Regulation and Compliance
How Brick-and-Mortar Retailers Can Survive in the Age of Amazon

As Amazon tightens its grip on the modern-day consumer, you have to wonder: Do traditional brick-and-mortar retailers have any future at all?

How Brick-and-Mortar Retailers Can Survive in the Age of Amazon

The list of old-line retailers that are struggling to survive, or have already given up the ghost, seems to get longer every day: Sears Holdings, J.C. Penney, Macy’s, J. Crew, The Limited, Radio Shack, Payless ShoeSource and Neiman Marcus, to name but a few. All have set up e-commerce operations to supplement their physical stores, but they can’t manage to get traction against the Amazon juggernaut. (Or, for that matter, against discount-oriented retailers such as Wal-Mart and Target.) The result has been a wave of store closures.

So why can’t these venerable names thrive in the age of omnichannel retailing? The word “venerable” offers a clue. Most are weighted down by legacy systems that inhibit their ability to fully embrace the digital world, says Melissa Gonzalez, chief executive officer and founder of The Lion’Esque Group, a producer of retail “pop-up” environments.

Unlike Amazon, these retailers weren’t born in an age of virtually unlimited information about consumers. The very nature of e-commerce sales opens the door to valuable intelligence the moment a customer makes an online purchase — or even visits an e-tailer’s site. In theory, brick-and-mortar retailers have the same access to data generated by online sales, but that capability resides firmly within Amazon’s DNA. For a traditional merchandiser like Sears or Kmart, it’s something that has to be acquired.

When it comes to actual stores, of course, retailers have the disadvantage of not knowing who’s shopping at any given moment — at least until someone makes a purchase. Even then, the information generated from a sale is nowhere near as detailed as that culled from the consumer’s behavior in cyberspace.

Retailers are working hard to correct that drawback. They’re scrutinizing store traffic patterns, surveying shoppers, even placing sensors at the door. They’re integrating technology into the shelves, to learn where shoppers spent the most time, and which products they pick up. In-store digital screens can showcase more brands and be constantly updated, offering special deals on the spot.

In addition, retailers are training sales staff to understand, say, why a particular shirt made it to the dressing room but didn’t get purchased. Was it a question of style? Quality? Price? “They’re taking on a more proactive mindset about how they empower associates,” says Gonzalez.

Personal information will always be tougher to acquire in a physical store environment, but some of the biggest retail brands are making it easier through the use of cashless payment. Then there are loyalty cards, a tried-and-true method of mining customer information in exchange for regular discounts and special offers.

By some estimations, brick-and-mortar retailers ought to thank Amazon for pushing them to innovate in the transformation of the customer experience. Still, their efforts in that direction can be hampered by limited resources. Over the years, Amazon has displayed a willingness to operate at a loss in exchange for building up market hegemony. At the same time, though, it’s been buttressed by the profits from Amazon Web Services, the company’s steadiest source of income. Neither of those dynamics can be matched by most traditional retailers.

At stake are the brand identities that retailers have spent decades building up. Today, the biggest name in retailing is Amazon itself, far more dominant than most of the brands that sell on its site.

The nature of Amazon’s threat to brands depends on the category, Gonzalez notes. Amazon has made less of a dent in the luxury space, where consumers tend to rely on the cachet of the product. But when it comes to mass-market items such as consumer electronics, baby products or clothing basics, Amazon is gradually becoming the most visible brand. Its line of Amazon Essentials is essentially a private label that can beat established brands on price, selection and ease of ordering.

One might assume, therefore, that specialty retailers stand the greatest chance of competing against Amazon. But the generalists are fighting back as well. According to Gonzalez, Wal-Mart, Target and The Home Depot are going head to head with Amazon, scooping up specialty brands and creating “mini-franchises” within big-box stores. (Target and others are also opening stores with a smaller footprint in urban environments, complete with high-tech features such as automated checkout, and tied into e-commerce networks.)

Augmented reality technology presents retailers with a promising tool for beating Amazon. Consumers can visit physical stores online. Inside the actual stores, they can obtain service through features such as dressing room mirrors that allow for communications with sales associates. (Assuming that consumers don’t find that capability too creepy to use.) “Stores are doing whatever they can to create more personalized shopping experiences,” Gonzalez says.

One has to ask whether even the most popular retail brands have an expiration date. There could come a point at which a merchandiser simply can’t keep reinventing itself in the eyes of the latest generation of novelty-obsessed consumers. But Gonzalez believes there’s a path to survival for familiar names such as Macy’s and Nordstrom. It all depends on their ability to think creatively, and be willing to break away from the strategies of the past.

In any case, physical stores aren’t going away any time soon. Amazon signaled that belief with last year’s acquisition of the Whole Foods grocery chain, as well as its move into retail spaces of its own. In the coming years, success for all retailers will be tied to their ability to take a multi-faceted approach to selling, tying all channels into an attractive customer experience, whether in cyberspace or on the sales floor.

