What Amazon Cant

  • Forget about competing with Amazon – retailers need to concentrate on what the online disruptor can’t do.

    March 2020

    How long can bricks-and-mortar retailers remain profitable by simply selling more stuff? Modern retail has, for decades, centred on a transactional relationship between store and customer, with retailer growth inextricably linked to selling more SKUs. “Pile-them-high, sell-them-cheap” retailers such as the failed Toys “R” Us was a prime example.

    The challenge for physical retailers now, however, is that online disruptors such as Amazon, Asos and Ebay, have achieved an unassailable lead when it comes to leveraging price, convenience and speed. This doesn’t mean, however, that high-street stores can’t fight back. Instead, retailers are increasingly wrapping their product offerings up in beautifully crafted experiences. Here’s how three leading retailers from very different retail segments are focusing on “what Amazon can’t” (WAC) to protect profits and market share.

    Pet store bites back with experience

    When you think “WAC”, out-of-town pet store Pets at Home may not immediately spring to mind, but it’s definitely one of the stores leading the fight back thanks to a switch from selling stuff to focusing on experiences.

    The retailer, which has recently posted its 10th consecutive quarter of like-for-like growth, now generates more than a third of its revenue (35.5%) from its vet practices, pet grooming services, adoption centres and Tailster.com – a dog walking service in which Pets at Home now has a 19% stake. Pets at Home says it has a “very active” pipeline for yet more pet services to be added to its proposition in its bid to focus on WAC and build an Amazon-proof model.

    The retailer recently opened a new flagship store in Stockport, packed with experience innovation which it plans to roll out across the rest of its store estate. The Stockport store features a ‘groom room’ where customers can wash their own pets, a ‘selfie spot’ kiosk, a dog food deli, ‘Vets 4 Pets’ and an RSPCA ‘Cat Adoption Lounge’ to name but a few. The company’s goal is now to generate 50% of its revenue from pet care services.

    Harnessing customer data

    Pets at Home CEO Peter Pritchard says analysis of customer data has been instrumental in identifying a highly profitable mix of in-store services and experiences. Speaking recently at the Omnichannel Futures Conference Pritchard said: “If you shop with Amazon, there’s a good chance they know if you have a dog, and they’ll do their best to sell you dog food. If you’re a pet owner and shop with us we’ll know your dog’s name, its birthday, its favourite food, its weight, its monthly worming and flea routine and whether you use a kennel or cattery. Ours is a much more granular insight and that leads to a much more insightful and profitable customer-focused relationship.”

    Meanwhile, Mark Dunhill, former CEO of heritage tea retailer Whittard of Chelsea, says his successful repositioning of the high-street brand was down to a process of premiumisation. The challenge for Whittard, which Dunhill openly recognises, is that all of its products can be bought significantly cheaper online. Whittard couldn’t simply sell stuff. The brand’s renaissance was built upon forging an emotional connection with its customers, based on engaging and memorable experiences to ensure repeat custom.

    Whittard’s strategy was summed up by the slogan ‘savour the adventure’ with a strong in-store emphasis on helping customers explore new tastes, aromas and flavours and building a community of tea lovers, aided and abetted by expert store staff known as ‘friendly fanatics’. Dunhill’s team achieved Whittard’s renaissance thanks to a transformation of everything from in-store environment to product packaging which were re-designed specifically to educate the shopper about product.

    Complimentary services and experiences

    Unsurprisingly John Lewis & Partners is also leading the way on the WAC factor in the UK. The retailer is wrapping its retail offering with a range of complimentary services and experiences. These include in-store stylists and fashion advisors, gin tasting, a pop-up barber in the Southampton store, offering the services of 400 curtain and carpet fitters nationwide, and providing eye tests.

    Simon Russell, director of operations development at John Lewis & Partners, says the retailer is using customer experiences to help grow itself out of the challenges facing the high street – giving customer more on-brand reasons to shop with the brand.

    It is also important to acknowledge that an increasingly large slice of UK consumer discretionary spend is going towards experiences rather than material goods and this fact further highlights the importance of in-store experience. The retail industry needs to revisit Harry Gordon Selfridge’s sage words (initially meant for department stores) and reapply them to next-gen retail in general, transforming shops into “a social centre, not merely a place for shopping”.

    With Amazon already in possession of 500 US stores, and planning to rapidly increase its physical footprint in North America and Europe the question must now be, how long do conventional retailers have to achieve a head start until the internet giant uses its formidable data resources to bring targeted customer experiences to its new bricks-and-mortar estate? It will almost certainly come, and it will be on Amazon’s terms, so physical retailers are advised to set out their new data-lead, reinvigorated and experience-rich store sooner rather than later.

    Conclusion

    In most cases this will involve retailers performing a strategic realignment and implementation of innovative business processes and state-of-the-art technologies within a very short time frame. These systems will achieve greater in-store personalisation and customer centricity. The retailers that can achieve an integrated view of critical business data, such as stock, customer and order, and then use that data to create in-store customer experiences, will deliver ‘what Amazon can’t’ and succeed over the long term.