Retailers Combat the “Amazon Effect” with New Technologies by Dan Brames

Amazon has quickened the pace of retail evolution and redefined the retail landscape, just as Walmart did decades ago when it moved onto Main Street.

A recent analysis conducted by PYMNTS estimates that Amazon will account for 2.1 percent of all consumer spending and 6.4 percent of retail spending in 2018 – triple that of four years ago. Such rapid growth should not be ignored by any retailer even if Amazon does not yet compete in its space.

How can retailers respond to the “Amazon Effect”? I believe they have two choices – learn how to survive and move forward or wind down their companies as some big names are doing. This article discusses some of the ways in which retailers are using technology to move forward successfully.

Three big changes in retailing

Amazon is no. 1: Toppling Walmart as the favorite retail brand in the world, Amazon achieved its status by making shopping a seamless, frictionless process end-to-end and continues to up its game through innovation. It’s now the model that consumers use to gage other retailers.

Rising consumer expectations drive change: Consumers’ expectations rise for all retailers when a leading retailer successfully addresses a common complaint. Think about the long lines that draw consumer complaints especially during holiday shopping. Many leading retailers have adopted serpentine lines as a superior alternative to multiple lines because consumers can see movement. However, serpentine lines are further shortened and, in some cases, eliminated altogether, by digital technologies.

Good help is hard to get. With unemployment rates down to around four percent in the United States and the United Kingdom, retailers are struggling to find quality employees who are willing to work retail’s long hours for limited pay.

Three ways to respond

1. Meet consumer expectations for an online presence. The vast majority of retailers cannot match Amazon’s online prowess. But, as discussed in Cracking the eCommerce Checkout Code, consumers, especially younger ones, expect retailers to have an online site that provides a “menu” of the retailer’s offer, easy navigation and frictionless, seamless payment and delivery.


2. Make your mobile app compelling. As mobile phones fill up with apps, retailers must give consumers a compelling reason to download theirs. Think about why so many Target shoppers sign up for the REDcard despite its high APR and late fees. Savings are applied at the time of purchase, not later on. Immediate gratification works.


3. Use technology to solve shopping problems.
   
   • Self-scanning to avoid lines. While more common in Western Europe, some early adopters in the United States such as Stop & Shop enable self-scanning through installed mobile phone apps (bring your own device or BYOD) or store-provided scanners. Nielsen’s survey of 30,000 consumers in 60 countries found that while only 12 percent of consumers use self-scanning today, 70 percent would try them to avoid checkout lines.
   • Helping shoppers locate items easily. With a dearth of salespeople on the floor, retailers must rely on technology to improve wayfinding. Store-provided scanners help consumer locate items in-store, provide pricing and offer deals. Some can be loaded with shopping lists, rearranged to reflect an optimal path through the store.
   • Using tablets to improve dining experiences. Multi-functional tablets speed up the ordering and payment process – even enabling splitting checks – at restaurants. Restaurants primarily benefit from quicker table turns and lower labor costs. Also, tablets with rating capabilities give unhappy customers a vehicle to vent privately (keeping negative comments off of Yelp).
   • Elevating employee quality with technology. Retailers empower employees through technology that provides training and facilitates interactions with customers – looking up a shopper’s history, checking inventory, promoting “endless aisle” and accepting payments on the spot.

There is no “one size fits all” technology to respond to the “Amazon Effect”. However, retailers should assess how new technologies can support their core competencies and their ability to remain competitive.