondering: “how can retailers compete with Amazon?”
Amazon Expands Retail Footprint
As of 2019, Amazon’s physical stores included 526 Whole Foods Markets, 18 Amazon book stores, 16 Amazon Go convenience stores, four Amazon Pop-Up Stores, and four Amazon 4-Star Outlets.
While this may sound like a lot of stores, consider a few major contenders from the National Retail Federation’s 2019 Top 100 Retailers:
- Walmart: 4,529 stores
- The Kroger Co.: 2,650 stores
- TJX Companies: 2,314 stores
- The Home Depot: 1,969
- Target: 1,844 stores
It has been rumored Amazon Go convenience stores may be expanding to include locations like airports, bringing another 3,000 brick-and-mortar stores in the coming years.
While there will always be competition in the marketplace, there is also room to grow for businesses that are attuned to what shoppers want and need.
How Retailers Can Compete With Amazon
Understanding Amazon’s fast success will help businesses compete with the retail giant. Brands and retailers should also consider what other major retailers are doing to retain their loyal customers.
Competitive pricing is important, but service reigns supreme.
Competitive pricing has been a hallmark of Amazon service. Yet, interestingly enough, consumers have repeatedly said they are willing to pay more for better service. Here’s a not-so-well-kept secret about Amazon Prime: customers don’t necessarily pay the lowest price for their items, but they are willing to pay a few dollars more to get the benefit of two-day shipping and Amazon’s generous warranty.
Make it easy for shoppers to get their goods quickly.
Online grocery services are rapidly expanding. While the percentage of shoppers buying their groceries online was at just 3% in 2019, a quarter of shoppers said they’d tried an online grocery service at least once. And only 26% of those shoppers, or 6% of all U.S. consumers, went on to say they order groceries online more than once a month.
Retailers are on the move with acquisitions to improve their convenience options:
- Walmart announced plans to offer grocery delivery at 1,600 locations by the end of 2020 and debut an unlimited grocery delivery service plan.
- Target has acquired Shipt, where users can pay for unlimited same-day delivery, and began offering Drive Up for more convenient curbside grocery pickup.
- Kroger delivers from 2,000 stores now, using British online grocer Ocado to boost their delivery business. They also purchased the meal kit delivery company Home Chef.
- Other retailers are outsourcing deliveries to established providers like DoorDash, Deliv, Instacart, and Roadie to reach new markets.
Offer the best customer service.
While many companies are making the move to expand their service options, other companies like Trader Joe’s are turning away from expansion in favor of focusing on improving floor space utilization and good old-fashioned customer service. Without reliable frontline service, anything else a retailer does is unlikely to succeed. First and foremost, customers must have a positive experience while shopping in a store. One bad experience could cost a business that customer for good. Shoppers must be able to access the assistance they need when they need it and feel as though a retailer cares for their needs.
To offer the best customer service like Trader Joe’s, retailers can:
- Invest in employees. Trader Joe’s pays competitive wages and healthcare benefits, even to part-timers. Employees are encouraged to go “above and beyond” in the quality of their interactions, to “make a difference,” and to spend more time with shoppers, rather than focusing on speed.
- Offer a reliable experience. Unlike most stores, there are no sales, coupons, or price cuts. They simply offer low, everyday prices. Their customers like the simplicity of knowing how much an item will cost. Brand options are limited, so shoppers never feel overwhelmed by the choices.
- Provide a relaxed environment. Trader Joe’s shoppers know they will be greeted by vibrant local artwork and employees wearing Hawaiian shirts for a relaxed experience. Small personal touches like stickers for kids, hidden stuffed animal searches, and free samples add to the fun.
- Choose a niche. Trader Joe’s offers a variety of prepackaged foods, focusing on offering busy customers a quick, healthy meal or snack on-the-go. Global offerings are unique to Trader Joe’s, and this exclusivity brings repeat customers back.
- Listen. When a customer expresses an opinion online or in-store, Trader Joe’s employees take the feedback right to the top. As a result, they’ve started using more eco-friendly packaging; stopped offering single-use plastic bags; changed store hours; and brought in new products by request.
Create a seamless multi-channel experience.
Nearly 60% of shoppers use their smartphones while in-store. They’re reading reviews, comparing products, looking up specifications, price-comparing, searching availability, and checking a store’s return policy.
Retailers may consider some of the advances Amazon book stores offer:
- Self-scanning: Want to know the price of a book? Take a picture of the cover with your phone. This not only gives shoppers the price, but takes them to the Amazon description and customer review page. Best of all, the scan effectively logs interactions with physical items, allowing Amazon to offer personalized recommendations and re-target later.
- Self-checkout: When it’s time to buy, simply scan the book’s code and show a sales representative on the way out. Amazon Go stores use technology to allow shoppers to simply grab-and-go, without having to physically scan an item.
- Integrated social proof. Amazon book stores only offer four- or five-star items. They also encourage shoppers to share their opinions on the products they’ve purchased to help determine which products will be placed on the shelves in the future.
Create members and reward loyalty.
Membership programs lead to increased customer retention. Successful companies like Sam’s Club and Costco have been offering memberships for years. The traditional model of subscription requires members to pay an annual fee in exchange for discounts on everything they buy. However, newer models like NikePlus offer subscriptions for free and provide shoppers with perks like personalized training plans, free priority shipping, exclusive invitations to special events, and member-only shopping hours.
Loyalty can be rewarded in a number of ways.
Loyalty can be rewarded in a number of ways. Shopkick is one strategy brands and retailers are using to get ahead of the curve. Customers who have downloaded the third-party mobile app can log in to see nearby brands and retailers offering reward points (also called “kicks”). Once inside a store, Shopkickers are greeted with a welcome screen and an overview of products that will earn them kicks. They earn kicks by walking into stores, scanning select items, and making purchases—in other words, by interacting with Shopkick partners. Eventually, loyal shoppers can redeem their accrued points to receive a gift card of their choosing.
A study conducted by Visa Decision Sciences found:
- 57% of sales driven by Shopkick are incremental;
- 73% of incremental sales are new customers;
- and 27% of incremental sales represent increased loyalty from existing repeat customers.
Shopkick offers brands and retailers the opportunity to reach new markets, showcase new products, generate awareness, and reward loyalty in lieu of (or in addition to) an existing loyalty program of their own.
Amazon Is Not the End of Retail; It’s the Renaissance.
Retailers needn’t agonize over Amazon’s entrance into the retail sphere. Rather, their investment can be viewed as proof of what market analysts have known all along: that eCommerce and physical retail can coexist. By studying what the top retailers are doing right and where one’s own enterprise may be lacking, 2020 can be the year to thrive, in spite of the competition.
Image courtesy of Sundry Photography