Brick-and-mortar retailers like Target, Wal-Mart, and Best Buy have been struggling to find ways to stay relevant in the new Amazon age. After trying to make incremental changes to stem losses, these retail giants are now realizing they have to make fundamental changes to their marketing and business strategies if they want to survive. CNN Money recently reviewed Target’s efforts, and results, in this article. After disappointing holiday sales in 2016, Target allocated $7 billion to modify their marketing mix. The article outlines changes made in every one of the 4 P’s and is a great example of how marketers need to consider all aspects of their marketing mix to create an effective marketing strategy.
Amazon is a juggernaut that seems to enter one market after the next. Most of these ventures are successful for the firm but not all work out well. A recent example relates to Amazon’s plans to sell pharmaceuticals to hospitals as detailed in this USA Today article. Amazon’s goal was to apply their logistics expertise and bulk savings benefits to pharmaceuticals and start supplying hospitals directly. According to the article, this is looking harder than they originally intended for a a couple of reasons. The biggest issue seems to be challenges disrupting the existing purchasing process. Hospitals have existing processes and suppliers and they appear to be unwilling to change those processes. Another possible issue could be logistical – transporting materials that need to be refrigerated.
There are several marketing concepts that could be tied to this article. There’s a logistics management issue Amazon would have to address, there’s a direct link to personal selling and the potential advantages that is providing incumbents, a general opportunity to discuss the buying behavior of business and organizational customers, and there’s the specific issue with the existing buying centers being unwilling to change their purchasing processes – presumably even when that change could result in lower cost. That last issue could potentially represent an ethical discussion as well. If insurance companies pay the bill, should hospitals be worried about cost management?
Amazon is a retail juggernaut. Last year the company was responsible for 5% of total US retail sales (online and offline). Their growth and expansion seems unstoppable at the same time that we see other iconic retailers (Sears, JC Penney, Radio Shack, Payless Shoes, etc.) struggling to stay alive. Given the convenience and potential for cost savings it’s easy to say that the future of retail is online and brick-and-mortar establishments are a thing of the past but this FastCompany article,”The Future Of Retail In The Age Of Amazon“, offers a different perspective. Fair warning – this is a fairly lengthy article but it provides a number of good discussion topics.
The article starts by discussing the decline in traditional malls but talks about investments being made by the Mall of America to attract younger buyers. While online shopping has certainly contributed to traditional store closures, the article also claims over-expansion and lack of investment are significant contributors to decline as well. Even with all of the well publicized store closings there was still a net increase of 4000 stores in 2017 and a higher increase expected this year. The article spotlights Target and talks about some of the investments they’re making to move back to partnered custom products and emphasize visual merchandising in their store design. Much of the article alludes to the idea that a focus on the shopping experience can provide a unique value proposition that allows traditional retail to differentiate itself from online retail.
Students do a surprising amount of traditional retail shopping and you can get some good discussions started when asking them to articulate why they choose to buy in-store as opposed to buying online.
This week Amazon opened their prototype grocery store to the public. What’s so different about it? It’s entirely self-serve with no checkout process. Hundreds of cameras and sensors identify what a customer puts in his/her cart and automatically charges their account when they walk out of the store. More details can be found in this USA Today article. While the concept may not seem revolutionary, the experience is fairly disruptive as compared to the current grocery shopping paradigm. Not only does it require use of a specialized smartphone app, it also challenges decades of ingrained behavior – the checkout counter is the last step of the retail shopping experience.
Amazon frequently pushes the envelope with new technologies and concepts. Some are a tremendous hit and others are spectacular failures. Which do you and your students think this will be? If you were responsible for a national rollout, how would you build your marketing plan? This concept will clearly appeal more to Innovators and Early Adopters and receive resistance from Laggards and the Late Majority. Can you effectively use that information to target a marketing campaign or is it impractical in this scenario?
Every few months there is an article about the end of the brick-and-mortar retail era. Chain after chain disappear, often citing Amazon as the primary driver. This article from the USA Today lists 15 retailers that declared bankruptcy in 2017. Is brick-and-mortar retail truly doomed?
Ask your students what they would do if they were responsible for marketing for a brick-and-mortar chain. Can Target, Best Buy, and Wal-Mart survive in the Amazon age? How? This can lead to a good discussion on differentiation and competitive advantage. Capture those ideas on the board and then ask them to design promotions that can effectively communicate those ideas. What type of promotion? Where would it be seen? What is the message?
If you have time, ask them if there’s anyone that could displace Amazon and force them into bankruptcy. It may sound like an absurd idea but remind them that many strong brands like Blockbuster, Barnes & Noble, Kodak, Macy’s, and Sears were once considered icons that would last forever. How can you beat Amazon? Can Amazon undermine their own success and open the door for competitors?