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Will the future of retail be place, purple fairy dust or prime?

The battle for core customers is heating up on many fronts

September 25, 2015 by Chris Petersen — Owner, IMS

Let’s say you are planning a dinner party and want to use the best fresh produce, and you don’t have time to drive all the way to the farmer’s market.  What if you could just go online and order everything fresh from your local farmer, delivered to your front door?  Or, what if you’re like me, don’t want to cook, but want to just enjoy a gourmet meal around your table with friends.  Why not order from favorite restaurant and have it delivered in an hour?  If this is all too expensive, then you could just order the ingredients from the new low price guys that beat Amazon prices.  It might sound like sci-fi, but all of these options are available in a major US city today.  It’s a great time to be a consumer!  Tough time to be a retailer!

Why this is important: The only sure prediction about the future of retail is unprecedented change. Even if you are on the right track, it’s easy to get run over.  And, consumers are the ones driving the locomotive of change called “choice."

The retail ecosystem continues to explode in many ways

Until about 30 years ago, retail was a fairly stable environment. Retail innovation primarily consisted of evolving store formats. Circuit City was a prime example of the "retail specialist" focused on specific categories of products. The Age of the Big Box retailer grew with Walmart and is still with us today. Although, Walmart is rapidly reinventing itself in much smaller formats, such as Marketside and even convenience stores.

Today's current retail revolution is rapidly expanding the ecosystem beyond the point of sale that has been the store. The ecosystem is exploding in the new virtual space where retailers are rapidly evolving to capture your virtual wallet with unprecedented consumer choice.

The battle for place continues - Best Buy stores in Macy's?

Macy's is a retailer with a rich bricks and mortar heritage. Macy's evolved as a classic US Department store that thrived when stores were the "destination location" for purchasing everything from apparel, cosmetics and furniture. Despite Macy's efforts to expand with opening "off price" stores and online shopping alternatives, Amazon is poised to overtake Macy's as the #1 US retailer in apparel. To continue to thrive, Macy's must reinvent its retail space physically and online.

A major problem for Macy's 770 stores – declining store traffic!

Reuters reports that Best Buy will open 300 square foot mobile oriented product stores within Macy's. Given that Best Buy has embraced Apple, Samsung and other stores within their stores, this kind of venture perhaps makes sense for them. Will Best Buy's stores within Macy's generate the kind of traffic that Macy's needs to survive and blunt the impact of the virtual online giants of Amazon?

Stay tuned, we'll quickly find out if the Best Buy in Macy's stores survive the holidays.

The "Purple Fairy Dust" – The biggest thing in shopping?

"Purple Fairy Dust" is my term for the ecommerce retailer Jet. If you've seen their latest TV ad, you will quickly identify the Purple Dust theme. It's a very clever ad that grabs your attention. Not so sure that the Purple Dust communicates much about Jet or its core value proposition. 

The "Purple Fairy Dust Guy" is Marc Lore, a founder of Quidsi. Quidsi was sold to Amazon for $545 million, and now Lore is back launching Jet.com with claims that they will "reinvent shopping". Perhaps, the ultimate irony is the use of a traditional TV ad to launch an ecommerce site, which essentially promises to beat Amazon and Walmart on price.

Lowest price has always been a weapon in the retail wars. Walmart used it as a primary way to squash local competition. Now, Walmart has numerous local "Dollar" stores competing on lower prices. Jet is attracting major investors and planning to spend $100 million on marketing its primary value prop of promising lower prices than Amazon. How low can retailers go to offer you the consumer a choice on "best price"?

Stay tuned, it will be relatively simple to track Jet's web traffic ecommerce sales success.

All kinds of new consumer choices – if you are primed?

So many things have been written about Bezos and Amazon's innovation. The drone delivery was definitely a headline grabber! Even if it doesn't materialize, drones are an iconic symbol of how Amazon continues to innovate ways to offer consumer choice and services, especially in the critical "last mile" of delivery.

In the opening paragraph, I related consumer shopping scenarios that are all possible today in a major city via Amazon. Let's recap some of the recent innovations in services and delivery:

• Amazon's Farmer's Market Direct program delivers quality locally grown, fresh produce to your door in Los Angeles, Orange and San Diego counties
• Amazon is rolling out a one-hour restaurant delivery service in Seattle
• Amazon's one hour package delivery service will continue to expand from NYC
• Amazon Fresh continues to expand delivery of groceries in major markets
• Amazon has filed a patent on customer pickup boxes that can be mounted in buses
• Amazon is now using the US Postal Service for special Sunday deliveries

Amazon is certainly not unique or the only ones focused on an array of delivery services. Google is also piloting home delivery of groceries and perishables in select markets. But, make no mistake about it, the prevailing theme that ties all of Amazon's strategies together is Prime! You have to be an Amazon Prime member to participate, get premium service, or high speed choices of delivery.

Stay tuned, but there are already 44 million Amazon Prime members, and they account for a major portion of Amazon's profits, and ability to leverage logistical costs to lower levels.

Who will win the retail wars … You decide!

The future of retail is unfolding right now. Consumers have literally become the new "POS" (Point of Sale) of retail. We decide when to shop, where to shop, how we'll pay, and whether to take delivery. And, that decision is highly situational depending on the purchase and the situation that day.

Future retailer survival will depend not upon size, stores, or even online expansion. You will vote with your purchases based upon who provides the best personalized experience before, during and after the "sale". You will literally decide who thrives and who dies.

It is a great time to be a consumer with unprecedented choices of where and how to shop. It is a very tough time to be a retailer competing in a rapidly expanding ecosystem where there are no limits or boundaries to the competition.

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