Is Amazon Retail’s Permanent Disruptor?

Is Amazon Retail’s Permanent Disruptor?

Disruptive. Innovative. Destructive. Transformative. All words that have been used to describe the new and ever-evolving technologies rapidly flooding every corner of the industry today. BOPIS, cashierless checkouts, digitalized shelving and robot assistants that look like they’ve walked (or rolled) straight out of a sci-fi movie are creating a retail landscape that not even the Jetsons could have predicted. Stop & Shop alone has deployed around 500 robots in their grocery stores, free to roam aisles in search of product inconsistencies and garbage.1 As leading companies across all sectors are struggling to maintain relevancy in lieu of modernization that has exceeded our wildest expectations, they are desperately wondering how to keep up with consumers’ desire for that next best thing.

Whether it’s their unwillingness to implement new strategies, their inability to see the bigger picture, or their skewed perception of their value, brands across the board have attributed their business disruption to the digital revolution. Kodak, for example, refused to focus on the development of digital cameras as they feared it would eradicate the extremely profitable film portion of their business. Despite the fact that they invested billions into technology that would allow photos to be taken on other digital devices and created a photo sharing platform that could have acted as Instagram’s predecessor, they continued their push for consumers to print digital images. They were quickly overtaken by Canon, who welcomed the shift with open arms while Kodak was forced to file for bankruptcy in 2012.2

Digital start-ups are thriving and tech has proved it is here to stay; their innovative beginnings will allow them to open more than 850 physical locations over the next five years, while old-school retailers are closing stores at more than double that rate.3 To combat this, larger companies seek to acquire the startup or technology doing the disrupting, eliminating the threat all together. Does this really work? More often than not, no. And we have come to realize that these elements are truly only succeeding because of one thing: consumers.

Technology isn’t the ultimate disruptor at all; consumers drive industry change.

As it turns out, technology isn’t the ultimate disruptor at all; consumers drive industry change, accepting the products or technologies they like most while rejecting those that don’t serve them. The needs and wants of this population can even drive the creation of entirely new brands when existing ones are no longer meeting their needs, like how the desire for easier transportation methods simultaneously killed taxis and birthed Uber. And when thinking about companies that have received mass amounts of positive customer feedback, one in particular comes to mind: Amazon. As we all know, the ecommerce giant has completely reinvented what it means to be customer-focused. In fact, it is the entire basis of their mission statement: "Our vision is to be earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online." 4

Rather than purely innovating for the company’s personal gain, Amazon instead looks to how they can offer benefits to the customer to create a synergistic environment conducive to growth. They have acquired Whole Foods to enter (and transform) the grocery industry, created entirely new store concepts to place branded products directly into consumers hands, and completely altered consumers views on shipping with the creation of Amazon Prime. This, in turn, leads to the conclusion that above all, Amazon is the true ultimate disruptor.

Companies are operators first, innovating for business-end collaboration and brand growth rather than innovating for consumers’ needs and interests.

This seems pretty obvious, right? Well, not exactly; if it was, then why haven’t other companies taken this approach and filled the industry with endless versions of Amazon-esque retail behemoths? The answer to this is simple: companies are operators first, innovating for business-end collaboration and brand growth rather than innovating for consumers’ needs and interests.

Take Sears for example (and as a cautionary tale). The once-dominant retailer accounted for 1% of the total US economy by a large margin in 1969.5 In any given quarter, two-thirds of Americans shopped there.5 Their extensive customer directory was unlike anything businesses of the time had seen; 30 years ago, their massive distribution network and influence on vendors is similar to that of Amazon’s today. But all good things must eventually come to an end, and no one but Sears led the march towards their decidedly tragic demise.

So, what happened? With their unmatched industry clout and billions of dollars in revenue garnered from their catalog division alone, it seemed like Sears would live on forever. The death of this retailer (along with many others) lies in the fact that they were not acting in accordance to Amazon’s values where the customer is king.

Their three main mistakes are as follows:

  • Their transition to digital was messy, miscalculated and money-burning. When their 1,500-page catalogs became unprofitable, Sears decided to alter their strategy in order to pursue the idea of an online store in 1993.5 Despite the fact that was a pioneer in the ecommerce industry with their groundbreaking BOPIS strategy and innovative website features, they dismantled their gargantuan customer lists and essentially had to start from scratch.
  • Their brick-and-mortar stores were drowning without a lifeboat in sight. When Sears CEO decided in 2005 that ecommerce was the future of the company, he failed to realize that their physical stores create visibility and still accounted for a large portion of their revenue.5 The business suffered tenfold; money spent on stores’ upkeep decreased, which turned them into eyesores that not even the most desperate of shoppers wanted to dive into. Sears stores began to disappear and after 250+ closed from 2013 to 2017, ecommerce sales fell 50%.5
  • Their product offerings became lackluster. For decades, Sears was widely known for their appliance fleet and their innovative Sears cards allowed consumers to buy appliances and build their credit with ease. The growth of big-box competitors paired with the popularity of companies like Mastercard made this aspect of their business obsolete and their remaining products quite frankly were not flashy enough to keep them afloat. Their apparel and home goods offerings were overshadowed by those sold by their competitors and when they finally did acquire desirable products, their messy stores acted as a deterrent and drove consumers to choose thrift stores like Goodwill over Sears.

Considering that Sears lost their Amazon-like status after they unsuccessfully attempted to transition into a new platform, we have been led to ponder the fate of Amazon’s transition from clicks-to-bricks. It is among the club of popular ecommerce brands like Casper and Warby Parker who are taking the plunge into digital from physical, whether it be through showroom spaces or full-service stores offering the best that the brand has to offer. But in a time where physical stores are closing in droves, it may be in their best interest to pump the brakes.

To put it simply, the United States is overstored. There is 23.5 square feet of retail space per person in the US; in contrast, the next two highest are Canada at 16.4 square feet and Australia at 11.1 square feet.6 Grand physical stores no longer act as the thriving retail hubs they once were, driving businesses to explore game-changing concepts. One of the most interesting and possibly most effective in this market is that of the showroom. B8ta is taking this old-school technique and infusing it with cutting-edge technology aimed at providing an analysis of the visitor’s store experience. This allows retailers to know which products are working, which are not, and offers a consumer-centric approach to physical store design. Amazon has incorporated a similar data-driven strategy into the creation of their physical stores; their 4-Star Store model that only sells items rated 4-stars or above by those in the area.

Overall, it is important to recognize that the opportunity to become an Amazon-sized disruptor is out there for the taking. In order for companies to cash in on this, though, they need to reconfigure and view technology as something to rally around that will ultimately benefit the consumer first, which in turn benefits the business. The future is now, and if you’re not adapting to the disruption then you’re already behind.

John Bajorek
John Bajorek
Senior Vice President, Brand, Strategy & Design
WD Partners

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