A while ago (while we could still meet in person), I had the pleasure of being part of a panel at an A.T. Kearney event on the future of retail. This was a really fascinating discussion about one of the most compelling questions in American business. Ben Smith of A.T. Kearney did a great job of recruiting people to participate in the discussion and involving everyone else in the room. Unlike many panels that are tedious and formulaic, this panel turned into a vigorous, lean-in discussion. The panelists were really only the catalyst for a conversation that ultimately involved most of the people in the room.
As the conversation evolved, it repeatedly came back to the one question that every retailer must confront “why not Amazon?“. Because now, for consumers everywhere, the reflex reaction is to use the Amazon app or (even easier) just say “hey Alexa get me some…” Although this conversation happened in 2018, the events of 2020 have only made this question more acute. As cities have returned to lockdown and people are reticent to shop indoors, the momentum towards Amazon and e-commerce has accelerated. Amazon has earned its success. It has removed much, if not all, of the friction from commerce. It has aggregated products, consumer reviews, content, and a wide variety of sellers under its Amazon Marketplace. It has built the most efficient logistics and transportation system in the county–maybe in the world. Over the past 20 years, it has grown from just being a seller of books, CDs and DVDs to being the preferred way to shop for most goods.
It is the nature of technological evolution that the new business seizes momentum and takes whatever it wants in the marketplace. It is then the obligation of the older businesses to react and adapt. When television burst on the scene, the film industry responded with wide screen cinematic epics (think Lawrence of Arabia) that overwhelmed the small black and white TVs of the day. When radio lost all of its shows and stars to TV, the industry responded by offering music, talk and sports.
When incumbent industry fail to adapt and respond, they die. We are witnessing the collapse of the department store category before our eyes. They are being squeezed by superstores including Walmart, Target and Costco on the one side and Amazon on the other. Their offerings are not as broad and cheap as the superstores and they are not as convenient as Amazon. They are sitting on a shrinking iceberg and the cold water is coming closer.
To survive and to compellingly answer the question “why not Amazon?” retailers need to focus on four things:
- Better service
- More intimate relationship with the consumer
- Unique, curated products
- Using technology to become more efficient
With Amazon and the big box stores defining the market, the opportunity is to do the hard stuff well. They will be efficient and cheap. But there are many times when the consumer wants the experience of being treated well. The shopper wants to talk to someone who is taking the time to be interested in their needs, their style, their goals. The lesson of social media commerce is that people respond to brands with a story, point of view and a purpose. The first three points answer the question “why not Amazon?” by promising the consumer a better product and a better experience.
The fourth point is in the background. HMTA invested in Candid Wholesale last year because we believed that there was a tremendous opportunity to help small retailers become more efficient. Candid’s founder, Avery Bloom, who is also a retailer himself, realized that communications between main street stores and brands was a mishmash of paper, email, and phone calls. That communications mess was sucking profits out of the business and aggravating the merchants. Candid has been rapidly adopted during the pandemic because it has proven to be a simple way for small businesses to manage their inventory and improve their cash flow. Improving profitability and cash flow permits the business owner to focus on improving the customer experience.
It is not easy to wean the consumer off of Amazon. I am as guilty as anyone of defaulting to the Amazon app. But I cherish small businesses that offer interesting products and great service and try to give them a fair shot at my money before going back to Amazon.