Retail's battle plan in war against Amazon

More than 200 guests celebrated the launch in Shanghai of Explorium, the Fung Group's laboratory to explore the future of retail.
Source: The Fung Group
More than 200 guests celebrated the launch in Shanghai of Explorium, the Fung Group's laboratory to explore the future of retail.

For traditional retailers, it's time to grow up.

After years of being seduced by technologies that looked sexy on the surface but in practice, didn't do much to help shoppers, the most buzzed-about ideas at this year's National Retail Federation convention offered more tangible benefits to businesses and consumers.

In fact, several of the technologies at the show are already being tested or rolled out. That's a far cry from years past, when certain technology vendors touted their products as the future of retail, when they hadn't yet been challenged in the real world.

"The industry has definitely learned," said Elana Anderson, senior vice president of worldwide marketing at Demandware technology firm. "We're starting to see some of that maturity."

Still, retailers are far from done. They continue to test new ideas and learn from these experiments, as they work to better compete against Amazon.

Here are five key themes from the NRF conference, which wrapped up Wednesday.

It’s no longer why, but how

Demandware's Anderson said retailers are no longer asking why they need to invest in both their physical and digital stores; now, they're asking how.

With that question comes a realization that they can't invest in every new technology that comes to market. Instead, they need to pick and choose the solutions that make the most sense for their shoppers and product.

For example, a digital mirror that allows shoppers to virtually try on eyeglasses may be a great solution for Lacoste eyewear; yet no matter how buzzworthy they are, virtual try-ons are probably not the right solution for a denim shop, Anderson said.

"It's very easy to lose your way," Deloitte's Rod Sides said.

Retailers are searching for their own solutions in innovative ways. Brands from Toys R Us to Stride Rite have teamed up with the Fung Group and IBM on the "Explorium," a Shanghai pop-up store where they can test different store formats and technologies among a group of volunteer shoppers.

Convenience — and service — are king

What good is an extravagant digital screen if it doesn't provide shoppers with more information, or allow them to make a purchase? Instead of being "wowed" by technology that looks great on the surface, retailers are wising up to the fact that it also needs to serve a purpose.

Enter Skip, a phone app that allows shoppers to skip the line by scanning their groceries as they go, and paying for them through their device. Instead of waiting in line at the traditional checkout, customers undergo a quick audit (à la Costco) on their way out. It's being piloted in Gerrity's Scranton, Pennsylvania, store, and will be rolled out to all nine of the grocer's locations by the end of the year.

The Skip app allows shoppers to scan items as they go.
Source: Skip
The Skip app allows shoppers to scan items as they go.

"If it doesn't save you time, save you money or help you with the discovery process … you have to really look at what's going to be the return on that [investment]," said Steve White, vice president of multichannel commerce strategy at Razorfish.

There’s more to say about pricing

Price competition was an Achilles' heel for retailers over the holiday, as steep promotions contributed to the industry's slower-than-expected growth. Brian O'Malley, a partner at Accel Partners venture capital firm, said pricing is an area of the market that needs to be revisited.

Retailers to face another major challenge: Macy's CEO
Retailers to face another major challenge: Macy's CEO   

While speaking on a panel about venture capital funding, O'Malley said companies are only starting to "scratch the surface" regarding ways they can better compete on price. He said shoppers are beginning to understand that two of the same sweater could be priced differently, if one is in a color that's flying off the shelves. That presents an opportunity.

Jenn Markey, vice president of marketing at 360pi, said retailers are also trying to figure out how to implement prices that vary by geography. Similar to dining at a national chain, where the menu prices depend on the location, a shopper in New York City might pay more for a product than someone buying in Gainesville, Florida.

The way to beat Amazon…

Much of Amazon's popularity can be attributed to one key factor: It carries the same products as other retailers, but at a lower price. So what if, instead of trying to compete on price, retailers instead competed on product?

360pi's Markey and Deloitte's Sides both predicted that more retailers will focus on private-label goods to help protect their margins. Not only do these products generate bigger profits for retailers, they also provide them with exclusive inventory that consumers can only find on their site — meaning they can't shop around for the lowest price.

… And fend off the next disruptor

Finding ways to fight off Amazon is all well and good, but what about the next disruptor? While it's impossible for retailers to predict what or who this may be, they can do their best to be prepared.

Kathryn Howe, Cisco's director of retail digital transformation, said one way to do so is to spend on technologies that could serve a dual purpose down the line.

For example, a food retailer may decide to invest in a system that alerts them to potential health hazards in a region where they're growing produce. While that's initially helpful to them, if an issue were to occur down the road, they could easily make that data available to concerned customers.

"The real terror is the one that you don't know," Howe said. "Just be ready."