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How Do Small Merchants Tackle 'Amazonization'?

  • Written by  Glenn Taylor

0aaaIan Benn IngenicoAmazon has transformed the retail world. From humble roots, this little online bookstore has become one of the largest businesses on earth.

Indeed, Amazon’s pervasive position has spawned a new concept, with a rather awful name, Amazonization. This refers to the wholesale disruption occurring across retail and e-Commerce thanks to the leviathan-like presence of companies like, well, Amazon.

The dreadfulness of the name aside, I don’t think the term adequately expresses what is actually happening in the retail world. Of course, a great number of retail brands are thriving across the globe, but many others seem to be stupefied. Unsure of what to do to tackle the competition, they oscillate between running in the tiny circles of conflicting tactical moves or stopping altogether, scared to rack up even the tiniest costs.

Pushing Back Against The March Of The Amazons

It goes without saying that, by not having the costs of a physical storefront, online-only retailers have a big advantage over brick-and-mortar merchants. They have speedy innovation, easy transactions and low prices, not to mention the tax advantages and the economies of scale they benefit from.

With all this in mind, brick-and-mortar merchants need to work harder to ensure their physical assets don’t just pay for themselves, but that they return a profit too. This isn’t easy — it requires ingenuity, courage and decisiveness too.

Great store-based retailers know that they must find ways to bring their customers all the experiences that they love when buying online. Consumers want to have plenty of choice — they don’t want to have limited options when buying. They also want easy access to essential product information to help them make their purchasing decision, as well as easy engagement with the brand as they move from one channel to another. In addition, consumers need to see competitive pricing — this doesn’t necessarily mean the cheapest, but the best value for money — as well as a quick, painless checkout experience.

However, consumers need things from their brick-and-mortar experience that a web site simply can’t provide. These include: a warm, friendly face; a sense of community; and a chance to touch and experience the products in reality — this is particularly important for clothes and shoes, as well as electronic goods like TVs and speakers. Consumers also need a pleasant trip out; the opportunity for instant gratification; as well as the option to buy the same things that they see in store through other channels without hassle.

It is sad when you see retailers that cut their costs by making their stores ever more unpleasant places for their customers. They risk losing the very USPs that make their stores stand out from their online rivals.

The Impact Of Amazonized Thinking

The Amazon challenge has had a significant impact on the way many brick-and-mortar retailers structure their organization.

One key example is the makeup of the boardroom. A couple of years ago, most retailers had a head of digital, often accountable to the marketing side of the boardroom, and an IT director accountable to the CIO or even finance.

Today, nearly all retailers recognize that keeping digital and physical thinking apart is a strategic mistake, playing into the hands of the digital giants. As this thinking has changed, the role of head of digital has slowly evolved from a marketing discipline to a technical one.

For many businesses, this has meant that either the CIO or Chief Digital Officer (CDO) role has triumphed, with the other position dropped from the boardroom altogether. This is a great shame because both backgrounds bring a valuable perspective based on a very specific set of experiences. Personally, I find that my role can sometimes become broker between the two worlds. I feel that there are important differences between the perspectives of these two roles that mean they both can have an important part to play in a company’s evolution.

CIOs, for instance, come from a background where their primary role is that of custodian. The CIO knows to keep the company safe, secure the data and keep all the systems running. They also often come from a background where new initiatives need big capital investments that must be written down over a long time. CIOs then think long term, with a focus on security and reliability at all costs. Better to be slow than to put the whole business at risk.

CDOs, on the other hand, come from a very different culture. Many physical retailers with an online presence set up their digital offering in an experimental manner, evolving the channels regularly and gradually, while keeping capital expenditure low to mitigate the risks of any mistake. For a CDO, the worst sin is to be left behind by a rival’s innovations. CDOs come from the Silicon Valley, “fail fast” school of iterative innovation.

I’ve sat at many board meetings and seen digital and IT teams clash — the CDOs scornful of their colleagues’ caution, the CIOs mortified by their team members’ recklessness. The truth is that both perspectives have merit and complement each other. A retail business that can’t keep up with its digital competitors risks a slow, painful death. But a retailer that loses control of its customers’ data or that is unable to trade through a busy weekend could be finished overnight.

The Power Of Combined CDO And CIO Thinking

Digital thinking has brought forward huge advances in development methodologies, from Agile to DevOps. It can help make the iterative innovation approach work to deliver real-world value to retailers around the world.

The CIO, meanwhile, never forgets that the business must be protected come what may, and all that messy capitalization and balance sheet stuff still adds up at the end of the business day.

If a brick-and-mortar retailer truly wants to tackle Amazonization head-on, they need to get the two roles working together at a boardroom level. Together, the CDO and the CIO can make the store experience a delight for consumers, with well-informed staff providing personalized services and flexible delivery options.

Harnessing the power of both, a physical retailer can ensure they get the best out of their assets, technology and unique expertise, giving them the tools they need to beat Amazon at its own game.


 

Ian Benn is a Senior VP at Ingenico where he is responsible for sales and project delivery for some of the world’s largest retailers. Formerly COO of FIS in Europe, Middle East and Africa and previously CMO at Misys, Benn has spent his career in the join between financial services and technology. Author of “Strategic Outsourcing: Exploiting the Skills of Third Parties” (Hodder and Staughton) and, most recently, “Write to Win” (Bite-sized Books), Benn is also an advisory board member at The Pennies Foundation (www.pennies.org.uk) and Fintech start-up, Obsidian Solutions (www.obsidiansuite.com).”

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