I had the pleasure of attending IRCE 2017. The conference covered a range of topics within digital commerce. Below I highlight key company strategies that I think will be crucial in the future of retail.
Amazon spends big on technology and logistics
As Managing Director for internet companies at RW Baird, Colin Sebastian tracks Amazon’s moves very closely. He highlighted Amazon’s focus on technology and logistics.
Amazon spent over US$30 billion in 2016 on research and development—more than other technology giants, such as Alphabet, Microsoft and Apple. The company is focusing its efforts on machine learning, computer vision, voice recognition, deep learning and neural networks. These technologies are fueling new products at Amazon, which Amazon may turn into products for other companies. In particular, he pointed out Amazon’s Just Walk Out Technology, improvements to its logistics networks, inventory sourcing for Amazon Business and scaling its own private label and advertising business.
Amazon is continuously improving its logistics capabilities to overcome customer complaints about delivery times and product condition. Within this logistics network, Amazon has a particular focus on local delivery. Some of the benefits to having a robust local delivery network are:
- Lower shipping costs
- Faster, reliable delivery
- Wider assortment, such as perishables
- Optimal inventory
Sephora integrates mobile seamlessly into the customer journey
Mary Beth Laughton, VP of Digital at Sephora, explained how the retailer leverages mobile to feed its customers’ mobile addiction and enable experiences that teach, inspire and play.
To feed the mobile addiction, Sephora uses mobile to drive the customer to stores, engage with the customer in the store and inspire her to return to the store. The Sephora assistant on Facebook Messenger is a way for the retailer to drive customers to the store, such as discussing in-store availability. Once in the store, Sephora’s app becomes an in-store shopping companion that shows the customer her loyalty rewards program, enables her to read reviews on products and view past purchases. Once she’s left the store, Sephora will send personalized messages to inspire her to return.
Sephora is digitizing the makeover experiences to teach, inspire and play. Its Virtual Artist tool allows store associates to help customers try out many different looks virtually. The products can be saved to the customer’s account. The store associate can also spend personalized emails with the product list, tips and photos. Customers can also find inspiration through its BeautyTalk and The Beauty Board online communities, which have millions of user generated content.
Ms. Laughton recommends that retailers create their own addictive mobile experiences that enhance the customer journey, including in the store. She highlighted that mobile isn’t just for transactions but can be used for education and inspiration.
Amazon Business is open for business
Peeyush Nahar, VP, Amazon Marketplace, spoke about what’s next for Amazon. He highlighted Amazon Business, which launched in April 2015 (replacing AmazonSupply). The service is in US, UK and Germany with more markets to come. Sellers have access to customers of all sizes in all industries (consumer products, government, education, manufacturing, banks, energy, consulting, healthcare, restaurants, entertainment, and telecommunications).
Amazon Business has over 45,000 business sellers, 400 million products and 10 million products with bulk purchases options or business discounts.
Amazon aims to use innovation to accelerate business to business sales. It’s launched 150 features for the website since it launched and aims to simplify the purchase process to one click only.
Brands embrace direct to consumer sales
The number of brands on the Top 500 Internet Retailer list, which ranks the largest online retailers, was 88 in 2016, up from 51 in 2009. The turmoil in traditional retail is one reason that brands are looking to sell direct to consumers online. Other reasons include the ability to develop a direct relationship with customers, reach a greater audience, and retain more control over business areas, including merchandising and assortment.
Direct to consumer is not without its challenges. Callie Lushina, VP of Marketing at Bioelements and Matt Grimm, Director of RST Brands, both highlighted that the direct sales teams had to reassure their traditional wholesale partners that the direct sales business would not undermine their business. Both recommended frequent and transparent communication to build trust. Both companies have seen their direct sales business grow alongside their retail partners.