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How to Beat Amazon

vs amazon

With Sport Chalet closing and even Walmart showing losses, Amazon is the clear competitor to beat.

So far no one has a clear winning strategy:  click and mortar, brick and mortar, online, no one is safe when it comes to retail.  However, there are some that are surviving and thriving by offering something online purchasing cannot match, a visceral shopping experience.

Retailers have to make their stores into a destination.  Funky decoration, unique customer experience, seminars/lectures, a sense of community, etc.  This is really where the personality of the business (the “brand”) is shown.

One example is The Last Bookstore, a bookstore in Los Angeles.   The photos below show a stark difference from Barnes & Nobles.  These aren’t Bookstore temporary holiday decorations but long-term attractions that draw crowds.

This piece invokes a sense of fantasy and imagination that some fictional works brings to readers.

Like other bookstores, there are stationery/craft goods for sale.  The wheel doesn’t have to be reinvented…just tweaked to a unique way.

This “nonperforming” space, in the traditional retail paradigm, would be scrapped in conventional stores.  The book tunnel is a big draw for shoppers.

The current version of The Last Bookstore is actually its 3rd stage.  First opened in 2005 in a loft, it quickly expanded into the former Citizens National Bank’s 22,0000 sq. ft. downtown space (an insane space for any retailer let alone an independent one).

Experiential shopping obviously has a bunch of challenges; you may need a unique space, maintenance of store fixtures, uniquely trained staff, only local reach (for the time being which I will get into at the bottom of the article), possible higher insurance, and other differentiating factors which all can result in tighter margins.  However, having a challenging strategy is better than having none at all.

Implementation

  • The Last Bookstore:  They are known as the largest independent bookstore in Los Angeles.  They have a crazy interior.  They also sell used books for $1.  This price point is important because buying a used book online will not be cheaper after shipping is factored in.  Also, books offer a fundamentally different tactile experience from eBooks.  So customers walk in to check it out.  They wander the vast selection, and take pictures of the funky decor.  They  wander through the store they touch items, a psychological factor in sales.
    • Now they’re are not just a consumer.  Now they’re a consumer at a super hip, independent, small business.  They feel good about themselves.  They tweet to their friends about it.  Repeat.
  • Clothing Retailers:  Using my client Maitri Yoga as an example, a yoga clothing retailer; don’t sell too many existing/famous brands.  About 40-60 (name/unknown) mix.  You’re not going to be able to compete on price and there are also covenants on discount pricing for name brands.  People already know the sizing for these brands so they will use your store as a showroom (like Best Buy used to be before offering price matching).  Sizing and other factors are not uniform throughout clothing, so the product needs to be felt and tried on.  Therefore you have to offer goods that aren’t known and aren’t sold on Amazon.  They come in for a Prana top but see a new unknown brand.  Now you’re the hip store that sells up and coming brands that aren’t offered on Amazon.  In order to do this, you and your purchaser/procurement officer has to know market trends, know which brands have good quality, nice design, etc.

The work doesn’t stop there.  The store has to be laid out in a manner that draws in the customer.  New items in the front.  Focal decor near the front and in the center/back.  You’re going to have to go to estate sales, yard sales, furniture store liquidation sales, etc. to purchase furniture, decorations, accent pieces that fit the company’s brand.

Additionally, you have to build community engagement.  If you’re a Williams Sonoma, you have to offer cooking events.  If you’re a Nike, you have run Clubs to build engagement. Potential customers will come in for the event but may purchase something that caught their eye.  The costs for holding public relations activities such as events can grow beyond the return on investment so keep an eye on public awareness expenses.

The good news for small business owners is that the unique, boutique atmosphere each independent retailer has cannot easily be matched by larger companies.

Every industry is different so I would have to consult with you on an individual basis; then look at industry & market trends, the culture of the brand, the company’s financials (look at its performing items and overhead), etc.  This is all under my strategy consulting services.

 

Walmart hits the slumps

sad walmart

Walmart lost $21 billion in market value after it forecasts drop in 2017 earnings resulting in the steepest decline of the company’s stock in 25 years.

In layman’s terms:  Because Walmart said it’s expecting to earn less in 2017, lots of their shareholders sold their stock and lots of potential buyers said they weren’t willing to buy unless the asking stock price is lower.

Why

  1.  Amazon.

Amazon is crushing pretty much every retailer (except some custom designers; however with Amazon Local they are partnering with may of those product/service providers).  Amazon sells practically everything you can put in a box and ship.  At extremely competitive prices.  Free overnight/2-day shipping in some cases.

Walmart offers very very competitive prices and has locations pretty much anywhere in the US.  However, they are still a brick and mortar business so there is a limitation on floor space thus a limitation on product offerings.  I say brick and mortar instead of ‘click and mortar’ because even though they have an online store, it sucks.  Last year, I purchased a product online and selected in-store pick-up.  5 days later it was available for pick-up at he Walmart that is down the street from my office.  Walmart’s supply chain management system is one of the best in the world.  However, somewhere down the road there was an implementation issue of the online business with the existing business.

Walmart’s situation has similar elements to that of Blockbuster.  They have a size and first mover advantage.  However, over time they lost their position.  I doubt Walmart will face the same fate as Blockbuster but with a $21 billion dollar loss, it is not nothing.  You can read about Netflix/Blockbuster here.

2.  Other competitors

  • Dollar stores:  Walmart is known for low prices but no one goes lower than dollar stores.  Furthermore with the long-going Great Recession and great income disparity dollar stores enjoyed great profitability.
  • Grocery stores:  Walmart has Neighborhood Market stores in some markets and super stores (all encompassing stores) in other markets.  Nonetheless, companies that are just grocery stores are a big and aggressive competitor to Walmart.

Other Factors

Walmart is also facing PR issues:  1)  It is considered low-class.  There is a search term “people of Walmart” which shows rather uncouth individuals shopping in Walmart stores.  2)  Also, Walmart is criticized for killing off small, independent stores.

Walmart is doing many things to try to turn their path around.  We’ll see how effect these efforts are.

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