7 Amazon-Obsessed Retail Predictions for 2019
That might sound like a stretch, but casting retail predictions against the shadow of Amazon is not. Who are we kidding: The retail industry is obsessed with the e-tailer, which will generate $258.22 billion in U.S. retail sales this year, according to eMarketer.
And what merchants do is often explicitly, implicitly or unwittingly, in response to Amazon. So it’s only fitting that we cast illusions of non-Amazon-obsessed thinking aside here, for some unapologetic Amazon-centric retail predictions for 2019.
Wishing you all a happy almost-New Year.
Old–School Big Shots Give Amazon A Run For Its Money
Big multichannel retailers like Target, Walmart, and Costco will start to close the digital consumer-experience gap with Amazon through services such as one-day shipping, mobile engagement and subscription product business models, according to Dan Druker, chief marketing officer for artificial intelligence firm Instart.
Paid Retail Membership Programs Will Gain Steam
Amazon CEO Jeff Bezos revealed this year that the online giant’s Prime loyalty program boasts more than 100 million members worldwide. The revelation confirmed what the retail industry already knew: That Prime is catnip to shoppers, leads to fandom and creates droves of sticky Amazon groupies.
As other retailers vie for a piece of the action, “paid membership is the new loyalty due to Amazon,” said Jane Hali, chief executive officer of Jane Hali & Associates, LLC. “There is power to the paid membership.”
Research shows that retailers are spending “tons of money to retain the same customers who have been shopping with them anyway — and most don’t take advantage of it. What paid membership does is turn short-lived loyalty into something deeper and more committed,” she said. Hence “there are many retailers entering this area, including Lululemon.”
Retailers from Sephora to Restoration are putting their own spin on the paid-membership perk. “For $10 a year, Sephora’s Flash program offers members unlimited free two-day shipping with no minimum purchase requirements; GameStop’s PowerUp Pro and Elite membership program, $14.99 and $29.99 per year respectively, offer members a select set of special gifts, discounts, benefits and privileges; and Restoration Hardware’s RH Member program costs $125 per year to join and offers members a range of perks and privileges including free interior design services and early access to promotional events,” Hali said. “Membership fees are revenue a retailer cannot afford to lose.”
Plotting Its Expansion Binge, Amazon Will Give Physical Retailers A Migraine
“Amazon has had so much success with its Amazon Go [checkout free] concept that it is considering opening as many as 3,000 physical locations by 2021 and just announced plans to open its first brick and mortar store outside the U.S.,” said Jaime Bettencourt, senior vice president of business development and account management for in-store media solutions firm Mood Media, which counts Target and Sephora among its clients. “With its acquisition of Whole Foods, Amazon is poised to continue to diversify across e-commerce and brick and mortar, allowing the company to meet its customers anywhere at anytime.”
The Rise of Community-Oriented Experiences
The transactional nature of buying on Amazon has retailers feverishly working to create shopping experiences that cannot be duplicated online.
And next year, “We expect to see more retailers create compelling community-oriented shopping experiences that establish a powerful sense of belonging around the brand,” said Jill Standish, managing director of global retail for Accenture. For example, LEGO is doing just that “by inviting customers to submit designs and vote on product ideas,” while “Nike has gamified shoemaking by running a contest for its Nike Air product range, and by organizing treasure hunts for exclusive trainer designs,” she said.
Watch Out, Amazon Go: China’s JD.com Is Invading Your Convenience-Store Turf
“The launch of Amazon Go stores attracted a lot of excitement in the U.S., however, China’s JD.com is leaps and bounds ahead,” said Joe Jensen, vice president, of the Internet of Things Group, and general manager of the retail solutions division for Intel.
“The retail giant plans to open one million smart convenient stores by the end of 2018, which will automatically identify the type and quantity of products at the self-service checkout,” he said JD is also pioneering “an important extension of retail through JD.com smart vending machines. Through cameras, computer vision and autonomous technology, JD’s smart vending machines offer an efficient, frictionless experience for consumers and retailers – and at a lower cost than tradition vending machines,” Jensen said.
A Laser-Focused Shift To Profitability
It’s no secret that shipping costs make e-commerce a huge profit drain for retailers, particularly legacy brick-and-mortar chains, which were built for a pre-Amazon shopping landscape and also bear the cost of operating stores.
Amazon, which pioneered digital shopping, now commands a whopping 49% of the U.S. e-commerce market, boasts an e-commerce operational model and distribution network that is unrivalled at retail.
Online shopping is not going away. In 2019, retailers will be getting super serious on finally nailing a sustainable profit model, said Vish Ganapathy, managing director and global retail technology lead, Accenture.
“As the cost of acquiring customers keeps going up and the ability to retain them keeps going down, there’s a renewed focus on profitability, not just revenue and traffic. Several retailers are now looking at profitability as a key success factor in omnichannel services like supply chain re-calibration, inventory placement optimization, in order to fulfil profitably —the ability to detect what customers and products are profitable and replicate those traits more broadly.”
Walmart Accelerates Moves To Close In On Amazon
Amazon dwarfs Walmart when it comes to online sales.
But as for the total retail sector, where stores still account for the lion’s share of sales, Walmart, which will generate a projected $500 billion in 2018, “is three times bigger than the e-commerce giant,” said Anjee Solanki, national director of retail services the USA at Colliers International.
The discounter is desperate to make a big dent in Amazon’s massive e-commerce lead if a series of recent deals are any indication. And that product-by-product category incursion should only continue in 2019, she said.
For example, “the Art.com acquisition is meant to increase the scale of its product portfolio into home décor and also gets them access to ARTView, a proprietary artificial reality tech that tests products in consumers’ homes,” she said.
“Walmart partnered with Microsoft to use cloud technology to leverage consumer data to streamline operations with regard to logistics and purchasing. The retailer has already started to reduce costs to compete with Amazon pricing,” Solanki said.
And “there is the fact that Walmart leads in grocery and is launching delivery services to increase [grocery delivery] to 40% of U.S. households,” she said. “Don’t forget they have over 6,000 stores globally, And they’re mastering the click-and-collect program.”