Daily Dose of iQ: Retailers Must Hit Amazon Where It Hurts, in the In-Store Experience

Ben T. Smith IV and David Thomsen, executives at Wanderful Media, recently wrote a CIO Network blog post for Forbes. In it, they talk about Amazon's rise to e-commerce dominance, notably making up over 19% of all U.S. e-commerce revenue, compared to 9% in 2001.

Smith and Thomsen, however, insist that retailers can still take advantage of Amazon's hidden weak spot: a lack of local leverage. "Retailers are fighting back with what Amazon and other ecommerce companies are missing — local knowledge and connections, improved offline shopping experiences, and services that link offline and online shopping offerings."

We’ve blogged about how Amazon is setting up delivery lockers and how other online retailers are opening up actual stores. Walmart and Best Buy are using existing stores for local in-store pickup of online orders. Big companies are trying to connect their channels to serve the customer better. We've even blogged about Amazon's Achilles heel: a lack of human touch.

The consumer is still willing to spend more with companies that provide excellent customer service.

Despite all the recent advances in e-commerce and significant discounts offered by online vendors, consumers are still willing to spend 20% or more with companies that provide excellent customer service, according to a recent American Express survey (page 6).

Great customer service is often founded on face-to-face interactions –- something that is not possible through sites like Amazon.com or eBay.

Physical locations also offer two additional benefits: the ability to hold the product and, the ability to purchase the item and take it home right away.

That's why online retailers are opening boutique-esque physical stores, to offer the best of both worlds: low prices coupled with face-to-face customer service. In addition, physical locations will also act as shipping “hubs,” allowing e-commerce sites to ship products in as little as one day. Having physical stores taps into another growing market segment: the 10 million U.S. households that do not have a bank account or credit cards. Being able to purchase goods at physical locations sidesteps the need for credit cards, online money transfers, and electronic transactions.

Speaking of hubs, my colleague Alen Puaca's 5-part Designing the Next Generation of Retail Places article series examines the social, community-building, hub potential of the interactive stores of the future.

I am willing to pay a premium to purchase an item and enjoy it right away.

Personally, my love for the convenience and discounts offered by online stores is offset by my impulsive shopping tendencies. I am willing to pay a premium (i.e. forgo the 20-40% discounts offered by online retailers) to purchase an item and enjoy it right away.

The only way to expedite the traditional 5-14 days standard shipping offered by Amazon or eBay is to pay for expedited shipping. Being able to interact with a physical product lets me identify its quality. Nothing's worse than waiting two weeks for a product to arrive, only to discover it doesn’t work properly or doesn’t fit right. I am a pretty big video game addict, and the ability to demo new video games at a local GameStop is really helpful; something I can’t get through an online retailer.

Take home message: The solution is not to fight online shopping, but to merge it with a customer’s in-store experience.

Take-home message for retailers: Retailers need to realize that competing on price alone is not a long-term solution. Apple’s premium pricing, both on their online and physical locations, is a case in point. The solution is not to fight online shopping, but to merge it with a customer’s in-store experience.

Using mobile POS devices to accept payment anywhere in the store is no longer a luxury, but a necessity, ESPECIALLY for “big-box” stores. Another strategy is to ensure customers are engaged with as many SKUs as possible. This means offering the ability for virtual browsing and drop shipping directly to their door. This is omnichannel retail.

At the end of day, consumers still want to feel appreciated and acknowledged. According to Ronald Gonzales, senior director of marketing at SAP, "Retailers have always been customer-centric. But now they are trying to be customer-intimate."