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Amazon

Black Friday: Expectations & Amazon’s Pop-Up

Tonight, I had the pleasure of attending the launch of Amazon UK’s latest bricks & mortar experiment – ‘The Home of Black Friday’ pop-up in Shoreditch.

This is the second year that Amazon has opened a temporary showroom in a bid to raise awareness of the 10-day discounting bonanza that is possibly now only trumped by the retailer’s very own artificially created shopping event – Prime Day in July. But I digress.

Love it or loathe it, Black Friday has become a permanent fixture on the UK shopping calendar and we have Amazon to thank for bringing it across the Atlantic back in 2010.

Three Black Friday observations for 2018:

1) More like Black November. Black Friday is getting longer: Amazon, Argos and Debenhams are just a handful of retailers running week-plus long events. Consolidating the bulk of your Christmas trade into 24 hours tests even the most advanced supply chains. Doug Gurr, MD of Amazon UK, mentioned tonight that one of the reasons Amazon has extended Black Friday in recent years is to “take out some of the pinch points”, operationally speaking. So, although spreading the event out over a couple of weeks might dilute the sense of urgency traditionally associated with Black Friday, it should ultimately result in a more streamlined experience for both retailer and consumer and, ideally, lead to lower returns rates. Previously, many shoppers who got caught up in the one-day frenzy would end up with buyer’s remorse and by the time the returned product made its way back onto the shelf (particularly for an online order) it would have to be further discounted.

2) Promotion fatigue/consumer scepticism. Consumer group Which? is warning shoppers not to get “duped by dodgy deals” since last year nearly 9 out of 10 Black Friday ‘bargains’ were cheaper at other times in the year. I’d like to think most consumers today are savvy enough to understand that Black Friday is mainly a lot of noise, with a few genuine bargains the mix. According to PWC, half of UK consumers are not interested in the event at all this year with 11% warning they would intentionally avoid shopping altogether.

3) But peer pressure… Despite the many harmful effects of Black Friday – erodes margins, pulls spending forward, dilutes trust and credibility, etc – it’s equally risky to shun it altogether. This is the only time of the year when retailers genuinely have a captive audience. There is an appetite to spend, a reason to loosen purse strings, and not many national retailers are brave enough to miss out on the potential sales. B&Q is the only genuine exception I can think of (even Next took part last year). On paper, M&S is shunning Black Friday again this year but they have been running 20% off sales for Sparks members. Limiting the deals to loyalty cardholders is a more subtle approach, but a blanket discount can be just as effective when it comes to driving footfall.

Amazon’s ‘The Home of Black Friday’ pop-up

As with most of Amazon’s bricks & mortar experiments, The Home of Black Friday pop-up has very little to do with shifting product. In fact, it would be a stretch to call this a shop (to be fair, Amazon doesn’t). It’s a showroom designed to humanize the Amazon brand, to tempt shoppers into the retailer’s very sticky ecosystem, get them engaging with the app and ultimately driving adoption of its various devices. If you’re interested in why Amazon is pushing so heavily into bricks & mortar retailing, there’s a whole chapter dedicated to exactly this in my upcoming book which launches in just six weeks!

The Home of Black Friday is located at 3-10 Shoreditch High Street, London, E1 6PG and will be open to the public from 22-25 November.

Categories
Amazon E-commerce

Takeaways: Amazon UK Analyst Day

I had the pleasure of attending the annual Amazon UK analyst briefing this morning where we heard from senior executives across various parts of the business. The event kicked off with UK Country Manager Doug Gurr dismissing the broader doom and gloom. According to Gurr, the fundamental basics of retail – selection, price, convenience – haven’t changed. However, the future will be a more blended retail experience. “There’s still no substitute for touching, feeling, seeing the product. We’ll see more merging in the future,” he said.

There was lots to take in but here are my highlights:

Amazon is quietly ramping up its private label portfolio in the UK. The big difference at this event versus last year’s was the sheer amount of AmazonBasics signs plastered around the room. In FMCG, the retailer has brought its Mama Bear, Happy Belly and Wickedly Prime over from the US. In fashion, the well-publicized launch of Find last year has since been followed by Truth & Fable, Iris & Lilly and Meraki ranges. It’s worth pointing out here that Amazon just quietly added new FMCG lines to its US site – Solimo and Mountain Falls (the latter is exclusive rather than owned by Amazon) and I imagine these too will eventually come to the UK as Amazon builds out its global grocery offering. Why the big push into private label? It will help Amazon inch closer to sustained profitability. With its own brands, Amazon can widen margins without raising prices. It gives them greater leverage over suppliers and allows them to sweeten the deal for Prime members, as many own label items are sold exclusively to them. With the sheer amount of customer data Amazon holds, no one is better positioned to understand customer needs and then develop ranges specifically for them.

