Beating Amazon will be tribal warfare
“If you know the enemy and know yourself, you need not fear the result of a hundred battles.” – The Art of War by Sun Tzu.
Amazon’s arrival will certainly mean war for many retailers and opportunity for many others. We have all heard that the Chinese use the same approach to describe the concepts of crisis and opportunity. What they mean to say is that within every crisis lies an opportunity, depending on how it is looked at. The word crisis comes from the Greek “to separate, to sift,” which means to pass judgement, to keep only what is worthwhile. There is an opportunity in every crisis and the deeper the crisis, the better the opportunity can be. The question is, which retailers among us will see the opportunity, and who will focus on their perception of crisis?
Where we see opportunity for our retailers in the light of a likely successful Amazon launch, is to firstly understand the Amazon data machine, reseller platform (50 per cent of all sales), product centricity (70 per cent of all transactions is a very large machine predicated on reach of customer data), Prime TV, advanced customisation algorithms and some innovative practices.
And to consider, as Sun Tzu and many strategists afterwards did as well, that uniqueness of offer is the key to survival. Somewhat paradoxically we see the rise of the differentiated speciality retailer, focused on customer experience and invested less in product and price differentiation, and far more invested into building their community or tribe.
One of our clients is a craft retailer, who for years built their brand by product centricity. Business was done in traditional shop environments, supported by online information and largely dependent upon range and price. Already affected by the rise of Bunnings, they were certain fodder for an Amazon business intent upon taking market share on a product price distribution model, unheard of before in this country.
And so, in thinking of differentiation we have repositioned this retailer to build their community through workshops (often after hours in the shop), teaching their customers in the “how to make” their various products. This has had the benefit of creating their own social media network of like-minded consumers, enabling achievement and encouraging social proof, also building a tribe that seeks this retailer out above product and price found elsewhere.
The key here is that customer experience is the enabler to greater product sales, not the historical reverse.
This approach in creating a customer-centric tribe is one example amongst many, applicable to many retailer categories and, above all, not just playing Amazon at their own game.
It takes action in strategy, understanding and relevance in customer insights, an ability to invest in this “tribe” from CRM platforms, to clever marketing and event based thinking, to rethinking the metrics and manner in which we deploy this customer infused game plan.
Agility and speed are weapons (which favour the nimble speciality retailer) for whoever uses this to their advantage.
If we are approaching retailing in this new terrain with the same battle plans based on price, margin and location, we will be playing into the heartland of our opponent and the result will be predictable and inevitable.
Brian Walker is founder and CEO of Retail Doctor Group, Australia’s leading retail insights/strategy to implementation practice and can be contacted on (02) 9460 2882 or [email protected]. Damian Milne is client services and insights analyst at Retail Doctor Group and co-author of this column. Damian can be contacted on (02) 9460 2882 or [email protected].