Chasing the Customer … Amazon & Google … the Perfect Storm?

 

It’s Like Being Hit By A Tornado & Lightening Bolt … At The Same Time!

 

Google announced yesterday that it has allocated 1/2 Billion dollars to tornadolaunch a same day home delivery service from assorted retailers.

Amazon has announced that it intends to “… provide 50% of a household’s needs to 50% of all households — within 4 hours.

Eric Schmidt and Jeff Bezos are about to unleash their own version of ‘global warming’ onto the world of brick and mortar retail.  There will be a lot of ‘heat’ put on traditional retail management to develop new competitive strategies. A lot of traditional retailing is about to be hit by the ‘perfect storm’.

 

It’s About More Than Price

 

Scott Galloway, NYU professor, recently wrote:

“Some of the winners in retail. First off, an obvious one, Amazon. Amazon is reshaping how value is signaled in retail. Things like, operational, returns, exchanges, pick up in store. When retailers are asked what they think consumers value or what consumers want from them, they think it’s deals and promotions and merchandising-based incentives. It’s not. Consumers want same day delivery, they want the ability to pull out their smart phone and look at eye-level skewed data, they want to pull up 50% discount Jim Lee Getty Imagestheir loyalty program in the store. Operational things that Amazon has taught them to expect, they are massively expecting. Amazon is teaching the whole world how to shop. And unfortunately, it is very expensive and it’s a great strategy for them because they have had the lowest cost of capital of any company in the world, they never got into the habit of giving their investors the crack cocaine of profit. They have been spewing them a steady dose of Methadone in the form of a big vision. No company has ever had access to this cheap a capital for this long and they are taking advantage of it, tapping into what consumers want and value in an area that is massively expensive. Or put it in another way, they are going underwater into the world of fulfillment which is very expensive, with the largest oxygen tanks, forcing every other retailer to follow them. But everyone else is following with a smaller oxygen tank and will begin drowning.

Seventy-five percent of their operating expenses is in fulfillment and technology. We never had a retailer spend half of that. They are absolutely going to where the puck is and they are convincing consumers that’s what they should differentiate their purchases on.”

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Legacy Media In The Storm’s Path Too!

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Amazon and Google will be in your house almost every day. Smartphone, Tablet, PC, Internet of Things connected. They will not be just delivering zeros and ones, but also atoms — digital media and physical goods. Watch for a big shift in marketing media from legacy to digital media as brands want to move closer to the consumer decision point. Both Amazon and Google are already media giants. Amazon, today, does a billion dollars per year in ad revenue. Google is at $57 billion and growing.

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Fighting Back!

 

That doesn’t mean some retailers aren’t fighting back with their own digital strategies. Nordstrom is spending a billionlogo_kroger dollars to upgrade their marketing systems. Macy’s is doing a great job too and is now working with dunnhumby … the guys who helped Kroger attain 10 years plus of uninterrupted 1/4 over 1/4 revenue growth. Kroger has just made a very smart acquisition and is probably the best positioned grocery and general merchandise retailer in the traditional grocery vertical. Dave Dillon and Rodney McMullen have done a truly great management job at Kroger.

 

Retail Digital Change is Real!

 

There is a major change occurring in the traditional retail landscape. It is evolve or perish!

  1. In 2008 there were 138 independent department stores. By 2009, 57 remained.
  2. By 2016, it is estimated that the Web will influence more than half of the dollars spent in U.S. retail.
  3. Online shoppers are projected to spend $1,738/person by 2016.

 

 

 

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