Should Brick-and-Mortar Retailers Try to Be Like Amazon?

It may seem like an uphill battle at times for traditional brick-and-mortar retailers to compete with Amazon, but that is far from reality. Amid the digital revolution, brick-and-mortar stores are watching Amazon closely for ways to capitalize on the e-commerce giant’s successes and failures.

Advantages of Brick-and-mortar

Amazon just posted its fifth profitable quarter, but traditional retailers are thriving in their own right. Ninety percent of all U.S. retail sales still occur in-store. Consumers love to shop, and not many see that changing anytime soon. Even Amazon can’t beat brick-and-mortar’s ability to satisfy the urge for instant gratification or product inspection—the ability to touch and test a product, and to interact with sales associates to learn more is invaluable. Perhaps that’s why Amazon finally opened its first brick-and-mortar stores this year in San Diego and Seattle.

Brick-and-mortars enjoy other advantages over e-commerce, depending on their segment:

·         Grocers excel with the perimeter (produce, meat & seafood, etc.), private label, personalized savings and buy online pick up in store services (BOPIS, or click-and-collect). Even with Amazon Fresh, shoppers don’t often order their milk and eggs from Amazon. Progressive grocers are enabling shoppers to order their cereal, baggies and litter online, for pickup in-store while they stock up on milk, eggs, bread and cheese.
·         Drug stores attract shoppers with the expertise of pharmacists, private label over-the-counter (OTC) products and personalized savings. Hyper-localization is also key to drug store success. Take Walgreens, which rolled out a “ready to eat” section in its downtown, urban locations to focus on lunch break shoppers. And CVS just launched beacon support in its app, so opt-in shoppers receive alerts to personalized offers as they enter the store.

·         Hardlines and softlines win with product consultation. While Amazon reviews are great for some purchases, larger buys like refrigerators and high-end apparel require domain expertise and knowledge of best practices. Consumers do not always know what to ask or look for in a product, and Amazon reviews may lack important perspectives.
Across categories, brick-and-mortar retailers are winning with rewards. When a consumer makes frequent purchases with a loyalty card, the retailer begins to learn and map the shopper’s purchase habits. Target offers free online shipping and relevant incentives to REDCard holders; Stop & Shop loyalty card members receive weekly personalized offers, cashback to schools and discounts on gas. Time and again, shoppers sign up and keep coming back for more.

The Mobile Challenge

Here’s where Amazon also shines. Amazon’s mobile app has a 76 percent penetration rate among shoppers, while Walmart and Target sit at 33 percent and 18 percent respectively. Mobile apps for consumers mean “right now, right here” and even include in-app exclusives on products. In 2015, Amazon added a “Watch this Deal” feature to its app, which notifies shoppers when an online deal is about to begin.

The mobile app is not a static phenomenon; it’s getting better and better. Meijer’s successful loyalty program is based on mobile phone number with PIN; Ahold allows shoppers to perform self-checkout completely from an app; CVS is rolling out digital receipts, allowing for a more mobile and environmentally conscience checkout experience.

An Omnichannel Future

As Amazon commits to physical stores to complement its e-commerce offering, brick-and-mortar retailers must commit to e-commerce—whether it’s building, buying or partnering to create an all-encompassing, seamless shopping experience, centered on the local physical store, which Amazon cannot replicate.

Recently, Walmart chose to buy online budget retailer for $3.3 billion and expand its e-commerce offering. Most traditional retailers, however, can’t afford such a record-breaking acquisition. Instead, most should choose a combination of build and partner. Brick-and-mortar retailers often already have many components of a successful omnichannel strategy. By building out their offerings—in-store associate training for example—and partnering with complementary players in technology and consulting, traditional retailers will remain very competitive.

Brick-and-mortar retail is alive and well. Stores are customizing, personalizing and localizing shopper experiences, and offering unmatched service and expertise. These strengths and a keen eye on the digital smarts of Amazon will carry brick-and-mortar long into the future to better serve shoppers and the retailers’ bottom line.

Mike Grimes is CRO at Mobee