By Frank Lochbaum, Managing Partner at KPS.
When Simon Russell, director of operational development at John Lewis, used the phrase “what Amazon can’t” (WAC) at the Future Stores event, you could hear murmurs of agreement from the assembled retailers around the room.
Simon’s argument was that Amazon wins hands down on price, convenience and a whole list of other factors, so physical stores need to work on their differentiators.
Amazon is a formidable retailer, but ultimately, they sell stuff. Their platforms are essentially transactional, incredibly slick and friction-free, but transactional none-the-less. The natural endpoint of the current Amazon incarnation is intelligent automatic transactions that take place without any customer input, involving essential, mundane everyday items.
Here Frank Lochbaum, Managing Partner at KPS, tackles the three key areas retailers should focus on if they are to keep ahead of Amazon.
Rich real-life experiences
Amazon’s biggest non-transactional experiences are centred on fulfilment. Savvy retailers realise that building an Amazon-proof model involves offer something else – a rich, real-life in-store experience that helps form a connection with customers as emotional human beings.
This doesn’t mean that retailers should throttle back or even surrender their digital offering in the face of the Amazon onslaught. Instead they would be well advised to ensure that this WAC customer experience permeates their value proposition on every sales channel, with the store at the very pinnacle. This is where that goodness should be brought to life, engaging all of their customer’s five senses.
Needless to say, John Lewis is 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.
The rise of experience over stuff
Simon said John Lewis’ strategy is to use experience 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”.
Pets at Home is another retailer successfully employing the “halo effect” – wrapping products within a rich layer of experiences and services. 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 more pet service to be added to its proposition in its bid to focus on WAC, and build an Amazon-proof model.
Retailers have long known that click-and-collect services boost footfall and this gives them a golden opportunity to engage all of their customer’s senses, impress and convert them to a sale. The same goes for the kinds of on-premise customer experiences offered by John Lewis and Pets at Home. Executed correctly they not only generate revenue by themselves but in an increasingly online world, they also give compelling reasons to come instore where store assistants with the right skills can make recommendations, upsell and cross sell.
This is were Amazon’s transactional approach and physical retail’s focus on rich, physical experiences intersect. To leverage Simon Russell’s WAC approach physical retailers need to know their customers at scale and depth. The answer to this challenge is detailed customer data – which can be used not only to identify the customers to target with specific services but also to spot emerging trends and create new experiences to capitalise on them.
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.
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.