Can Brick and Mortar Stores Compete with Amazon?

Amazon has become the poster-child of the e-commerce growth story across the world. For many years, retail executives across the globe have been nervously watching Amazon capture a bigger share of the pie each year.

Doomsday scenarios are often predicted in media and by political pundits. However, the reality is that the situation is not likely to change very much in the near future.

Retail analysts estimate that about 80% of all sales are still likely to take place via brick and mortar stores till 2025.

Amazon is becoming more aggressive with its sales strategy. Amazon recently acquires Whole Foods co. which means that the company is indeed interested in having an offline presence.

Also, Amazon is launching several programs which are aimed at pulling users away from online stores. Amazon already knows that it has won the e-commerce race. It is now competing with brick and mortar stores.

However, the point is whether brick and mortar stores have the wherewithal required to put up a fight. In this article, we will have a closer look at some of the strategies which can be used by brick and mortar retailers to compete with Amazon.

In-Store Service: Retail stores cannot beat Amazon on price. Amazon has some of the most efficient supply chains in the world. This means that Amazon has the ability to consistently price its products 5% to 10% lower than the brick and mortar stores.

It is essential that the stores realise that they need to outflank Amazon and create a new battlefield. In order to do so, they need to understand consumer needs better. For instance, more than 86% of customers believe that they need better customer service. At the same time, less than 1% believe that either brick and mortar stores or Amazon are likely to provide this service in the near future.

This is where the brick and mortar stores need to capitalize. Brick and mortar stores are where consumers are physically present. Hence, it is easier to gauge their moods, needs and shopping preferences and provide them with the best possible service.

Customers are looking for good products which match their needs at a price comparable to online shopping. They wouldn’t mind paying 5% to 10% premium as long as they get better service.

Unique and Customizable Merchandise: Retail stores cannot possibly compete with Amazon as far as providing options to their customers is concerned. Amazon provides over 320 million options to its shoppers.

Also, since these products do not have to be stocked in the real world, it doesn’t cost Amazon anything to add more options. No brick and mortar store can compete with that kind of collection. However, the reality is that no brick and mortar store needs to. Very few of these products are actually relevant to any given customer. Hence adding more and more options could actually be counterproductive.

Brick and mortar stores can compete by providing products which are not provided online. A lot of times, this could mean setting up different supply chains for their stores. It could also mean creating captive brands which meet a specific customer need but cannot be found online.

Speed and Convenience: Up until now, stores used to claim that Amazon cannot compete with them since they allow customers to experience the product before buying it.

However, this may be about to change as Amazon has introduced Prime Wardrobe. As a part of this service, Amazon will ship three pieces of wardrobe to the customer, which they can try. Amazon is obviously trying to take away the in-store experience.

However, it needs to be understood that speed is a very important element in this regard. Anyone who has ever been shopping knows that three options are not enough.

People usually try 10 to 15 different outfits before they choose one. Trying 10 to 15 outfits via Amazon would take about 5 iterations and close to 15 days. This is where brick and mortar stores can capitalize. They need to advertise on the fact that they are the fastest way to try and then buy a product.

Personalized Offers: Brick and mortar stores tend to have a small customer base. However, they can use it to their advantage.

Since they have a smaller customer base, they tend to know more about their customers' likes and preferences. This means that they can provide customized shopping offers.

For instance, if a store knows that a particular person tends to shop more in a given month, they can be given offers and discounts in order to incentivize them to continue shopping with the store.

Online stores are also trying to implement this strategy using big data. However, humans feel special when other humans take care of their needs.

At the same time, humans find it creepy when machines try to record their data and spy on them. Hence, brick and mortar stores have a definite advantage over Amazon when it comes to providing personalized offers.

Community Events: Lastly, it is important that online stores make shopping a community event. Many malls have recently realized that people want to interact with others and have fun while shopping. This is why organizing events like food festivals and talent shows for children tend to increase the number of footfalls and also the dollar value of items sold.

The bottom line is that brick and mortar stores can still survive. However, they have to take very specific steps and stick to a niche.

Authorship/Referencing - About the Author(s)

The article is Written and Reviewed by Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.