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IBM Amplify: Leveraging Stores & Store Associates to Fight Amazon

Late last year, Bridge Solutions and IBM completed an IBM 2016 Consumer Expectations study. Here are some stats:

  • In 2011, those 13-29 shared common views. Today, those in their 30s carried over their opinions.
  • Omni-channel capabilities are more important than ever.
  • How retailers rate themselves and actual executions are often miles apart.
  • Consumer expectations for low cost, rapid fulfillment are well beyond what many retailers are capable of delivering effectively and/or profitably.
  • The Amazon Effect is influencing consumer expectations and behavior.

Defining the Amazon Effect

Amazon has had a huge impact to a large number of retailers

  • Best Buy
  • JC Penny
  • Kohls
  • Macys
  • Nordstrom
  • Sears
  • Target
  • Walmart (lowest impact. Only lost 2% vs up to 50% for other major retailers)

Quote: It’s not your father’s delivery network anymore. The expectation is that 3 days delivery is slow.

Those changes are far from over.  Think of their drones program.

Understand that Amazon is losing money on shipping but their cloud efficiencies allow them.

The effect:

  1. The cost of the shipment is squeezed.  This despite the fact that FedEx and UPS are raising prices.
  2. Speed expectations are skyrocketing

Shipping cost

  • Number one reason for cart abandonment is shipping cost.
    • Retailers are moving to a dynamic shipping cost pricing model…but now they need to show shipping cost in the cart
  • Males tend to have a higher level of tolerance on shipping costs. They are willing to pay more
  • Females want it faster and are willing to pay less.
  • 83% of consumers have chosen not to purchase because of shipping costs
    • By age group, the older you get, the less tolerance you have.
  • 61% of consumers have chose not to make a purchase due to shipping costs (Conversion statistic)
  • 77% of consumers would purchase from an unknown retailer with no shipping charges over a known / trusted retailer that charges for shipping
  • Free shipping doesn’t change consumers inclination to choose in-store pickup.  79% of consumers prefer to pick-up in store and 77% would prefer to return to in-store even if free shipping is offered
    • Point: be really careful with free shipping.  Perhaps in-store pickup and a gift card might work better
  • 3-day delivery is the new “slow”
  • By age group, those under 40 consider expedited delivery even more important
  • Greater than 25%hose in their 20’s and 30’s are willing to pay between $5-$7 for same day delivery
    • Overall, there is a large number in all age groups not willing to pay anything for same day delivery.
    • Men in general are more willing to pay for same-day delivery
    • women in general are less willing to pay for same-day delivery

How Stores Can Battle The Amazon Effect

In most cases, we don’t see retailers using their stores for in-store pickup.

  • There are a couple retailers where the in-store pickup experience was so abysmal that they’ve lost customers.  This implies that eCommerce really needs to be thought through for the phases
  • The greatest potential damage to the brand comes from Post-purchase phase
  • 63% say post purchase phase is likely to be able to recover from poor purchasing experience

At the same time, in-store pickup and return are more important than ever. 82% consider it important to offer. 79% will choose in-store pickup. 70% will purchase additional products while in the store.  One caveat: 79% expect the pickup to be quick, easy, and convenient.

Quote: Consistency is the key

How stores can help

  • Stores have more stores than distribution centers
    • Gap, “Some people talk about Amazon with their 100 distribution centers. We have over 2000 of them in stores.
  • Best Buy has been able to reduce average delivery time by 2 days by shipping from stores
  • 10% of items ordered from Walmart are shipped from stores

But the challenge is getting the store associates to be part of this process. They are the linchpin. It can be hard. # of stores * # of employees = complexity.

Quote: in-store pickup is table stakes. Ship from store can be a natural extension of that process but it must be orchestrated.

Ship from store adds some complexity.  You have to help the store associate by using technology to find the right carrier, schedule the carrier, print the shipping label, etc.  The local ship model means that using a national carrier like UPS may not make sense.  A local courier could do it more rapidly and at a lower cost with fewer touches. This creates a hybrid carrier strategy.

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Michael Porter

Mike Porter leads the Strategic Advisors team for Perficient. He has more than 21 years of experience helping organizations with technology and digital transformation, specifically around solving business problems related to CRM and data.

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