The Changing Face of Retail: Amazon is coming for your business - Nov 2017

By Jim Dion

It is impossible to read a paper or watch the news these days without encountering Amazon. As a specialty flooring retailer you might feel that the mega-retailer, which started in book sales, has little impact on your business because flooring sales are more complex and expertise-based than Amazon could provide. But make no mistake, Amazon is out to take your customers from you! This is not meant to scare you, it is meant to terrify you.

Remember when Wal-Mart was growing from 1985 to 2005? The firm managed to put well over 40,000 brick and mortar retailers out of business. The flooring industry was not affected by this growth. However, the other 800-pound gorilla called Home Depot-along with Lowe’s and Menards-gave quite a few flooring retailers an early retirement package, though they left most middle- and upper-market flooring stores pretty much intact. They just made the opening price points not worth carrying.

Amazon currently has less retail sales volume than Wal-Mart. As a matter of fact, it has far less than 25% of Wal-Mart’s sales. Yet its valuation is almost double that of Wal-Mart. This seems kind of crazy, until you understand that over forty cents of every dollar spent on online sales today is spent with Amazon. That is an amazing share of business for such a young company. And Amazon has to continue to “feed the beast” to keep its high valuation. This means expansion into other categories that for years were difficult for Internet companies to penetrate.

Large purchases, such as home appliances, flooring, plumbing, electrical and other home categories, have been very difficult for a consumer to purchase online, not so much because of a lack of availability but because of consumer apprehension. With such a high price, they want to be sure that the product is really what they want before buying-hence, the trip to the store to see and touch the product. This gives them a feeling of making the right decision. When a customer wants to re-do their bathroom, many retailers send someone out to measure and make sure that the right amount of tile has been ordered, that the tub and new washbasin will fit, and coordinate with the general contractor (GC) to make it all happen.

AMAZON AS GENERAL CONTRACTOR
Imagine being able to turn on your smartphone camera in your bathroom, swivel it around to capture the walls, floor and ceiling with a high degree of accuracy, then through augmented reality (AR) take a 3D tour of what your new bathroom could look like-complete with any tile or stone you desire and thousands of shower head, shower stall, vanity and toilet options. You will spend a few minutes answering some questions so that Alexa will know which of the millions of choices will most likely please you and your budget. Once you have finally selected all of the pieces you want, simply hit “buy” on your phone, and Amazon will manage all the details of delivering the product, arranging for an installer and foreman to be on site to make sure it all happens in the week that you want it done. And if there are any problems-with the tile, stone, fixtures and installation-they will be solved instantly by a backup team. Everything will be fixed by Amazon-guaranteed. And on top of that, the price will likely be about 20% lower than if you went to your local GC or designer.

By now, I am sure that you think there is no way that what was just described will happen in the next ten years. And you are right. It will not happen in the next ten years. It will happen in the next six years. What I described above will be fully operational by 2023 and most likely even a year or two sooner. Amazon is selling thousands of chandeliers, toilets, sinks, heat pumps and more today, completely installed and guaranteed. And when they deliver the new products, they take away the old ones for free!

Terrified yet?

PLANNING FOR WHAT’S COMING
What do you do? Sell your business now? Shut down in five years? Or begin right now to prepare for this new threat? It is your choice. You, like most retailers, have likely spent far too little over the past 20 years on technology for your business. That lack of investment must end today.

Know what is coming your way. Study the strengths and learn from them. Then, study the weaknesses and capitalize on those. Every industry is going to have to compete with Amazon. They are all watching each and every Amazon move and will respond as fast as they can with their own unique strategy. Remember when I told you that Wal-Mart went on expanding and decimating a few years back the same way Amazon is doing today? Well, a lot of retailers left the scene, but most survived-in fact, thrived-after the field was thinned, and they understood what needed to be done. It is going to be the same with Amazon. Oddly enough, Wal-Mart is now almost entirely focused on competing with Amazon too.

For 2018, this column will take you step-by-step through what you need to do this year, next year and for the next five years so you can effectively compete with this new world of technology and business-and capture consumers that are constantly raising the bar.

THE FIRST STEP
Your first assignment is to search AR and begin to understand what this technology is about. Yes, there are millions of articles about it. I would recommend you begin with installing a few AR apps on your iPhone or Android phone and play with them. The IKEA Place app is also a peek at the future of home shopping.

Remember, your new customers are Millennials. How much do you really know about them? Do you know that the futuristic shopping situation that I described earlier is exactly how they want to shop?
Final word: Sun Tzu, Chinese military leader and author of The Art of War, said, “Know yourself, know your enemy, and you shall win a hundred battles without loss.”

See you next time.

Print the Article