It’s been a busy 8 weeks since our book was launched…
I often get asked what the book covers, what’s our hook, and, without fail, ‘is it available on Amazon’?
So I’ve decided to round up some of the interviews, podcasts and general discussions that Miya and I have had over the past two months, including today’s interview on tech TV channel Disruptive Live.
Hope it gives you a flavor of the book. And, yes, it is available on Amazon. đ
Whenever
I give talks on the store of the future, I always sum up with this line: the
store wonât just be a place to transact but also to eat, play, work, discover,
learn and borrow.
Thereâs
usually a lot of nodding heads until I mention the b-word. Fair enough â shops
naturally want to sell, rather than lend, to their customers.
In fact,
our very economy depends on it.
Over half
a century ago, American economist Victor Lebow noted how the economy âdemands
that we make consumption our way of life, that we convert the buying and use of
goods into rituals, that we seek our spiritual satisfactions, our ego
satisfactions, in consumption⌠we need things consumed, burned up, worn out,
replaced and discarded at an ever-increasing pace.â
That was
in 1955.
The times
are finally changing. We are entering an age where access will trump ownership.
This is due to the combination of a growing population, unprecedented
connectivity and shifts in consumer values and priorities.
We are no
longer defined by our material possessions. Instead, weâre opting to spend less
on stuff and more on experiences.
Last
year, according to a Barclaycard UK survey, expenditure on entertainment and
travel generated the highest growth (9% and 7% respectively), while spending in
most discretionary retail categories was either flat or in decline.
Millennials
and younger generations are increasingly â though not necessarily willingly â
forgoing ownership of homes, cars, bikes, music, books, DVDs, clothes and even
pets. Meanwhile, the World Economic Forum predicts that by 2030, products will
become services and the notion of shopping will become a âdistant memoryâ.
The trend
is compounded by a growing awareness of sustainability and, therefore, more
mindful consumption. The concept of a circular economy is gaining momentum and
itâs going to hit retail hard.
Service, share and rent
Ikea made
waves with its recent announcement of a trial furniture rental scheme in
Switzerland. This might sound like a radical departure for the flatpack king,
but letâs not forget that Ikea was one of the first retailers to address
the rather thorny topic of âpeak stuffâ a few years back.
It has
since set the ambitious goal of using only renewable and recycled materials in
its products by 2030. In some markets, Ikea already buys back used
furniture so the rental scheme is a natural extension.
When Boots boss
Seb James was running Dixons Carphone, he acknowledged that shoppers
were only âgrazing on ownershipâ and expressed an interest in a similar type of
subscription model for durable goods.
And you
can see whatâs in it for the retailer. Aside from the obvious eco brownie points,
rental schemes allow retailers to get closer to customers by offering
additional services such as assembly and repairs. This idea of âretail as a
serviceâ is exactly why Ikea acquired Taskrabbit last year.
In
todayâs market, you have to transcend the transaction and develop a deeper
emotional connection with your customers.
The
category most familiar with rental retail is fashion. Luxury retailers have
spearheaded the trend, with Rent the Runway describing itself as the worldâs
largest dry cleaner. But can it go mainstream?
Property
giant Westfield thinks so. Its vision for the shopping centre of the future,
dubbed Destination 2028, reflects the rise in the sharing economy with space
dedicated to renting everything from clothes to exercise gear.
Rental
retail makes sense, first and foremost, for those categories where the product
itself can be delivered digitally â music, video, etc. And there is clearly
demand for rental fashion among younger consumers which could solve the
industryâs latest dilemma: âwardrobingâ (the ugly, unintended consequence of
free delivery and returns).
But for
those products that donât become services, retailers should be seeking to
extend their lifecycle. The days of throwaway fashion are numbered, and high
street retailers are already taking steps to address our culture of waste.
H&M,
for example, runs âTake Careâ workshops in some stores to educate shoppers on
how to get more life out of their wardrobe.
