Chris Walton and Omni Talk discuss the new flywheel of 21st century retail that just may be Amazon proof.
The below is one of my favorite charts:
It illustrates exactly what the retail industry is up against.
The real kicker?
The pie is the pie.
Overall retail sales won’t change much annually. While they will continue to shift significantly from offline to online in the years to come, the total level of retail sales will likely only grow at a steady rate per year (pundits argue probably in the range of 1-3% on average).
Legacy bricks-and-mortar retailers will undoubtedly still garner some slice of the pie, but how big will their slice be?
My prediction: Amazon and Walmart will dominate even more than they do today, and the residual slice of the pie shared by everyone else will shrink dramatically. Not only will it shrink, but new players will enter the picture too, putting even more pressure on an industry that is already struggling to keep pace with the blitzkrieg of Amazon and the kamikaze warfare of Marc-las (Marc and Doug at Walmart).
But there is hope. Amazon’s flywheel, while real and EXTREMELY powerful, can be countered. If you have never seen Amazon’s flywheel, here it is (courtesy of The Motley Fool):
Simply put, it is how Amazon makes money.
Amazon is not the only player running this selection-predicated flywheel playbook anymore either. Walmart’s recent strategies are quite duplicative of Amazon’s, meaning we should all now sit back and enjoy our invitation and front row seat to the super cock fight of the century. Both Seattle Jeff and Marc-las have taken out their you-know-what’s, and neither will stop until a “winner” is declared (a term which by the way is utterly ridiculous – see Simon Sinek).
But who really benefits from this fight?
Amazon and Walmart do.
We, as consumers, do too. Product selection will be wide, cheap, and readily available at the press of a button.
But who loses?
The rest of the industry loses, and therefore so too do the millions of Americans employed across our national landscape whose jobs will be sucked up in the fight faster than a line of cocaine during a night out with Uma Thurman in Pulp Fiction.
So, let me be pointed — I don’t give two shits about Amazon and Walmart. I only care about the bottom right hand corner of the chart above. Let Amazon and Walmart duke it out in their egoistic quest “to win.” I want to preserve as big a slice of the pie as possible for the rest of the industry and especially for the hundreds of other players across the country that are too small to even make the chart!
It is time we come to grips with reality.
STUDENT BODY RIGHT RETAILING DOESN’T WORK ANYMORE!
We need a new playbook. We need a new flywheel to compete, one that assures our long-term cohabitation with Amazon and Walmart.
Without one, we stand no chance.
So, after much build up, I share this new flywheel with you today:
If you are interested in a live demo or an audio exposition of the flywheel while you workout, you can also click on the video below:
As you can see from the diagram and/or from the video, the new flywheel of 21st century omnichannel retailing is not predicated upon selection. Rather, it is predicated upon data. Data is what will enable retailers to compete against the Amazon/Walmart kraken.
Data begets better omnichannel brand experiences, which beget traffic, which, in turn, begets opportunities for new partnerships, partnerships which only further augment the quality of data, and therefore enable the cycle to enrich itself and begin again. In the background, a retailer’s cost structure and pricing schemes augment these efforts by creating “margin” that can be funneled back into the wheel.
The key here is the utilization of data in the celebration and design of the physical. Legacy retailers have never really used data to design their stores and their experiences. Some will try to argue that they do, but they are mistaken. If they were right, physical retailers would have the same analytical understanding of their stores that an e-commerce player has of its website (they don’t), and their salesfloors would be analogous to e-commerce browsers and be capable of being analyzed as such (they are not).
Why? Because historically the technology has not been there. Now it is. Advances in cloud POS, location technology, and data processing now make the previously impossible possible. Retailers, if they have the guts to take the red pill and to see how far the rabbit hole goes, now have the ability to acquire the analytical understanding of their customers’ behaviors through the “funnel” of their store experiences — measuring things like dwell time, item conversion, basket size, etc. — interactively, in real-time, down to the second.
We are not far from a world in which the activity on a salesfloor will be thought of like a major regression analysis, where all things being equal, we will know what experiences, what products, and even what sales associates drive the most comparative value in our stores day in and day out. Our stores will become, from a data perspective, like multi-player video games.
So why does this matter? Because Amazon and Walmart play on selection and price. Neither plays on the physical well. Amazon still knows little about stores and Walmart is, well, Walmart.
Celebrating the physical and thinking of a store as a Product (big “P”) through data creates a niche within a realm the two juggernauts do not yet understand. Having data at one’s fingertips to inform the tactile, the colorful, and the textural presentation of a brand gives new answers to the most important question of all — “In the future why will people still go to physical stores to shop?”
The new flywheel of 21st century retailing creates an iterative cycle of understanding behind the “why” a person desires the experience and delightful memories of being in a place, or, in other words, of doing something one cannot simulate at home or on the couch.
Let Amazon and Walmart duke it out on price and for their share of our couch time. My money is on the retailers whose sole focus is on giving us a reason to go somewhere, to go out, a reason to “feel” something both physically and emotionally, both in the present and in looking back fondly within our own memory banks.
For every trend, there is a counter trend.
It is time we start going against the grain and buck the trend. It is time we start adopting the new flywheel of 21st century retail.
It may be our only hope to survive.
Be careful out there,
P.S. If you enjoyed today’s content, please tell your friends and please also don’t forget to subscribe below for future updates:
P.P.S. If you happened to click on the video explanation of the new retail flywheel above, you were in for real treats — shadow puppets and my rapidly growing bald spot (minute 6:49). I am taking bets on the over/under in years until I finally give in and shave it all off. What do you think — 2 years? 3 years? Can I keep the mane going another 10? Feel free to leave your comments below.
P.P.P.S. I finished two more books on Entertainment Weekly’s Top 100 List: Song of Solomon by Toni Morrison and The Sound and the Fury by William Faulkner. The former was stellar — a great read for anyone right now. The latter not so much — my second least favorite book on the list. You can see my running assessment of the entire Top 100 list here.
Chris Walton is an accomplished Senior Executive with nearly 20 years of success within the retail and retail technology industries. He is well-versed in merchandising, store operations, inventory management, product design, forecasting, e-commerce, pricing and promotions, and tech product development.
Chris was most recently a Vice President with Target, where he led the retailer’s Store of the Future project and also ran the Target’s home furnishing division for e-commerce. He previously worked for GAP, Inc., as a Distribution Analyst and Manager.
Chris holds a BA in Economics and History from Stanford University, and a MBA from Harvard Business School.
He likes to dress as Darth Vader for Halloween, and his wife also frequently asks him to ask Alexa, "to turn off the music."