The moment we were all waiting for finally arrived. The inevitable entry of Amazon to full-scale brick and mortar retailing with the acquisition of Whole Foods for $13.7 Billion. In boardrooms across the World, companies regardless of industry are now realizing that the combination of digital and acquisition can disrupt their industry overnight. How your company responds to Amazon entering brick and mortar should be a discussion at every board table and here is what you need to know.
Think it can’t happen to your company? Think again…
Amazon has the capital and investor patience to leverage what they learn in one category to enter multiple categories. Remember books and Amazon’s first category online? It is a matter of time before Amazon decides which failing department store (ie. Sears, et al) it plans to buy next. From learning in the grocery channel they plan to make shopable distribution and last mile delivery centers for non-traditional online product categories such as furniture, bicycles, appliances, mattresses, beauty, tires, etc. Sounds a lot like existing department stores doesn’t it?
How did Amazon do this?
Amazon built up its empire over a long period of time with sustained losses promising on the future of retail. Those losses are soon to end as the most expensive aspect of Amazon’s supply chain gets solved, last mile delivery with stores. While everyone else is focused on making next quarters numbers Amazon is focused on knocking next decades numbers out of the park. This has allowed the company to have a mandate towards radical innovation whereas current players are focusing to serve today’s customers with incremental innovation.
Should brands be worried about Amazon Brick and Mortar?
In a word, yes.
What seems like a great option for many brands that rely on the behemoth for sales and distribution via FBA, ultimately these companies are going to pay the price. If traditional retail buyers for your wares continue to disappear, Amazon will simply restrict you to low margins by threatening market access. All of a sudden traditional retail doesn’t sound so bad. For those product categories with low barriers to entry, expect Amazon to private label and completely eliminate your brand, see batteries or clothing. Amazon not only wants to own the digital retailing world but retail period from end to end.
We will see branded manufacturers and retailers disappear as a disturbing shift of power from brand and retailer to Amazon and consumer will occur.Amazon is not just targeting retailers anymore, but manufacturers as well with the ambition of becoming the World’s largest private label manufacturer. Amazon Prime coupled with Alexa is the Trojan horse to get into every consumers living room as they aim to take the brand out of the shopping experience and change the way we order online, see video.
The ease of shopping on Amazon has led many consumers to start their product search on the marketplace, which means brands and retailers must develop strategies around offline sales where Amazon currently does not own the space.
How to prevent being caught in Amazon’s cross-hairs?
Now more than ever, branded manufacturers need to focus on wholesale. Combining online and offline sales channels is the next logical step to make the consumer path to purchase easier while letting consumers shop on their terms. Product education and offline consumer experiences are also key to make consumers want to shop at physical retail. At a time when most branded manufacturers are turning their backs on physical brick and mortar and competing with their retail partners the pendulum is going to shift back to brands needing brick and mortar to survive. Alternate sales channels other than online, where Amazon dominates, are going to be required to have better negotiating power with the company.
As more consumers start their product search on Amazon, the product discovery offline is only going to increase in importance. Pure-play online only brands may just never get found. Manufacturers and retailers need to consider a partnership approach to create the best possible experience for consumers online and offline. This will require much closer collaboration and sharing of sales, customer, and product data across channels in omnichannel harmony.
Conclusion
The way we think about investment horizons needs to change. Management teams should no longer be based solely on quarterly or annual figures but on their innovation pipeline. Many manufacturers have innovated around developing better products, but often forgotten about is the way to sell those products to consumers with new sales strategies. With Amazon now officially on retailers turf, they are more open than ever to innovating and partnering with their vendors.
As a branded manufacturer or retailer we all need to think about how best to serve consumers, even if at a lower margin. The reason Amazon is moving into Brick and Mortar is because consumers still prefer to shop there. Rather than competing online, manufacturers and retailers need to create better shopping experiences by partnering online where consumers can buy online and pick-up at a store or have the store deliver online orders in the last mile. Neither retailers or manufacturers will win against Amazon in the direct to consumer model and time is running out if action is not taken now on brick and mortar. The time for manufacturers and retailers to partner to invest in the future is now, no more siloing of sales channels. Otherwise the way many talk about the retail apocalypse we will start to hear about the branded manufacturer apocalypse.
About Us
ShipEarly offers a cross-channel sales platform for manufacturers to make it easier for consumers to buy. Rather than competing online, like most do now, our engine helps manufacturers partner online to both sell in and sell through channel partner or brand owned store inventory creating the ultimate consumer experience. At ShipEarly we think about things differently, we help branded manufacturers turn your online sales channel into your own private Amazon to partner with retailers online. If interested in learning how you can partner online to drive revenue growth and get found by more consumers offline with our platform, contact us at 1-888-536-1335 or eMail info@shipearly.com