Whether itâs teaching customers how to remove a stain or leasing them an entire kitchen, retailers need to start thinking of new, innovative ways to serve a more conscious, no-strings-attached consumer.
A version of this article originally appeared on Retail Week.
What a fantastic couple of days at The Retail Summit in Dubai. I had the pleasure of moderating two sessions on e-commerce and ânew retailâ and interviewing a number of retail CEOs over the course of the event (to be shared in the near future!)
Here are my 5 key takeaways:
What apocalypse?
Itâs funny how once you step outside the UK or US, words like apocalypse stop cropping up. There was a genuine sense of excitement among international retailers, many of which are in the advantageous position of not being in an overstored market to begin with. Store revitalization is easier when you have a clean slate.
Store reinvention – bring it on.
Itâs clear that, even for retailers in mature markets that are contending with an oversupply of retail space, store reinvention is not optional. But all of the retailers I spoke to were optimistic – some even oozing with enthusiasm – about the future of retail, acknowledging that there will be losers along the way, but the ones that survive this transition will be better retailers as a result.
Chieh Huang, Founder of Boxed, and Bouchra Ezzahraoui, co-founder of AUrate, tell me how they’re disrupting the status quo.
Amazonâs existence is making for better retailers.
I always like to throw the A-word into the mix. Everyone I spoke to was quick to acknowledge that thereâs no such thing as being âAmazon-proofâ, but equally that Amazon isnât the be all and end all of retail. Many CEOs were keen to point to the fact that Amazon canât do curation, community, experience, discovery, personalization – all the things Miya Knights and I highlight in our book. This also means an end to âbeing all things to all peopleâ and that weâll see more specialist, disruptive retailers popping up, catering to specific customer needs and styles.
Equally, Chieh Huang, founder of Boxed, told me how the Amazon/Whole Foods deal was actually beneficial in that it stimulated demand for online grocery in the US (although in the process it also created stronger competition as legacy retailers upped their game). Huangâs point echoes past comments from CEOs of Ocado and Instacart, the latter even referring to Amazon/Whole Foods as a âblessing in disguiseâ.
Letâs rethink the terminology.
Bouchra Ezzahraoui, co-founder of AUrate, a direct-to-consumer
fine jewelry brand (the âStitch Fix for jewelryâ) told me that she doesnât have
employees, she has brand ambassadors. And I couldnât agree more. As shopper expectations
exponentially increase, retailers have to work harder than ever before to keep
them happy. What was once considered a luxury or VIP service is now becoming
the norm – everything from personal shopping to in-home delivery is becoming
democratized. Therefore, customer service and experience should be prioritized
and youâll only get that with an empowered workforce. Iâd argue that âemployeeâ
isnât the only word that should be reconsidered. What is a retailer? A store? The
boundaries are blurring as retail space becomes less about retail, but more on
that another day.
Joel Palix of Feelunique, Ghizlan Guenez of The Modist and Beth Horn of Facebook give their views on the future of retail
E-commerce retailers also need to become experiential.
Building trust and engaging with shoppers is always more challenging in a digital environment, particularly for smaller retailers. The co-founder of Made, Julien Callede, acknowledged that sometimes the best way to build trust is by (wait for it) opening a store. As we know, many digitally native brands are now moving into the physical space to offset rising shipping/customer acquisition costs, raise brand awareness and therefore grow online sales, and, for some, because they see an opportunity to disrupt the store experience. But for those retailers looking to stay purely online, thereâs still an opportunity to help shoppers discover new items through product sampling, something Joel Palix has initiated at Feelunique, or through the use of influencers, as Ghizlan Guenez of The Modist has done (and in doing so, has helped modest fashion to break through to the mainstream).
For more insights from The Retail Summit, click here.
The phrase âthe Amazon effectâ brings to mind images of boarded-up shops and retail bankruptcies.
