While hurricanes and earthquakes overwhelm the headlines, an old friend the local retail store, continues on a long, predictable death spiral. The story is getting back page coverage.
We are only 3 months away from the holiday season, historically the most lucrative moment for retail. The news suggests a not so happy holiday season. Toy’s R Us files Chapter 11 bankruptcy and Macy’s closes yet another 15% of its retail stores. This year has brought the closing of well-loved retail brands such as The Limited, Wet Seal and RadioShack. Wall Street is betting that things are going to get worse.
Two thirds of Macy’s market value has vanished over the past 2 years, JC Penney is down 90% from 2012. So what’s happening? The shift in consumer behavior is the clear ‘killer’ of this once flourishing part of the economy. It’s Amazon. It’s about the way we live and how technology has changed our expectations with retail and the local store.
Nearly a third of consumers’ product searches now begin on Amazon. That traffic once belonged to Google and Bing. Consumers claim broad product selection and product information drive them to Amazon first when they are shopping.
So Why is Amazon Going to Bricks & Mortar?
Our behavior has given Amazon superpowers: detailed insights about our searching and buying habits. Because search data is foundational to their business they are able to know the exact products that are of interest in each local town. They can control their inventory and stock only those items people will purchase in that exact location. They are winning the war on inventory because precision data is driving their business.
Simply put, ‘old school’ retail is dying by tying up capital and real estate to keep 1000’s of SKUs on hand. They don’t have the information readily available to focus only on the selections that people want, on the days, hours and minutes they want it.
But something equally important is a play in the physical store for Amazon: real-time Market Research. Amazon is using it’s physical stores as a fantastic laboratory. These stores help them to showcase new gadgets, build loyalty and most important, experiment with new retail technologies. Robots, sensors and new payment models are all part of their experimentation.
And So The Wars Begin
A month ago Walmart announced a new alliance with Google. They both have motivations to do this deal. The two companies said the partnership was less about how online shopping is done today, but where it is going in the future. Walmart customers will shop by speaking to Google Home, the company’s voice-controlled speaker or by using the Google Assistant, the artificially intelligent software assistant found in smartphones running Google’s Android software.
Walmart’s Marc Lore, the president and CEO of Walmart U.S. eCommerce says it will use its 4,700 U.S. stores and its fulfillment network “to create customer experiences that don’t currently exist within voice shopping anywhere else, including choosing to pick up an order in store (often for a discount) or using voice shopping to purchase fresh groceries across the country.”
They are testing, watching and working with customers using new technology and so should you.
So What Should You Do Now?
It’s interesting to follow the movements of the digital giants like Amazon and Google. However the time has come for a ‘discover-pilot-test-market’ plan for your own business. You know these new technologies are coming. The big guys are getting your customers accustomed to new behaviors. It’s time you had a plan for the future. There are 100’s of Startups already in your market working with new tech. They are launching faster, better business model approaches capturing the latest retail trends like self service. You can work with these startups now and not take on the direct risk or expense as you learn.
How do you find and engage with Startups who can help you? A lean approach to this is the best way forward. Lean means fast, without spending a lot of budget. You have to test many possibilities before you come up with the solution that will fit your business. Take a look at our Fast Track services. This is an example of what can be accomplished in just 12 weeks. First we define the most pressing problems to solve, then we scout for the best startup partners, run a pitch competition and finalize your program with a plan for a pilot program.
It’s clear, sitting still right now means certain death. Although we can’t control calamities like hurricanes or earthquakes, this is one where you can take steps now to change the course for your future business.