As U.S. retailers know, the Amazon Effect is a very real thing. As the Seattle-based company continues to expand in unexpected (and inevitable) directions, industries are forced to react and enact new strategies at breakneck speeds—or face certain doom. The hardest hit industry is, of course, retail. Stores and brands continued to over expand themselves for years only to have to quickly reverse course, close stores, and firm up their online/ecommerce platforms.
Until recently, though, the mantra of Amazon’s impact on retail had been relegated to the area between the East and West Coasts of the U.S. Now, according to a recent report by the Wall Street Journal, investors far from our own shores are finding themselves reacting to Amazon’s expanding reach, dumping shares of retailers around the globe.
“Virtually every retailer needs to assume Amazon is coming for them,” Eddie Perkin, chief equity investment officer at Eaton Vance Investment Managers, told the Journal. “What companies and investors thought were immune categories have turned out not to be immune.”
The selloff in the European retail sector didn’t really start taking effect until this year. According to the WSJ report, the Stoxx Europe 600 retail sector has been the worst performing this year, falling off 3.7 percent so far. However, as recently as 2015, the sector rose 8 percent.
How Amazon has impacted the European and broader global market differs from how the company disrupted retail here in the U.S. Part of what started to sink U.S. retailers and brands is the simple fact that storefronts overreached from a footprint perspective. Aggressive expansion strategies came back to bite brands in the butt. And for brands, that’s been explicitly felt through the struggles of department stores like Macy’s and Sears—among many others—which have shut countless stores in the past year alone.
European outlets on the other hand don’t have a footprint problem. And, in fact, they’re customer base is quite accustomed to shopping online already. Rather, as Amazon has expanded its reach across the globe, they’ve had a tough go of it staying competitive with the company’s prices, delivery, and range of products. The WSJ shared data from Morgan Stanley that showed Amazon made up one-third of all retail sales growth in the U.K. and Germany last year, thanks in large part to its work launching its own fashion brands and fulfillment centers in those regions.
On a broader scale, Amazon’s international sales have increased 16 percent during the first half of this year, compared to 2016.
The WSJ report hints that some analysts believe the whole “Amazon Effect” thing might be overblown. That may be the case (it’s not), but at the very least the nervousness of the market should suggest to retailers throughout the world that there’s a call for change. That change doesn’t have to be seismic in nature. But it does have to happen. And it all revolves around the customer experience.
We’ve talked about it ad nauseam here at Dealerscope, but it can’t be stressed enough. Part of what makes Amazon so enticing to the consumer is the inherent simplicity of the shopping experience. When you go to their website, you can find pretty much exactly what it is you’re looking for (or, if not, they’ll direct you to a third party seller who has it), it’ll be at a very affordable price point, and you can get it shipped to you in a few days—or hours.
That’s absolutely tough to compete with, but retailers have to find a way. Maybe it’s by offering superb in-store experiences, top-notch customer service, or just a friendly environment.
“We are implementing this in-store experience in the overall context of our multichannel strategy with a seamless connection of the on- and offline channels,” Carstene Strese, COO at MediaMarktSaturn, said in an interview with Dealerscope earlier this year. “This way, we are combining the best elements of both worlds: We have 155 stores as showrooms in Germany, while we at the same time offer a comprehensive online shopping experience. An example of how successfully we interlink our offers is that 40 percent of our online customers pick up their purchase at one of our stores.”
Click and collect is just one strategy that larger retailers are using to get consumers into their stores. Other omnichannel strategies do exist, but for the local independent store owner the sell has to be all about the experience and service. Prices could be made competitive, but what you as a smaller store owner can provide is exceptional, hands-on service that a customer would never be able to receive from a major corporation or even an Amazon.
There’s always going to be room for retail, otherwise why would Amazon be making such a large play here (Whole Foods) and throughout the globe? It’s just up to you to figure out how you fit in your local market, and what the areas for opportunity really are.