Amazon and the future of retail

On today’s Marketing Over Coffee, we debated a bit about Amazon and how retailers can stop “showrooming”, the practice of having customers come into real life stores, examine physical goods, and then check the price on Amazon and buy it there.

That’s the tip of the iceberg, and the retail Titanic is headed straight for it, full steam ahead. Here’s why. Amazon recently announced openings of new distribution centers, some in major metropolitan areas, in exchange for collecting sales tax in those regions on behalf of the government. Why? Slate argues that it’s to provide same-day delivery of goods in high-demand areas.

That alone should make retailers deeply worried. After all, if I can stop by my local big box electronics store and know that I can take delivery to my house from Amazon in 4 hours, the incentive to buy and lug anything home goes down. Retailers who are celebrating Amazon’s surrender on the sales tax war, long perceived as a competitive advantage, may be celebrating Amazon eating more of their lunch.

Here’s the even bigger picture. Amazon has more data and access to more data than any retailer, period. They know exactly what’s popular, where it’s popular, and when. Amazon is likely aware that showrooming is somewhat self-destructive – once it pushes stores like big box electronics chains out of business, consumers will have fewer places to see and feel the items they want to purchase. The logical conclusion, then, is an Amazon showroom.

Think of the power that a physical showroom might have. Amazon’s datacenters can tell each showroom which 100 products to feature in it that provide the best balance of profit, popularity, and volume, while the local distribution center ships the goods to your house in 4 hours, or you can pick them up at the showroom’s Amazon delivery locker. You walk into the showroom with your mobile phone, try out the featured goods in person, scan the barcode for the items you want, pay using your existing Amazon account, and go on with your day, knowing your purchases will be on your doorstep before the next meal. (or you could wait in the showroom’s coffee shop and see the top 100 Kindle bestsellers of the hour and buy one while you have that coffee, I suppose)

What can the average retailer do to combat this? If you’re a big box chain, you’re pretty much hosed. You have been ever since the Amazon price-check app. Remember the time-honored adage:

Amazon has already nailed cheap with the price check app. They’re in the process of wiping out the fast advantage of the physical retailer with real-time distribution. That leaves your only true competitive advantage of good. You’ve got to provide a customer experience that a highly impersonal series of digital transactions can’t provide. Before you scoff that real people will always want a personal connection, recall that a highly-tuned, nearly flawless digital experience (Amazon) is routinely beating the pants off flawed, broken real-world customer experiences (big box electronics stores) already.

Go shop in some of the retail world’s successes. The Apple Store. Tiffany’s. The American Girl doll store. Compare and contrast the end-to-end experiences you have in those retail locations with the experiences you have in any of the big box retailers, and you will understand what bar you have to reach in order to survive the Amazon onslaught. The writing is on the wall.

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