We think of the 2,700 stores that shut or the 80,000 retail jobs that disappeared in the UK in the first half of 2018 alone. E-commerce, and Amazon in particular, is often positioned as the death knell for the high street.
I donât buy into the âretail apocalypseâ narrative, but it must be acknowledged that this is a period of unprecedented change and naturally as spending shifts online, fewer stores are needed.
This isnât rocket science, it is just about following the customer. Over the past five years, online sales of non-food products in the UK have doubled. Now, nearly 20% of all retail sales take place online. Today, people are ubiquitously connected. They live online. They have access to billions of products right at their fingertips that turn up on doorsteps, often free of charge, the very next day.
Online shopping has become utterly effortless, and that has shaken bricks-and-mortar retail to its core. 2018 was the year that retail chief executives finally pulled their heads out of the sand and acknowledged that there is an oversupply of retail space and there is retail space that is no longer fit for purpose.
Blaming Amazon
Amazon is an easy scapegoat. After all, itâs thought that around a third of UK e-commerce sales go through Amazonâs platform (in the US, itâs closer to the 50% mark).
And, after years of chipping away at the high street, Amazon is now among the top five retailers in the UK. Not many retailers can match âthe everything storeâ on range, convenience and, perhaps to a lesser extent, price. Not many retailers have 100 million customers around the globe willing to fork out roughly $100 annually just for the privilege of shopping with them. Not many have embedded themselves into the shopperâs life â and physical home â in the way that Amazon has; a testament to the strength of its ecosystem.
But it is also true that not many retailers have deep pockets like Amazon â it spends more on R&D than any other American company. It is able to constantly throw ideas against the wall because it has been afforded the luxury of long-term thinking â and not paying a whole lot of tax hasnât hurt. Business rates account for less than 1% of its sales (for comparison, Debenhams’ bill as a percentage of sales is almost 4 times that amount). The playing field has been tilted in Amazonâs favour since day one and I believe retailers are right to call for legislation to be rewritten for the digital age.
High street woes go beyond Amazon
But the industryâs problems run deeper than Amazon. Retailers continue to grapple with the dangerous combination of rising costs and soft demand which has created considerable pressure and particularly exposed some of the weaker retailers with underlying issues, such as Toys R Us.
Real disposable income growth has been weak for a good decade and now the big unknown that is Brexit is added to the mix. In a similar vein to the weather, Brexit may be a convenient excuse for retailers reporting weak results, but itâs clear that shoppers will rein in spending during times of political and economic uncertainty.
What else is behind the high streetâs woes? Although âthe Amazon effectâ is often cited, what about âthe Aldi effectâ or âthe Primark effectâ? There are a handful of very agile bricks-and-mortar disruptors that are weeding out the complacent incumbents.
We are at the beginning of quite a fundamental shift in consumer values, as shoppers prioritise spending on experiences over simply acquiring more material goods. Are we perhaps nearing âpeak stuffâ?
In any case, itâs clear we are at the intersection of major technological, economic and societal changes that are profoundly reshaping the retail sector.
So itâs not all Amazonâs fault. In fact, in many ways Amazon has been a force for good. It has stamped out complacency and made everyone raise their game, all to the benefit of the customer.
What would retail look like if Amazon didnât exist? In a nutshell, consumers would be more tolerant of mediocre service.
Amazonâs technology roots and passion for invention are what sets it distantly apart from rivals. Many of Amazonâs past innovations can, in fact, be easily forgotten because they have simply become todayâs normal. Think back to the late 1990s: online shopping used to be quite a laborious process. Amazon cut the friction out by launching one-click shopping, personalised product recommendations and user-generated ratings and reviews.
Delivery, meanwhile, wasnât always fast and free. Prime significantly raised customer expectations, leaving competitors with little choice but to invest in their own fulfilment capabilities. Amazon went on to tackle one of the biggest barriers to online shopping â missed deliveries â with the 2011 launch of Amazon Lockers. Today, virtually every major Western retailer offers click-and-collect (though Argos was perhaps unknowingly ahead of its time).
