Winning the Retail War: Bricks vs. Clicks

Winning the Retail War: Bricks vs. Clicks

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As consumers move their retail activity online, Amazon has emerged as the undisputed winner in the Retail universe, while brick-and-mortar retailers feel the heat. For example, Macy’s and Sears announced 250 store closings between them last month, while Michael Kors conveyed disappointing results earlier this week.
The market capitalization of Amazon tops the combined market value of 6 traditional retailers including Walmart, Target, Macy’s and Best Buy. This was not always the case. Just ten years ago, the same retailers had a combined market value that it was more than 20 times higher than Amazon’s market cap. Since Q1 2007, their combined market cap has been reduced by more than 25%, while Amazon’s market value has grown from $16bn to $400bn.
In Europe Zalando, a German e-commerce company founded in 2008, reached a market value of $9.4bn, higher than the market cap of Macy’s, the 159 years old department store company.

Recently, Amazon opened a new advanced supermarket, Amazon Go, where shoppers can select items and go, without waiting at checkout lines. Once customers leave the store, items are billed to their accounts. Initially, this convenience store with no cash registers is open only to the retail giant employees, but after the testing period will be accessible to the wider clientele.
Amazon plans to add 100,000 new US jobs making some analysts speculate that the e-tailer will aggressively add physical stores. The company already operates one bookstore in the states of California, Oregon and Washington, respectively and plans to open a new one in New York later this year. It uses data from its e-commerce site to make decisions on books assortment. Consumers can also test and buy devices like kindle.

How can retailers fight back?

As Amazon continues to penetrate new categories like grocery and fashion and considers expansion into the physical world, traditional retailers face an existential threat. What left to them is to embrace an omnichannel strategy and using it as a differentiator to fight the online retail war. In today’s multi-channel environment, omnichannel capabilities can drive the engagement of core shoppers with the retail brand and eventually draw them to the physical store. Traditional retailers with physical stores will do better not only by leveraging the power of the online world, but by synchronizing the physical and the digital worlds to provide shoppers with a seamless experience across channels.
Because consumers no longer recognize channels during their shopping journeys, retailers should abandon the idea of digital as a separate business. They must build and execute their strategy in a much more integrated way. They should also invest in improving the shopping experience at their physical stores.  Such a strategy will not only differentiate retailers from the competition, but will give them a competitive advantage over online-only retailers.
It seems Amazon has already understood that and makes its first moves into the physical world. It remains to be seen how quickly traditional retailers will successfully embrace the omni-channel space. This adaptation will most probably differentiate the winning companies from the rest in the upcoming years.