Online retail is not enough for Amazon and Google… offline retailers beware!
It is no secret that online giants have realised tremendous growth over the last two decades in almost every facet of their business. These increases have involved acquiring huge amounts of users, increasing revenues and driving large profits. Amazon and Google have been the elite showcase in this market and have shown impressive growth curves ever since they were founded.
Their colossal growth has been the result of repeatedly building successful solutions in a shifting economy that places the customer at the centre of the engagement. They capitalised massively off the buying behaviours of consumers which moved rapidly from offline to online-driven experiences.
Image 1 & 2: The revenue and sales growth for Google and Amazon
With all this glory, e-commerce transactions still only represented 8.5% of the US retail transactions in the first quarter of 2017 (source: Census). In other words: of every $10 spent by consumers in the first quarter of 2017, $9.15 still got was spent in the offline world.
Knowing this, it comes as no surprise that all major online giant’s (Google, Amazon, Alibaba and even Paypal) are setting their sails towards conquering offline retail for their next phase of growth for their businesses.
Image 3: Media headlines indicate the importance of offline growth for online players
To understand how they are coming after offline retail it’s important to understand just how they drove change towards online sales over a decade ago. They leveraged a shift in customer’s expectations from the very beginning, and if replicated in the bricks and mortar world, could be the shift towards more offline sales.
So, what are the lessons these online players are trying to bring to the offline retail world?
1) Immediate Customer Satisfaction
Internet speed is getting quicker every year, growing exponentially. The speed of the Internet and related technologies have completely changed how we consume services.
Instead of waiting in front of the television for your favourite show to appear, younger generations reach for Netflix and Amazon prime to watch almost any TV show at anytime. The same process evolved listening to music, reading books, watching videos to even studying as Google answers the questions for you. A large culture shift has also occurred where consumers are now happy to buy products through sites such as Amazon and communicate instantly with their friends through Facebook.
With the introduction of IOT, there seems to be no end to having every engagement created with high speed and instant access in mind. The internet creates a desire to receive everything to virtually instantaneously.
Image 4: As consumers we don’t like to wait. We want to be immediately satisfied.
Online giants have tried to appease this demand, innovating in the last mile delivery. From drones to self-driving delivery vehicles, there is incredible strives being made, and Amazon can now deliver within 30 mins in some cities. Alas, this isn’t even good enough.
Last mile delivery for e-commerce businesses is still a mess. It is in this space that the offline retailers still hold the trump card. Consumers are still spending such a large amount of retail spending in the physical retail which can be attributed to this instant gratification.
Although even with this issue, online retailers have gained the insight that how we think about consuming services has changed forever. With understanding, this change in consumer desires, brings them closer to gaining a bigger share of the offline retail market.
2) Data-driven & Real-time Decision Making
Everything is data-driven inside Google. There is never any decision that is reached by simply a gut-feeling or a roll of a dice.
I remember from my time at Google that even CV’s were expected to reflect data-driven insights and it was up to me to convince them I was the right fit using as much data as possible. It’s not enough to simply say that you graduated with a B+ in mathematics. They would expect you to answer “what percentage of others have performed worse than you? Are you in the top quarter percentile?” You can’t just say you overachieved on your targets in your last job- “By how much have you overachieved?”.
Google and Facebook have also contributed to a changing marketing environment. Historically, marketing was commonly regarded to be full of gut-feeling decisions and vague results. This sector has now become a very much data-driven experience with deeply rooted metrics like traffic, conversion rates and optimisation funnels.
Booking.com is a great example of an online business that has driven successful innovation through data-driven insights. Everything a user does on their website is tracked and used for optimisation purposes. The site measure’s anything from how many hotels you visit before booking to how long you wait on a page before you continuing to the next one.
Some retailers have already begun their data-driven journey. TESCO has innovated and gathers data through their Clubcard loyalty program. They then have used this data to better understand their customer’s behaviour and has lead to much better customer segmentation and tailored offerings through coupons. Retailers now have plenty of opportunities to continue this journey and expand further.
In many physical retail environments most in-store processes still happen on pure gut feeling and experience. For example, paper loyalty forms are still being issued; which give no insights into the customer sign-up journey. The in-store marketing material is also still printed; which gives no data-driven feedback on sales performance and pre-ordering food in store still happens happen through paper; which gives no insights in to what customers are looking for, etc.
Digital and real time information about these processes is needed to optimise and respond to consumers needs and expectations, which are changing faster than ever before.
Jeff Bezos made headlines in 1998 by describing his vision for Amazon. He famously quoted:
If we have 4.5 million customers, we shouldn’t have one store. We should have 4.5 million stores.
Jeff Bezos – Washington Post, 1998
Personalisation and tailoring customer experiences has been tremendously important to the success of digital businesses.
Image 5: Screenshot of my Amazon.co.uk home page
Image 6: Screenshot of my colleagues Amazon.co.uk home page, taken at the exact same time as mine (image 5)
The same level of personalisation has still not happened yet for offline customer journeys. Different customers, with completely different needs and backgrounds, are presented with the exact same product shelf and promotions.
Image 7: Different shoppers with different needs and backgrounds are often presented the exact same journeys in physical stores.
Digital leaders understand that this can be done different and they have already started to invest resources in cracking this for the offline world.
Image 8: Google has experimented with tailored in-store messaging based on your Google search history
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4) Ultra Fast Deployment
“Without a sense of urgency, desire loses its value.” – Jim Rohn
The tech companies of the 21st century don’t have time to wait around for change to occur, they dive right into the next available opportunity as soon as they possibly can!
The old ways of conducting business involved taking your time and ensuring that decisions were absolutely correct and would stand the test of time. However, online retailers don’t operate in this fashion. They need to act with the utmost haste to ensure they can get ahead of the curve and beat competitors to the next big thing.
This action of moving as quick as you can is a process that companies in the online tech environment live by. For example, Facebook recently shuttered it’s teen app ‘tbh’ that it acquired a mere 8 months ago. This app is the third to be closed by Facebook in a matter of months that were only fresh to their recent additions.
Image 9: CNN reporting on Facebook’s recent app ‘Tbh’ it’s shutting down
The world is moving so quickly nowadays only the fastest companies can take charge and truly own the market, and offline retailers will need to adapt or risk being left behind.
5) Eat Your Dog Food
You won’t understand until you try it yourself. Online giants are experts in trying their own products before they get released to the general public. ‘Eating your own dog food’ is a well known term for online players. It is even believed that the term has originated from Microsoft in the mid ’80’s.
Google used Gmail and every other tool it has launched extensively within their own workforce before releasing it to the public. New innovations can easily be tested by deploying them internally first to gather vital usage information before launching it to the public.
Image 10: Online players tend to try new products internally first before serving them to their users.