03 May

Retail Stores vs. Amazon (2012)

Something subtle but very important occurred yesterday. I am talking about Target’s decision to stop selling Amazon’s Kindle e-readers (hyperlink: USA Today).

In the above article you can find one sentence that summarizes the struggle that Retailers have been facing:

Target’s decision to phase out the Kindle is also occurring as the retailer, along with other major merchants, is trying to fight a growing practice called “show rooming.”

Consumers visit a physical-local merchant/retail-store to see, try and feel a product, then compares prices online via their smartphone in real-time, then leaves the store. Many will go ahead an buy from Amazon, way cheaper, as Amazon has mastered the art of inventory, moving inventory and adjusting prices (in real-time). In addition, Amazon, to complement such sale, will show you something that pretty much is guaranteed that you will like and potentially buy.

There is such a huge opportunity for whomever solves this problem; of keeping the customer within the store and helping close the deal, right there — by bringing the right information to the floor, including adjusted prices, in real-time. As the article reads, retailers are trying to combat this via “exclusive merchandise” but that is not the right answer — the answer is “inventory-demand-data/intelligence + consumer lifetime value index + price adaptation, all in real-time”. Easy to say, hard to do. Amazon not only knows this but it has the advantage.

(Disclaimer: back in 2008 while at eZee, we saw this problem coming and we tried to build the above. Not only we were too early, but it is a very hard thing to build – we had to pivot the company. Merchants were not seeing what was coming their way. Today, merchants are not only recognizing this problem, but are living it; Best Buy, a company we tried to get into, is a good example of what I am talking about).