Independent retailers are positioned to become “the mini Amazons of their communities,” but doing so will require them to adapt to a turbulent world transformed by technological innovation in retail.
The influence of Amazon and other players in e-commerce have created a “new world order” for retail, changing everything from pricing strategies and distribution to store formats, merchandising and promotion, Nick Nickitas, CEO of RosieApp.com, said in a presentation at the NGA Show in Las Vegas on Tuesday.
Independent retailers can play a role in this world, Nickitas said, but that role will go well beyond simply offering customers online shopping for delivery or pickup.
“It’s not about having one model. It’s about having all the models, because shopper behaviors change based on things going in their life—the weather, the season,” Nickitas said. “Independents can’t think, ‘I have online shopping, I’m done.’ This is the only the beginning of an evolution that your business will go through over the next 10 to 15 years as you occupy each of the channels that your customer wants to shop.”
The presentation highlighted various ways that e-commerce and e-commerce retailers are rewriting the rules of commerce, and suggested that small retailers have an obligation to play by them if they want to succeed.
Innovations have, for example, contributed to the to the changing landscape for physical stores with an acceleration in stores closing—213% more retail stores closed in 2017 than the year before, Nickitas said, but at the same time, new store openings increased by 58% as e-commerce and new stores designed around its influence develop side by side.
Nickitas said he was particularly bullish on “next-gen” retail food stores—typically smaller, more fresh-focused and experienced-based than the legacy units they are gradually replacing. “Fundamentally, the next-gen store has learned a critical concept for retail: We are no longer selling product to a cooking customer. Most millennials want you to prepare their food for them, and solve the question of what’s for dinner.”
Another area Amazon’s influence is changing is private label, which Nickitas noted is a likely beneficiary of the growth of voice ordering technology; the recipient of a rapid pace of innovation, testing and investment by the Seattle-based e-commerce giant. Private label, he said, “was the future of e-commerce.”
“When I order new batteries from Alexa, I don’t hear about Duracell or Energizer: I get Amazon Basics and order right away. Right now, Amazon is selling Alexa by the bananas and apples at [Whole Foods] because this just another hook to out-convenience stores. By adding Alexa into the shopper environment, they’re finding more ways to bring the store right into the customer’s home.”
Retailers therefore need to rethink the role that private label plays in their stores, including being used as way to get branded counterparts to invest in sales.
“Traditionally, we have looked at private label as a cost control measure, a way to keep us competitive with national suppliers; but I think there’s a bigger opportunity today,” Nickitas said.
In addition to providing multiple ways to fulfill orders, independents need to create virtual environments that can replicate the look and feel of their stores and their communities, Nickitas said. These storefronts should further differentiate behind local, unique and signature products that emphasize local provenance and exclusive avialability.
Large retailers collecting data in the meantime is “dramatically and almost invisibly changing the hand of retail,” and will force independents to update their own thinking.
Walmart, for example, generates 2.5 million gigabytes of data every hour. “They can run real-time [profit and loss reports], shopper preferences and engagement across every single store.
“Independents still think of data in terms of compliance, regulatory and accounting, but we’re not using it as much to drive sales,” Nickitas said. “Even stores that have invested in sophisticated loyalty programs are still using it mainly for discounting, and not to drive shopper engagement.”
What independents possess, however, are valuable and close customer connections providing the base for success in adapting to the turbulent environment.
“The reason we’re passionate about independent retailers is that they own very valuable real estate very close to the end customer. Amazon bought 420 stores with Whole Foods. There are more than 15,000 independent locations that are closer than Whole Foods, waiting to capture that customer’s business.
“You can be the last mile, mini Amazon.com for your community,” he told attendees, “but things have to change.”