E-commerce and omni-channel capabilities are the #1 forces impacting retail. Greater personalization and automation should help companies improve efficiency and reduce costs. However, challenges abound. Profitability remains under pressure due to extreme price transparency and high home delivery costs. Amazon has such a brand lead that an estimated half of all product searches start on amazon.com. Protectionism concerns have risen sharply and could generate inflationary pressures across a swath of products.
Company specific thoughts: “Following the ‘Best Buy’ blueprint”
Many companies are following the ‘Best Buy’ blueprint, the first major company to up-end its business model to fight back against e-commerce cannibalization. To compete, Best Buy had to price match Amazon, build out omni-channel capabilities, improve in-store offerings and accept lower levels of profitability. Walmart has embarked on a similar path, adding multiple e-commerce operations (like Jet.com). It’s using more in-store technologies (pickup towers, automated prescriptions fills, etc.) than almost any other retailer. Home Depot has also outlined a five-year, multi-billion investment in its supply chain to provide same-day delivery anywhere in the US. Finally, CarMax is enabling customers to conduct all of their search activities online, fill-out credit applications and make online appraisals of their vehicles.
Consumer: Up close
The future of the Consumer sector will be determined by those who are willing to reinvest, adapt and turn future threats into opportunities.