- June 14, 2017
How Retailers Overcome the ‘Amazon Effect’
The current retail market has clearly evolved and retailers need to rethink their strategy. Today’s consumer has raised the bar on what they want in terms of price, quality, product assortment and service.
At the recent Supply Chain 360 Conference, Jane Singer, Director of Market Intelligence at Inside Fashion discussed why some retailers are succeeding and what’s working.
Singer stated, “Retail sales have been unstable, margins have deteriorated and fashion is no longer an exciting purchase for most consumers”.
While many blamed online players like Amazon, Tmall or e-commerce in general for the recent struggles of traditional brick and mortar, Singer has a different perspective. “In reality, online sales account for 10-15% of total retail sales, but online retailers get 90% of the media attention.” Singer said, “Online revenue is important and growing, but it still only represents a minor portion of total retail sales. Online isn’t the big, ugly monster that people make it out to be.”
Singer argued, it’s crucial for retailers to be Multi-channel by having both an online and physical presence. She supported her point of view with a number of key reasons why retailers should not only focus on online:
- The cost of free shipping is actually expensive for the retailer. High levels of return merchandise and re-stocking is also a big issue.
- The addition of new brands is very difficult in the online space, as the marketplace is very crowded.
- Customer loyalty is nil in the online space.
- Sales per customer offline can be 20% -140% greater than online.
- Consumers actually like shopping in stores (when retail is done right).
So if physical stores are the answer, why are so many closing?
Singer stated, “The main reason for stores closing is not because of online competition, but as a result of being ‘over-stored’. Singer backed her view by showing a number of related news articles. “In as early as 1992, years before Amazon, the LA Times reported that America was in danger of becoming over-stored,” Singer said.
Overall, there is still a lot of value for retailers to have physical stores. In fact, the biggest and the most successful online players are opening physical stores. Amazon started opening physical stores in 2015. Apple has nearly 500 physical stores worldwide and Alibaba bid $2.6 billion for Chinese mall operator in InTime Retail.
Singer suggest, that retailers need to implement a coordinated strategy between online and physical stores.
“We find that especially in the apparel retailer, often times the online pricing and offer is different from the physical store, which can be very confusing to the consumer,” Singer said.
“When the message and merchandise online is different from what we offer in our stores, the consumer loses respect for our brand,” Singer added.
To learn more about the latest retail trends that can impact your business, sign up to our next webinar “Winning at Retail – What Leading Companies are Doing Right” presented by Jane Singer.