If you’re apt to believe the news you read then you know that the online commerce war is over and Amazon won. Consider these stats alone:
- Over 60 percent of the growth of online retail sales in 2016 came through Amazon
- Growth for the top 500 online retailers other than Amazon slowed to 11.7 percent last year while Amazon’s sales grew 31 percent.
- Amazon now represents 40 percent of total online retail sales in the U.S.
- Fifty-two percent of U.S. consumers have an Amazon prime account
Adding fuel to this fire, the demise of bricks and mortar retail is materializing faster than anyone predicted. In the first three months of 2017 alone more retail store chains have shuttered than through all of 2016– a record year in retail failure itself. With Sears and Kmart expected to fall next there is plenty more to come. According to L2, a digital research group, mall traffic has dropped more than 50 percent in the last three years. Today’s younger consumers are sending a clear message. They don’t trust that current retail will deliver the choices, fair prices and timely experience that they’ve come to expect through channels like Amazon. And in the mean time, retail has failed to come up with a compelling experience model that justifies summoning an Uber in order to head out to the mall.
Amazon is the indisputable winner. Right?
On one hand, Amazon is working to own your customer and ultimately drive them to their own proprietary brands. At the same time new shopping sites like Wish.com continue to emerge. Wish connects a global audience through a social media driven app that serves up heavily discounted products of all kinds shipped to your door directly from Chinese manufacturers. Wish has reportedly raised over $500M in capital and has grown to over $10B in revenue in less than five years. Wish is effectively working to disinter-mediate the U.S. brands that have been reselling low cost Chinese made products under their more expensive American labels.
And the final straw that could break the camel’s back for brands in retail is the dismantling of cable television as we know it. In a recent report put out by technology investment group Andreessen Horowitz, prime time television audiences have dropped from 15M to 4M viewers in the last few years. During this same period advertising rates have continued to escalate. The mass media outlets that were at the center of building brand image and creating demand generation at retail are beginning to die a slow death.
Online retail channels are building their own brands. Strip malls and retail chains are closing at an alarming rate. Foreign manufacturers are learning how to sell millions of products with no brand awareness through nothing but social media exchange. All while mass media advertising is collapsing in front of our eyes. Dorothy we’re not in Kansas any more.
Where are the opportunities for brands and retail?
But before you fold up your tent and call it quits consider the following. According to global management consultants, Bain and Company, 75 percent of retail sales will still be conducted through physical stores as far out as 2025. However, the experience will change to an “augmented retail” experience. Augmented retail will seamlessly combine digital technologies with physical spaces. “Stores will have stories to tell, rooted in a sense of community and entertainment.” The retail experience in the future will likely support and augment the online experience rather than the other way around.
How can U.S. manufacturing brands compete in this picture?
First, you can only win if you join the fight. According to Forbes Magazine the number of manufacturers that are selling direct grew by 70 percent last year. Today 40 percent of all manufacturers sell directly to their customers. And one third of all U.S. consumers said they bought directly from a manufacturer website in 2016.
If you haven’t already, it’s time to stop and reinvent your long term go-to-market strategy. That strategy has to go beyond who is selling your products. It’s time to start to think about the experiences you need to create, the customers that you need to engage with and how your products service and go to market plan help solve their problems.
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