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How Retailers Can Best Compete With Amazon

February 11, 2013 By James A. Tompkins
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Jeff Bezos, CEO of Amazon.com, would probably take offense to the title of this article. Why? Because as Bezos says, "Do not be competitor focused; be customer focused."

He's right. It's more important for retailers to focus on making their own customers happy. You don't simply compete with Amazon by competing with Amazon, but rather by providing your customers with compelling reasons why they should shop with you instead of Amazon. (See more in my Amazon Effect video.)

So why should consumers shop with you? The specific answers will differ for each retailer since each defines its own unique retail strategy, technology solutions and supply chain capabilities. The overall concepts of strategy, technology and supply chain will be the same for all retailers, however.

Now, the key question essentially becomes the following: How can retailers compete with Amazon by defining their unique positioning on these three concepts and present a compelling reason for consumers to shop with them?

1. Strategy: This is about the right operations strategy. Each retailer needs to uniquely define how it's going to compete with Amazon for their customers’ attention by addressing what I like to call the four pillars of retail success:

  • great prices;
  • awesome selection;
  • best-in-class convenience; and
  • personalized experiences.

Each brand must define a compelling strategy in which consumers will select them over Amazon based on offering better prices, selection, convenience and/or experience.

2. Technology: This involves enabling your operations strategy to work effectively and efficiently. Traditional ERP-type technologies drive operations from store sales and/or sourced products. This isn't only inadequate, it's inefficient.

No retailer is satisfied with its sales forecasting, merchandise planning and allocation methods. Consequently, excessive inventory expenses and working capital — along with high store out-of-stocks and fulfillment lead times — are limiting margins and upsetting consumers. 

Furthermore, the ability to have all channels operating at optimum performance levels is absent. So the key to competing with Amazon from a technology perspective has two categories:

  • Customer-facing technology: Put technology in place based on customers’ shopping histories so that their needs can be easily anticipated and you can exceed their personalized expectations and desires.
  • Supply chain-facing technology: The supply chain of today and tomorrow isn't push, but pull. To succeed, technology driving the supply chain must be new demand-driven operations strategies that allow for the flow of goods through the entire supply chain based upon the heartbeat of the customer.

3. Supply chains: Think multichannel operations excellence. Traditional distribution  networks are inadequate for multichannel operations. Store replenishments from distribution centers (DCs) should be upgraded to accommodate DC-bypass, store-ready products, cross-docks, etc., to assure speed of product availability. 

 

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