Most of Amazonâs innovations catch competitors on the back foot, leaving them in the undesirable position of reacting to rather than leading change. So what is âthe Amazon effectâ, really?
Itâs Tesco rolling out same-day delivery nationwide.
Itâs M&S trialling scan-and-go technology, allowing shoppers to skip checkout queues ahead of an impending Amazon Go launch in London.
Itâs Waitrose delivering groceries directly into your fridge.
Itâs Asos allowing shoppers to âtry before they buyâ.
Itâs Zara shoppers collecting their online orders through automated pick-up points in-store.
And this is a global battle. âThe Amazon effectâ is Ocado finally securing a string of international deals, as the Amazon-Whole Foods acquisition accelerates demand for online grocery shopping.
Itâs Carrefour partnering with Google to launch Lea â its answer to Amazonâs Alexa voice assistant. In the US, Walmart offers customers a far superior experience today thanks to Amazon breathing down its neck. The retailer has even had a name change: after nearly half a century as Wal-Mart Stores, in 2018 the worldâs largest retailer dropped Stores from its legal name to reflect the new digital era.
Amazon has impacted all aspects of retail, and now everyone is scrambling to either keep up with or distance themselves from the online behemoth. The link may be slightly more tenuous but it could even be argued that âthe Amazon effectâ is Debenhams adding gyms and beauty bars to its stores. Itâs John Lewis sending staff to theatre training and democratising personal shopping. Itâs Next putting hair salons and Prosecco bars in its shops.
The opportunity
High street retailers are recognising that for all its perks, shopping on Amazon is still quite a functional, transactional experience. It has taken the touch and feel out of shopping and there is a massive opportunity for retailers to distance themselves from Amazonâs utilitarian image.
There is an opportunity to inject some personality and soul back into their stores, providing an immersive, memorable experience that simply canât be replicated online. Itâs about WACD: What Amazon Canât Do.
This is why in the future, stores wonât just be a place to buy but also a place to eat, play, work, discover, learn and even borrow stuff. Retail space will be less about retail.
In summary, Amazon is almost singlehandedly redefining retail, at least in the Western world. Yes, there have been casualties and the industry should brace itself for more short-term pain as it reconfigures itself for the digital age.
But this is retail Darwinism, itâs survival of the fittest. Itâs evolve or die. Amazonâs existence has weeded out those underperforming retailers who canât deliver on the basic principles of being relevant to their customers or standing out from rivals. But those left standing will be stronger for having reinvented themselves in the age of Amazon.
Click here to display content from play.vidyard.com
It was a pleasure to work with Dropbox on this future of retail campaign. There’s a lot of doom and gloom out there, but I believe the future is bright for those retailers willing to reconfigure for the digital age. In the future, retail will be more blended in that we’ll see an acceleration of the convergence of physical and digital worlds, but also in the sense that retail space will be less about retail. We’ll see a greater blurring of the lines between retail, hospitality and leisure.
Tonight, I had the pleasure of attending the launch of Amazon UKâs latest bricks & mortar experiment â ‘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 â 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 buyerâs 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 âduped by dodgy dealsâ since last year nearly 9 out of 10 Black Friday âbargainsâ were cheaper at other times in the year. Iâd 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 – itâs 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.
Amazonâs ‘The Home of Black Friday’ pop-up
As with most of Amazonâs 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 youâre interested in why Amazon is pushing so heavily into bricks & mortar retailing, thereâs 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.
British supermarkets donât have a great track record when it comes to running discount chains in parallel with their mainstream stores. But thatâs not stopping Tesco from launching Jackâs â its final answer to the persistent threat posed by Aldi and Lidl.
Why now?
