Competing with Amazon.com
Best Buy is planning on shrinking the size of their stores while Barnes and Noble has announced the shuttering of as many as 1/3 of their locations. Clearly, big online sellers such as Amazon.com are eating away at traditional brick and mortar retail sales. To add insult to injury, consumers often visit neigborhood retail stores to make their selections and then purchase from competing online retailers – sometimes while still inside the brick-and-mortar store. This practice has become known as showrooming. How can physical retail stores compete with the low overhead online behemoths?
1. Acquire and train competent salespeople. One reason customers choose brick-and-mortar stores over Amazon.com is that they want to be able to talk to someone. Unfortunately, cost-cutting to compete with online pricing has led to less sales help which in turn results in a disappointing retail experience, driving buyers to more online purchases. It's a vicious cycle.
However, according to a recent article in Forbes, Best Buy's new management is spending “to better equip and train its salesforce—the human element of Best Buy is one of the only factors that help separate it from rival e-commerce businesses like Amazon.com and eBay.” It makes sense. If a competitive advantage of physical retail stores is their ability to provide sales assistance, it makes no sense for management to cut salespeople in the hope this would make them more competitive.
2. Make technology and the internet your friend. Best Buy is encouraging showrooming at its own bestbuy.com by offering instant savings coupons and online ordering while shoppers are in the store. Other brick-and-mortar retailers are investing in their websites and encouraging their salepeople and customers to utilize their online catalog even while in the store. Salespeople can be equipped with tablets and smartphones to ring up transactions on the spot rather than at an order desk or cashier.
3. Exploit Amazon.com's biggest weakness. What can buyers get immediately at a physical store that they cannot get immediately from Amazon.com? The product itself. For centuries, commerce at its most basic has meant buyers making exchanges with sellers. The buyer trades her money for a seller's product. The exchange is instant, as is the reward on both sides. But waiting for the UPS driver to bring your latest electronic gadget is hardly instant. The satisfaction from the transaction is delayed if not lost entirely. Well-stocked brick-and-mortar retailers will let shoppers know that they can be using their purchases in a matter of minutes.
4. Engage the senses. Potential buyers need to smell the candles that are for sale. They need to feel the digital camera in their hands. They need to see the difference that a retina screen makes. The six senses cannot be experienced online. Yet, too often shop owners keep their candles wrapped in cellophane, their cameras locked away behind glass doors, and computers stacked up in boxes.
5. Provide exceptional experiences. The temptation to cut back on the frills in order to compete with internet prices is great. However, expanding on those frills and turning them into rich consumer experiences can separate a retailer from her “price only” online competitor. When a customer buys a new range online, a truck shows up at her house, and drops a big box in the driveway. She's on her own. However, suppose she buys that same range from a local appliance dealer. His truck shows up with a driver who uninstalls the old range, unboxes, and installs the new range, tests it to make sure that it is working, explains the basic operation, then puts the old range on his truck to take it to the recycling center. Later, the customer goes back to the retailer to purchase some accessories, and signs-up for a 6 session convection cooking school. It's a great consumer experience, and can't be matched by an online retailer.
6. Sell to the market segment of one. – Amazon.com and Starbucks are masters at the art of personalization. Based on your buying history, and their computer algorithms, Amazon.com can recommend a unique list of books suited to you alone. When you go to Denny's for a cup of coffee there is only regular and decaf, but at Starbucks as people line up to place their orders, it seems that no two orders are the same. Each cup of coffee is customized for the buyer. To fight showrooming and improve profits, today's brick and mortar retailers must tailor buying experiences to suit the buyer.
7. Learn to cross-merchandise. An appliance retailer selling hi-tech induction cooktops decided not to send customers to a department store for the cookware needed for induction cooking, but instead added cookware to his own product lineup. The results were add-on sales of high margin cookware, and more satisfied customers.
I've used some examples from the appliance industry because of my background there. Can you think of other examples of successfully fighting showrooming and competing with online retailers?