How to Compete as a Brick and Mortar Business in the Age of Amazon

There’s no denying that Amazon is ruling the roost right now in the retail sector. However, just because the ecommerce giant owns the lion’s share of the market, doesn’t mean brick and mortar is obsolete. For proactive retailers, there are plenty of ways to stay relevant.

Amazon Isn’t Going Anywhere

In June 2006, Standard & Poor launched the S&P Retail Sector ETF, using the ticker symbol XRT. This ETF is used as a sort of barometer for tracking and gauging the health of the nation’s retail sector over time. While it does include some ecommerce businesses in the fund, XRT is predominantly comprised of brick and mortar retailers.

Any educated, data-driven conversation on brick and mortar business in the U.S. should involve an examination of XRT. Keeping this in mind, what does it currently say about physical retailers in a marketplace that appears to be dominated by ecommerce?

“It’s highly unlikely the brick and mortar retail model will completely disappear. However, based on the recent price performance of XRT, these companies will need to undergo some drastic changes in order to compete with the likes of Amazon,” Mark Soberman writes for NetPicks ETF Investor. “Without question, major disruptions are occurring within the retail industry. Not everyone will survive.”

While the future isn’t exactly bright for brick and mortar, Soberman’s words are laced with optimism for those willing to identify disruptions and adjust in accordance with new changes and developments.

As Boston Retail Partner’s Ken Morris says, “Brick-and-mortar isn’t dead, it’s evolving.” In his opinion, “Stores are no longer stores, they are distribution points for products.”

If you want proof that brick and mortar retail isn’t going to vanish, look no further than what Amazon has been doing over the past couple of years. Despite being the king of ecommerce, Jeff Bezos and crew have actually started launching physical stores in select markets like Seattle, Portland, San Diego and Boston. They’ve also launched Amazon Go — an upscale convenience store that requires no checkout — in Seattle (and have plans for more locations across the country).

It’s also hard to ignore the fact that Apple has found great success with its retail locations, despite generating most of its revenue via ecommerce. In fact, Apple stores have been one of the driving factors in the company’s growth over the past few years.

What does all of this mean? Clearly Amazon and other ecommerce sites are dominating the retail landscape, but there still appear to be prime opportunities for entrepreneurs and businesses that are willing to do what it takes to compete.

The question is, how do traditional brick and mortar companies remain competitive in a rapidly evolving marketplace where trends come and go?

4 Ways Retailers Can Compete in the Age of Amazon

If you’re still using the same sales and marketing strategies from the turn of the century, you’re on the verge of becoming obsolete. Today’s customers aren’t opposed to shopping in brick and mortar stores, but you have to appeal to their evolving needs and preferences — many of which have been significantly altered by their online shopping experiences.

The following tips will give you a nice starting point for becoming more competitive in today’s marketplace:

1. Create a Compelling Experience

One of the great advantages brick and mortar retailers have over ecommerce sites is the “touch” factor. There’s something about being able to touch products and interact with people in a face-to-face manner that makes physical retail special. But if you want to maximize the touch factor, you have to spend a lot of time thinking about customer experience inside of your stores.

Every store has a customer experience built in, but only a few are strategically, meticulously developed with customers in mind.

“The truth is, most of our experiences as consumers happen almost accidentally. Many retailers may have a general idea of the experience they want in their stores, but only a few have taken the pains necessary to engineer, plan and stage those experiences with precision,” retail futurist Doug Stephens explains. “That engineered quality of experience is precisely what has made retailers like Apple, Starbucks and Sephora strong. The experience you receive in a Starbucks, Apple store, or Ritz hotel is not accidental but completely deliberate and by design.”

You need a customer experience strategy. Not a vague idea that you and your team discuss in theoretical terms, but a concrete strategy with tangible action steps that will be implemented in order to give customers what they’re looking for. Until you do this, you’ll find it difficult to compete.

2. Drive Online Traffic to Your Stores

Even brick and mortar stores need an online presence. In fact, it’s the strength of your online presence that helps your store remain competitive and successful.

View your website as a resource that people use before visiting your store. The more you can build convenience into your site, the more effective it will be at funneling traffic to your store. Some things you may consider doing:

• Clearly list your inventory online so customers know whether or not an item is in stock at their local store.
• If your store is large and items are hard to find, provide aisle and bin numbers for each product online. This increases convenience and helps customers find exactly what they’re looking for.
• Give customers the opportunity to reserve/purchase items online and pick up in store.

Little tweaks like this make a huge difference and make customers more willing to stop by your store (rather than purchase online from one of your competitors).

3. Invest in a Geo-Conquesting Strategy

One of the bigger trends in retail today is the use of location data to engage, convince and convert shoppers. With so many ways to collect data, it would be foolish not to put it to use.

“Retailers should consider creating a ‘geo-conquesting’ strategy by utilizing location data and geofencing to find audiences that shop at competing locations,” entrepreneur Brian Handly suggests. “Toys ‘R’ Us, for example, could work to incentivize and win over the shoppers at the GameStop, Target, Walmart and BestBuy locations, sending them relevant ads and offers when these competitive shoppers browse their phones or social media.”

4. Try Smaller, Local Stores

Today’s consumers have become spoiled. When they shop online, they’re used to perfectly tailored, heavily personalized experiences that take thousands of data points into account. While you don’t have all of the same resources and opportunities, there are ways for your brick and mortar business to capitalize on the desire for hyper-personalization.

Cutting-edge businesses like Lululemon are moving away from cookie-cutter stores and are focusing on innovative, hyper-local stores to take the personality and flavor of the community into account. This gives them the chance to zero in on individual customers and address specific needs and desires.

While there’s something to be said for consistency across different stores, this may be a concept you look at down the road. By making stores feel like they belong in the community, you are making it much more likely customers will see your brand in a positive light.

Don’t Let Amazon Deter Your Business

It’s easy to study the growth of Amazon — a company that took 18 years to catch up with Walmart in market cap, but just two more to double it — and be deterred by your own limitations and constraints. However, Amazon isn’t your enemy.

As a brick and mortar retailer, Amazon is showing you the way. The company has peeled back the layers and revealed what your customers want — convenience and high levels of engagement.

Will you have to digitize some of your processes and dip your feet into ecommerce to remain competitive in the coming years? Certainly. But there are also plenty of opportunities to take advantage of your existing infrastructure and delight your customers offline.

Learning how to balance your business model will prove to be the most important skill over the next decade.

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This article, "How to Compete as a Brick and Mortar Business in the Age of Amazon" was first published on Small Business Trends