Aldi and Lidl have been trading in the UK since the nineties so why now? Well, shopping habits have evolved dramatically over the past decade. The 2008 financial crisis forced many consumers to re-evaluate their household budgets. Frugality went from being shamed to celebrated, and the notion of âsmart shoppingâ took off. What many didnât realize at the time was that this would be structural, not cyclical, change. Some industry observers thought the discounters were simply enjoying their time in the sun, but the discounters recognized an opportunity to meet shoppers halfway, deviating from their lean operating model by broadening their ranges, investing in quality and the instore experience, and moving into better locations. As a result, Aldi and Lidl have become more credible, well-rounded competitors.
The launch of Jackâs is an admission that the likes of Aldi and Lidl have fundamentally changed the way we shop and thereâs no sign of them abating. Tesco couldnât pay the discounters a higher compliment.
Over the years, Tesco has attempted to stem the discountersâ growth through endless price cuts. Theyâve reduced the number of promotions in a bid for more honest, consistent pricing, taking a leaf from the discountersâ book. Theyâve launched their own discount brands and even created dedicated pound zones instore. The reality is that none of this has stopped shoppers from defecting to the budget supermarkets. Aldi and Lidlâs combined market share has grown by 80% over the past five years. Tesco has exhausted all their tactics – launching Jackâs is very much a last resort.
Will it work?
Letâs be clear â the odds are against them. But Iâd argue that itâs better than standing still. Tesco needs 3 things to make this work:
Scale â you canât run a successful discount chain with a handful of stores. If this is going to work, Jackâs will need to go big quickly.
Discount differentiation â ahead of launch, the biggest question for me was âWhat can Jackâs do that Aldi and Lidl canâtâ? If Tesco wants to be a discounter, then they need to start acting like one. The model is based on simplicity and ruthless efficiency. So, Tesco must ensure that they distinguish themselves from the very well-established competition *but* without adding cost into the business model. Tesco has always had muscle but theyâve further strengthened their buying power recently, having acquired Booker and teamed up with Carrefour for joint purchasing. Tesco will differentiate by undercutting Aldi and Lidl on price. It really is as simple as that.
Distinct offer â some self-cannibalisation is inevitable, so itâs vital that Jackâs distances itself as much as possible from Tescoâs mainstream stores. To do this, and of course to keep costs down, Tesco’s own brands will feature heavily and all the traditional components of a full-service supermarket (loyalty scheme, online offering, counter service, etc) will be stripped back.Â
So, whatâs next? At best, Tesco will have won back some of its more price-conscious shoppers. At worst, Jackâs becomes another costly distraction. Either way, Aldi and Lidl arenât going anywhere. This is about co-existing with the discounters, not stamping them out.
For more, check out my interviews on the Today programme (15 min in) or BBC Breakfast below:
Click here to display content from YouTube. Learn more in YouTubeâs privacy policy.
This week Iâve taken part in the Retail Week Tech Race. Using only chip and pin, I had to spend as little as possible on: a home assistant, Asos branded clothing, 500 penny sweets, original Nintendo Game Boy, personalised item, ÂŁ5 scratch card and a build your own robot arm.
The aim of the race was to demonstrate the importance of payments as a frictionless part of the customer experience.
Team Contactless – Andrew Busby, Founder & CEO, Retail Reflections
Team Crypto – Peter McCormack, Cryptocurrency Trader, Miner, Blogger and Advisor, What Bitcoin Did
Team Mobile â Rachel Arthur, Chief Intelligence Officer at The Current Daily
Team Chip and Pin: Key takeaways
1) Shopping habits have evolved, payments not so much.
My initial reaction to being assigned chip and pin? NO. ONLINE. SHOPPING.
That alone was going to be a challenge for me. And thatâs not because I donât shop in stores, but when faced with a long list of disparate items â some of which are near impossible to find in a bricks & mortar shop â my first instinct is to get online.
Having to physically trek around individual stores (in 32 degree heat no less) in the hope of some very specific items being in stock was a stark reminder of just how spoiled for choice we are today. We have access to millions of products right at our fingertips – and they turn up on our doorsteps the same or next day!