To disrupt fashion, Amazon must adapt. The big challenge in fashion, according to Head of Apparel, Nick Pope, is “balancing the discoverability and fun of fashion with the practical excellence that Amazon delivers”. For all its perks, Amazon is still a utilitarian shopping experience. Sure, they can shift a ton of socks and underwear (they’re expected to become the largest clothing retailer in the US by the end of this year) but, when it comes to customer perception, Amazon is simply not a fashion destination. Amazon is looking to change that by adding more brands to its site, ramping up private label, introducing a more visual layout, using its Shoreditch photo studio for consistency in imagery, and they’ve just begun integrating video on their UK site (piloted with the Truth & Fable range). 

Higher-margin private label clothing allows Amazon to fill gaps in merchandising while simultaneously boosting the bottom line, which will become all the more important as they move further into groceries. At the same time, more fashion brands are succumbing to Amazon’s platform – they can no longer ignore Amazon’s incredible reach and many also want greater control over pricing and presentation (if their brands are already present on Amazon’s marketplace). In addition to signing on major global brands such as Calvin Klein and Tommy Hilfiger, Amazon is working with local brands in each market (ie Coast, LK Bennett in the UK). They’ve taken a similar approach in Italy, France, etc. There was no mention of initiatives like Prime Wardrobe or the Echo Look which are both currently available in the US, but these innovations will play a major role in Amazon’s plan to disrupt fashion so I’d be very surprised if these weren’t launched in the UK within the next 12 months.

Amazon is getting more comfortable with the exclusivity of Prime. At its 2005 launch, Jeff Bezos described Prime as “all-you-can-eat express shipping”. Today, it was referred to as the “gateway to the best of Amazon”. Lisa Leung, Director of Amazon Prime, said that there are now millions of UK Prime members and that the major difference with this year’s Prime Day (details of which I won’t go into here) is that Amazon “wanted to make the benefits come alive”. As such, they’ll host an entertainment extravaganza on 15 July, the evening before Prime Day, with events ranging from a family screening of Paddington 2 to an exclusive Take That gig. Whole Foods Market stores will also get involved in Prime Day this year with special discounts and free instore massages.

Prime Now serves three shopping missions particularly well: crisis, gifting, top-up grocery. I can personally attest to all three! Jason Weston, UK Country Manager for Prime Now and AmazonFresh, said that Christmas Eve is one of the most popular days for Prime Now. He gave the example of a Manchester customer placing an order for women’s jewelry, perfume and a PlayStation console at 10pm on Christmas Eve, which was delivered by 11pm. Meanwhile, cut-off times are getting later and later in a bid to cater to the ‘for tonight’ shopping mission. Today, customers can order by lunchtime and have their delivery arrive by dinnertime. In some postcodes, this can be as late as 4pm. I was surprised to learn that Prime Now covers 30% of the UK, although this is largely limited to cities. I asked Weston if he thought same-day delivery would become the norm in UK grocery (Prime Now has been such a catalyst for change as I describe here in this BBC article). His reply? “Time is becoming a more important commodity for everyone.” I couldn’t agree more.  

Too early for a book plug? My and Miya Knights’ book on Amazon is now available for pre-order here.

 

Categories
Amazon E-commerce

Tesco can’t out-Amazon Amazon

One of the fundamental reasons for Amazon’s success is its unwavering commitment to a vision laid out two decades ago: to relentlessly innovate in a bid to create long-term value for customers. Amazon’s USP is disruption and they continue to finetune it. Every action is guided by a vision that hasn’t changed since Amazon’s inception.

Most publicly traded retailers aren’t afforded the luxury of such long-term thinking, and turnover at the top often brings a change in strategic direction. However, retailers can compete with Amazon by honing in on their own strengths and streamlining anything that does not add value to their core proposition. In this climate, it’s differentiate or die. Being ‘all things to all people’ is no longer an option.

