Amazon Prime Now Emerging As Existential Threat to Local Retail
April 26, 2016 | Contributed by: Greg Sterling
For years I have presented US Census Bureau stats about e-commerce vs. traditional in-store retail sales for the argument that local is more powerful than online. Indeed, e-commerce remains a small (though growing) fraction of in-store sales: 7.5% vs. 92.5%.
I used to think that local shopping was relatively safe from e-commerce. But many traditional retailers are struggling; and while they’ve made some “omnichannel” gains, they’re still not where they need to be in terms of the overall customer experience. Indeed, the RIO SEO summit I attended last week reflected the internal, organizational challenges many retailers still face in executing against what might be called the “omnichannel imperative.”
Meanwhile Amazon continues its march toward global shopping domination.
Since its introduction, there has been massive growth of Amazon Prime. Various estimates now put subscribers in the range of nearly 50 million to 80 million globally. Amazon is also far and away the dominant mobile retail site/app; it’s the only retail app in the top 15 according to comScore. Then there’s the “dash” button.
Now with the introduction and expansion of same day delivery (Prime Now) Amazon is creating an existential threat to traditional retailers. Now in nearly 25 cities, Prime Now eliminates one of the primary reasons for in-store shopping: “I need it today.”
In response to all this, one could argue any or all of the following contrary points:
- Prime Now isn’t and won’t be everywhere
- It doesn’t have comprehensive product inventory
- Prime now will mostly focus on groceries and selected other product categories and won’t reach key categories such as apparel
- In-store shopping serves a social function that online can’t
- People like the “human touch” of offline retail
- Prime Now isn’t a threat — it simply expands the reach of traditional retailers through Amazon
Yes and maybe. But the strength of the Amazon brand, it’s excellent customer service and the overall convenience and great multi-platform usability of its site and apps make it the best “retail” experience out there.
While Prime Now won’t put retailers out of business — though the same can’t be said for independent local businesses — it will impact sales in some cases and put more pressure on them to accelerate their “modernization” efforts. Retailers should be laser-focused on the mobile and in-store experiences (including improved customer service). They should also be distributing real-time inventory data through Google and SEO/inventory marketing services such as LastMile.
Retailers have tended to think of mobile as a coupon distribution platform or, more progressively in some cases, as a loyalty tool. However it needs to be the hub of the shopping experience offline and online (with corresponding analytics benefits). There should be a much more ambitious program combining e-commerce and the in-store experience, with indoor location. Retailers should also integrate “skip the line” mobile payments functionality.
Most traditional retailers can’t get most of their customers to install or retain their apps. That’s historically because they’ve been weak experiences — small-screen versions of e-commerce sites. While it’s not time to hit the panic button, it’s time for some much more aggressive moves that put mobile at the center of the customer experience in every way.
Agencies, brands, retailers and marketers interested in hearing more about what’s working in proximity marketing, location analytics and in-store mobile experiences should attend The Place Conference, September 21 in Chicago.