Analyst Corner

Is Amazon the Walmart of 1990?

According to Investor’s Business Daily, over 51% of all E-Commerce growth during the holidays went to Amazon, and roughly a quarter of all North American retail growth for the year went to Amazon. Over 38% of U.S. households now have an Amazon Prime account, mainly for the free, two-day shipping, and those households have an annual income that averages $20,000 more per household than the national average. Sobering, to say the least, and telling for the retail industry at large. We have not seen this type of dominance and growth since the vast expansion of Walmart in the 90’s.

In our latest study Brave New World of Unified Commerce, every retailer said their selling channels influence each other, but that level of influence changes dramatically based on retailer size.

  • Tier I is fairly balanced, with stores influencing 32% of E-Commerce purchases and E-Commerce influencing 28% of in-store purchases.
  • For Tier II, stores influence a full 58% of E-Commerce buys and with the smallest retailers, E-commerce has an influence on 53% of all in-store sales.

With data like this and increased pressure from Amazon, it is not surprising that retailers are racing toward Unified Commerce as a competitive survival strategy. According to the study, 86% of all retail software spend in 2016 will come from six core areas of Unified Commerce: Store Systems, Merchandising, Supply Chain, Marketing, Ecommerce and BI/Analytics. (This leaves only 14% for spending on infrastructure, security, collaboration and other activities—leaving no doubt about the urgency of delivering the unified shopping experience).

Multi-Channel Customers Remain Much More Profitable

When it comes to profitability, multi-channel shoppers deliver far more profits for retailers than single channel consumers. In the Grocery/Drug/Convenience segments, customers are highly brand loyal and those that shop multiple channels are 28% more profitable than store-only shoppers.

In Department and Specialty Stores, customers that shop both online and in-store are 26% more profitable. It’s no secret that customers are in the driver’s seat and they want what they want—and they want it now. Delivering that is the essence of shopper loyalty, profitable growth and future survival.

Retailers, your stores are your best competitive advantage when it comes to competing with Amazon. But your systems must be integrated, and frankly, you must deliver a customer experience such that customers want to come into your stores. The systems integration, as difficult as this is to accomplish, is the easier portion of the equation. The tougher part is creating the environment in the stores and the team you need to assemble to help bring it about. If you choose only to focus on the systems and give short shrift to the people and environment, your stores are likely to be usurped by Amazon the way that Walmart laid waste to smaller mass merchants in the 90’s.

For more information on the Brave New World of Unified Commerce, please click here.