Facing THE Amazon

How the retailing business model has changed:  “Losing,” more than ever, is winning more than ever. 

Target sent a letter to suppliers asking for their help in combating the intense competition barcode scanning search help smartphones have given consumers for price comparison shopping – to the effect that stores like Target are becoming showrooms for e-tailers like Amazon.com

More important, the growing competition from Amazon is based on a different business model entirely: Amazon can sell products so cheaply because it uses its other profitable units—such as cloud data storage and fees it charges others to sell on its website — to subsidize the rest of its business.

"The traditional retailers are still doing business the old way while Amazon has reinvented the model," says Sucharita Mulpuru, retail analyst at Forrester Research. "Wal-Mart and Target are willing to sell a few things at a loss. Amazon's whole business is a loss leader."

What’s one lesson here?

Striving to protect your business against an onslaught of legal and ethical innovations that initiate market-changing trends has the potential to put your business to death.  Defense can only be a good offense if it plays as an offense.  You can be sure that cutting yourself off from the market by limiting consumers’ ability to interact with your products on their terms is a failing concept.  What’s important is giving consumers the freedom they want and using that freedom to elevate your products/services’ standing in their eyes.  Thus, if they want to do price comparisons while in your store, make it easier for them to do it. At the very least, don’t make them do it secretly.  Perhaps, you might put up signage that encourages them to do it and let them know if they find something cheaper (having figured in shipping and tax costs – if any) that you will match it.  I know that a brick and mortar store that had that kind of service available would definitely receive my business when making big-ticket purchases (assuming they have the products I want) because of beating out 1-day shipping costs – that would be HUGE.  And, it’s no marketing secret that price comparison and advertising are not true ways of competing.  They are ways of keeping prices higher.  They let your competitors know your price so that they don’t depress the market by pricing much lower, or so that you can keep your price high on one product and depress price on another product so that you and your competitor share profits rather than minimize them (when either of your inventories run out during the course of the advertised price, the consumers have to shop elsewhere – where the prices are higher along with the profit margins – and so multiple competitors are better off than having had competed on multiple products).  What Target is doing with unique brands is a great example of harnessing the trend to its benefit.  It cannot beat Amazon on standard products’ pricing, but they can with private-label branded products that have no comparison because they are made exclusively for Target.

Another example related to quality business practices:

I’ve been in contact with a clothier’s salesman and master fitter for nearly two months now.  It’s been a trying experience.  Everything has been solved on the product end at this point, but, unfortunately, per his style of salesmanship, he repeatedly spoke negatively about other men’s clothiers over the few times we met.  I would much rather have had him promote the quality of his own product.  I left thinking, “I’m glad I have this suit and am done with this place.” I felt beat down through the experience rather than encouraged.  I will probably not return for future purchases, fitting, or tailoring.  I won on price/quality of the product and ancillary service, but I lost of customer service per relationship [maybe the most significant component to clothing sales].  Thus, they won on price/quality of the product and ancillary services; but, because they lost on customer service, they’ve lost a future customer.