Even if I attempted to use click & collect, I would have had to pay for the item online which ruled out using chip and pin. Argos was an exception here, so reserve and collect (ie. pay at the store) came in handy. I even resorted to calling a few stores to see if items were in stock â very 2003!
2) With low-value items, cash is still king.
Bearing in mind that the goal was not only to source all items on the list but to do it as cheaply as possible, I ran into some issues when trying to purchase low-value items like the ÂŁ5 scratch card and personalised item. Retailers would charge an additional (50p) fee or simply wouldnât accept card payment. It was a reminder that, in some instances, cash is still king.
3) Less choice on the high street further limited my options with chip and pin.
This yearâs high-profile collapses of Maplin and Toys R Us made it more difficult to source some of the more peculiar items on the list â ie. build your own robot arm. The superstores I visited also, unsurprisingly, had a much-reduced electronics section as this category has largely shifted online.
In the end, I managed to purchase 5 out of 7 items on the list using chip and pin – all but the Asos-branded item of clothing and original Nintendo Game Boy. It was only at the very end that I had a lightbulb moment – I could have saved myself a ton of time and energy by using Amazon Top Up!
Main takeaway of the race? Consumers demand to be able to shop on their own terms and they expect that experience to be completely and utterly seamless. But when it comes to payments, thereâs still a whole lot of friction.
You can hear all about the #RWTechRace in our session at the Retail Week Tech conference, 12-13 September, and for video updates of the race check out the NBK Retail YouTube channel.
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 – havenât changed. However, the future will be a more blended retail experience. âThereâs still no substitute for touching, feeling, seeing the product. Weâll see more merging in the future,â 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 yearâs 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. Itâs worth pointing out here that Amazon just quietly added new FMCG lines to its US site â 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 âbalancing the discoverability and fun of fashion with the practical excellence that Amazon deliversâ. For all its perks, Amazon is still a utilitarian shopping experience. Sure, they can shift a ton of socks and underwear (theyâre 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 theyâve just begun integrating video on their UK site (piloted with the Truth & Fable range).Â
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 Amazonâs platform – they can no longer ignore Amazonâs 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). Theyâve 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 Amazonâs plan to disrupt fashion so Iâd be very surprised if these werenât 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 âall-you-can-eat express shippingâ. Today, it was referred to as the âgateway to the best of Amazonâ. Lisa Leung, Director of Amazon Prime, said that there are now millions of UK Prime members and that the major difference with this yearâs Prime Day (details of which I wonât go into here) is that Amazon âwanted to make the benefits come aliveâ. As such, theyâll 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 womenâs 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? âTime is becoming a more important commodity for everyone.â I couldnât agree more. Â
Too early for a book plug? My and Miya Knights’ book on Amazon is now available for pre-order here.
One of the fundamental reasons for Amazonâs 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. Amazonâs USP is disruption and they continue to finetune it. Every action is guided by a vision that hasnât changed since Amazonâs inception.
Most publicly traded retailers arenât 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, itâs differentiate or die. Being âall things to all peopleâ 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 Tescoâs product range beyond the confines of their superstores. But if there is one rule in retail today, itâs 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. Tescoâs 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. Letâs 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 â from silicone wine glasses to cat scratch turntables â 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 wonât help Tesco to retain its title as the countryâs largest food retailer. Thereâs 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 wonât be the last of Dave Lewisâ and Charles Wilsonâs strategic cull as they continue to tighten Tescoâs focus on food by offloading non-core assets. There is, after all, only room for one everything store.
I donât buy into the âretail apocalypseâ narrative, but it must be acknowledged that this is a period of unprecedented change and naturally as spending shifts online, fewer stores are needed.
This yearâs high-profile collapses of Maplin and Toys R Us made it more difficult to source some of the more peculiar items on the list â ie. build your own robot arm. The superstores I visited also, unsurprisingly, had a much-reduced electronics section as this category has largely shifted online.
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.