The closure of Tesco Direct is an admission of defeat to Amazon: it was after all designed to compete with the behemoth head on by replicating their marketplace format, extending Tesco’s product range beyond the confines of their superstores. But if there is one rule in retail today, it’s this: you cannot out-Amazon Amazon.

Aside from racking up Clubcard points on big-ticket purchases, there was very little incentive for shoppers to choose Tesco Direct over Amazon. Tesco’s site in comparison was confusing and full of friction. Pricing was inconsistent, it lacked product recommendations and reviews, and the range was neither broad nor compelling enough to make it the go-to destination for general merchandise. Let’s not forget that many shoppers today begin their product search not with Google but with Amazon. Amazon has become the first port of call for even the most obscure products – from silicone wine glasses to cat scratch turntables – which when combined with Prime delivery becomes a very compelling proposition.

Tesco Direct was loss-making and contributed very little to the topline, which sparks a lesson to be learned from Amazon: admitting failure and swiftly moving on. Offering 94 types of treadmills online won’t help Tesco to retain its title as the country’s largest food retailer. There’s no time for costly distractions when Amazon is on your doorstep. Tesco will be far better off to merge grocery and non-food onto one platform, as some competitors did several years ago, and then focus on logical category extensions to mirror what shoppers would find instore.

There is a renewed sense of urgency to strengthen these core non-food categories and it actually has nothing to do with Amazon. A combined Asda-Sainsburys-Argos will create a retailing powerhouse in toys, baby, clothing and home. Tesco needs to up its game fast in these categories and leave everything else to the specialists.

The Direct business joins a growing graveyard of Tesco brands including Giraffe, Euphorium, Harris + Hoole, Nutricentre, Hudl, Blinkbox, Dobbies. What was once considered business-critical diversification is now seen as a pricey distraction. Tesco Direct won’t be the last of Dave Lewis’ and Charles Wilson’s strategic cull as they continue to tighten Tesco’s focus on food by offloading non-core assets. There is, after all, only room for one everything store.

Article originally featured in The Grocer

Categories
Amazon E-commerce Fulfilment Retail trends Store closures Store of the future

INFOGRAPHIC: 2018 UK Retail Predictions

NBK Retail launches today with an infographic charting the forces impacting retail in 2018.

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Amazon E-commerce Retail trends Store of the future

Day one

After 15 years at two of the world’s leading retail analyst firms, I’m beyond excited to transfer those skills over to my new venture: NBK Retail.

I have always been captivated by retail and the way we shop. I have fond memories interning at a Connecticut shopping mall, where my career in retail started out by counting cars in the parking lot and, on Black Friday, making sure the store managers had access to endless donuts and caffeine ahead of the 6am craze.

Even in the quietest of times, retail is a fascinating sector. It is always evolving, becoming more convenient, more connected, more customer-dictated. But today, the scale and pace of change facing the sector is unprecedented.

A decade ago, Amazon was the 47th largest retailer in the world. Today, they’re number 3 – and could very well become the world’s first trillion dollar company.

A decade ago, online retail was the holy grail. Today, pure-play e-commerce is dead. As technology breaks down the barriers between physical and digital retail, having a bricks & mortar presence becomes vital for both brand engagement and ultimately driving online sales.

A decade ago, multi-day lead times were acceptable. Today, Amazon wants same-day delivery to become the norm.

A decade ago, we put the success of the discounters down to temporary effects of the recession. Aldi and Lidl’s share of the UK market has more than doubled in that time.

A decade ago, click & collect was just something Argos did. Today, virtually every high street retailer offers click & collect, as it enables shoppers to marry the benefits of online shopping – assortment and price – with the convenience of collecting instore.

A decade ago, the purpose of the bricks & mortar store was predominantly transactional. Today, the store is being reconfigured as a hub for both experiences and fulfilment. It must become a place not only to buy but also discover, play, eat, work, and collect.

A decade ago, the thought of food in our cupboards being automatically restocked sounded like science fiction. Today, frictionless commerce is becoming a reality thanks to the rise of voice technology, simplified and auto-replenishment capabilities.

And the list goes on.

I’m looking forward to sharing my views on both UK and global retail via this blog. In the meantime, if you’re attending the Summit E-Commerce Scorecard event this morning, I’ll be there taking part in a panel debate. Please come say hello!