Next: More on the future of retail brands.

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The list of old-line retailers that are struggling to survive, or have already given up the ghost, seems to get longer every day: Sears Holdings, J.C. Penney, Macy’s, J. Crew, The Limited, Radio Shack, Payless ShoeSource and Neiman Marcus, to name but a few. All have set up e-commerce operations to supplement their physical stores, but they can’t manage to get traction against the Amazon juggernaut. (Or, for that matter, against discount-oriented retailers such as Wal-Mart and Target.) The result has been a wave of store closures.

So why can’t these venerable names thrive in the age of omnichannel retailing? The word “venerable” offers a clue. Most are weighted down by legacy systems that inhibit their ability to fully embrace the digital world, says Melissa Gonzalez, chief executive officer and founder of The Lion’Esque Group, a producer of retail “pop-up” environments.

Unlike Amazon, these retailers weren’t born in an age of virtually unlimited information about consumers. The very nature of e-commerce sales opens the door to valuable intelligence the moment a customer makes an online purchase — or even visits an e-tailer’s site. In theory, brick-and-mortar retailers have the same access to data generated by online sales, but that capability resides firmly within Amazon’s DNA. For a traditional merchandiser like Sears or Kmart, it’s something that has to be acquired.

When it comes to actual stores, of course, retailers have the disadvantage of not knowing who’s shopping at any given moment — at least until someone makes a purchase. Even then, the information generated from a sale is nowhere near as detailed as that culled from the consumer’s behavior in cyberspace.

Retailers are working hard to correct that drawback. They’re scrutinizing store traffic patterns, surveying shoppers, even placing sensors at the door. They’re integrating technology into the shelves, to learn where shoppers spent the most time, and which products they pick up. In-store digital screens can showcase more brands and be constantly updated, offering special deals on the spot.

In addition, retailers are training sales staff to understand, say, why a particular shirt made it to the dressing room but didn’t get purchased. Was it a question of style? Quality? Price? “They’re taking on a more proactive mindset about how they empower associates,” says Gonzalez.

Personal information will always be tougher to acquire in a physical store environment, but some of the biggest retail brands are making it easier through the use of cashless payment. Then there are loyalty cards, a tried-and-true method of mining customer information in exchange for regular discounts and special offers.

By some estimations, brick-and-mortar retailers ought to thank Amazon for pushing them to innovate in the transformation of the customer experience. Still, their efforts in that direction can be hampered by limited resources. Over the years, Amazon has displayed a willingness to operate at a loss in exchange for building up market hegemony. At the same time, though, it’s been buttressed by the profits from Amazon Web Services, the company’s steadiest source of income. Neither of those dynamics can be matched by most traditional retailers.

At stake are the brand identities that retailers have spent decades building up. Today, the biggest name in retailing is Amazon itself, far more dominant than most of the brands that sell on its site.

The nature of Amazon’s threat to brands depends on the category, Gonzalez notes. Amazon has made less of a dent in the luxury space, where consumers tend to rely on the cachet of the product. But when it comes to mass-market items such as consumer electronics, baby products or clothing basics, Amazon is gradually becoming the most visible brand. Its line of Amazon Essentials is essentially a private label that can beat established brands on price, selection and ease of ordering.

One might assume, therefore, that specialty retailers stand the greatest chance of competing against Amazon. But the generalists are fighting back as well. According to Gonzalez, Wal-Mart, Target and The Home Depot are going head to head with Amazon, scooping up specialty brands and creating “mini-franchises” within big-box stores. (Target and others are also opening stores with a smaller footprint in urban environments, complete with high-tech features such as automated checkout, and tied into e-commerce networks.)

Augmented reality technology presents retailers with a promising tool for beating Amazon. Consumers can visit physical stores online. Inside the actual stores, they can obtain service through features such as dressing room mirrors that allow for communications with sales associates. (Assuming that consumers don’t find that capability too creepy to use.) “Stores are doing whatever they can to create more personalized shopping experiences,” Gonzalez says.

One has to ask whether even the most popular retail brands have an expiration date. There could come a point at which a merchandiser simply can’t keep reinventing itself in the eyes of the latest generation of novelty-obsessed consumers. But Gonzalez believes there’s a path to survival for familiar names such as Macy’s and Nordstrom. It all depends on their ability to think creatively, and be willing to break away from the strategies of the past.

In any case, physical stores aren’t going away any time soon. Amazon signaled that belief with last year’s acquisition of the Whole Foods grocery chain, as well as its move into retail spaces of its own. In the coming years, success for all retailers will be tied to their ability to take a multi-faceted approach to selling, tying all channels into an attractive customer experience, whether in cyberspace or on the sales floor.

Next: More on the future of retail brands.

Comment on this article

How Brick-and-Mortar Retailers Can Survive in the Age of Amazon