Exploring the Brick-and-Mortar Future

Brick-and-mortar retail has reached a time of reckoning. As consumers choose e-commerce over shopping in brick-and-mortar stores, we can expect to see more deserted storefronts and “going out of business” signs. It’s time for traditional retailers to change or die. The path forward may come from the e-commerce world. Tech innovations and UX insights from online retailing success are being applied in physical stores with promising results. Future Store offers insights from IDXP Analytics into the transformation of traditional retail.

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The Amazon Assault is landing in your backyard. How can you defend your brick-and-mortar turf?

Gustavo Lemos
CEO, IDXP Analytics

“The lead that Amazon has is substantial, and the gap is widening. Retailers that are not actively innovating to compete should be very worried.”
Tom Furphy, former Amazon executive and founder of Amazon Fresh

I have seen the future of retail and its name is Amazon Go. Or is it Amazon Fresh? Maybe Amazon grocery stores? The correct answer is Amazon A ll of the Above with more to come. Let’s just call it the Amazon Assault because the relentless barrage of Amazon innovations is now targeting the brick-and-mortar world. The Amazon Assault is designed to disrupt and, perhaps, destroy the traditional business practices of Retailers and CPGs. Amazon, the techy
e-commerce player, has transformed into a customer-centric, omni-channel retailer with an innovative ground game to complement their dominant air game.

Getting Physical

The Amazon Assault came to a tipping point late last year when Amazon shocked the retail world by announcing plans to open 2,000 brick-and-mortar grocery stores over the next decade . To top that off, they are radically changing how the store of the future will be managed. The open, checkout-less experience is just the tip of the iceberg when you see the Amazon Go video. What lies beneath the surface is Amazon’s unique ability to combine big data and little data (individual shopper preferences) with a mastery of distribution and logistics.
This is beyond the tail wagging the dog. While Amazon controls only 5% of the US grocery market today, they have built the foundation for rapid fire expansion. The company already has a trusted relationship with 44% of US households that are Prime members spending $2,486 annually with Amazon. Plus they have invested billions to not only understand who their customers are but also what, where, why and how customers buy. The core of the Amazon Assault is that Amazon probably knows more about your customers than you do.

The question for Retailers and CPGs is: “How are you going to defend your brick-and-mortar turf?”

We have studied (and admired!) Amazon’s innovations and internalized our findings. What we see behind the scenes of Amazon’s big leap into brick-and-mortar is a new deployment of their most powerful weapon. That weapon is not logistics and it is not pricing. Their most powerful weapon is their ability to leverage extensive shopper behavior data. Amazon applies what they learn to improve their customers’ shopping experience by transforming the way they plan,
execute and measure the success of the business.

As Jeff Bezos, Amazon founder and CEO, has said, “If you’re competitor-focused, you have to wait until there is a competitor doing something. Being customer-focused allows you to be more pioneering.”

Collaborate to Innovate

The success of Retailers and CPGs is inextricably linked with their ability to collaborate effectively. The ongoing challenge for brick and mortar retail has been the inability to capture,dissect and understand shopper’s in-store behavior. What happens at checkout is not nearly as important to influencing basket size and profitability as understanding shopper behavior during the shopping journey.

Amazon analyzes every step of the online shopping odyssey and knows how to transform shoppers into buyers. Retailers and CPGs have not had access, so far, to the same level of detailed data needed to really understand shopper behavior. Retailers and CPGs must join forces and collaborate to transform the way they plan, execute and measure the success of their businesses. And they must compete with Amazon or face extinction in a decade.

At IDXP, we are empowering Retailers and CPGs with a solution to the core problem: ineffective in-store promotions due to lack of actionable data. And the stakes are high: trade promotions are the Number 1 profit contributor for retailers and represent an investment of 30% of manufacturers’ gross revenues.
By combining shopper behavior with sales and promotion data, our technology reveals not only what was sold but how they could have sold more. Our proprietary algorithms and predictive analytics correlate a range of variables to better understand customers and dramatically increase average basket size. In one example, our solution recommendation to move a Colgate toothpaste promotion to an unconventional location (the pet food section!) generated a 56% boost in sales conversions. IDXP creates a powerful new competitive weapon to defend against the Amazon Assault while gaining a deeper understanding of your customers.

IDXP insights convert missed opportunities into basket-growing, brand-expanding advantages for Retailers and CPGs. The weak performance of in-store promotions has helped create a huge opening for Amazon in brick-and-mortar retail. IDXP trade marketing intelligence generates ROI breakthroughs for in-store promotions. Our solution strengthens the partnership between Retailers and CPGs so they can collaborate, innovate and compete against the Amazon Assault
to win the brick-and-mortar war and retain customer loyalty.

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