Did you hear that? I heard it. That huge thud. It was the sound of traditional retailers’ playbooks hitting the bottom of the trash can. It was the sound of boardroom doors closing throughout the retail sector. If traditional retailers are to survive and succeed, it had better be the sound of incremental thinking dying.

Retailers have been mostly incremental in adapting to the Amazon threat  ̶  building an online presence, using technology to better track inventory, improving supply chain components, and chopping the tail off underperforming store footprints. All of this is logical and rational, but way too slow. Amazon’s acquisition of Whole Foods changed everything. Through the Amazon lens, we are getting a sharper view of the future of retail and, unsurprisingly, it isn’t just clicks. While this does suggest there is a value to having a physical presence, don’t settle in comfortably just yet. As Amazon goes to traditional stores, they will bring an Amazon culture and mindset with them. They will bring Amazon technology. They will bring Amazon capabilities. They have written the rules for e-commerce already. They are about to rewrite the rules for physical stores.

Bricks and Clicks Are Both in Our Future

In some categories, such as food, it is clear that physical stores are necessary. The Whole Foods footprint will give Amazon a platform for incubating lots of new ideas to improve the customer experience. Today, most box retailers still have limited effectiveness doing this because they have underinvested in it in both money and thought. For more than a few, the future arrived faster than their balance sheets and scale were prepared for, and they are struggling to make this transition. Retail in the United States was scaled for Baby Boomers, but the future is not about them. It’s about the Millennials. They came of age with phones and tablets, not catalogs. Their future is here and now.

There is no doubt retailers, broadly speaking, are as unprepared for this reality as they were when Amazon was just a quaint, online seller of books. The ones that will remain relevant have a way out, but it will require a whole new approach. The good news is that the schematic for success in the new world has been laid out:

  1. Know your customer. This requires enterprise-wide systems from point of sale to manufacturing plant to develop a customer graph. What have they bought before? What might they buy? What is the lifetime value of this customer? Amazon can answer these questions. This is Amazon’s DNA.
  2. Be able to serve the customer wherever and whenever the customer wants. This means omni-channel capabilities, flexible payment solutions, end-to-end knowledge and abilities from point-of-sale to warehouse, while being payment method agnostic (from Mastercard to PayPal to Google Pay), so the customer can do what they want to do. This is where Amazon is now rapidly moving.
  3. Be able to do all of this efficiently and profitably. This is, after all, the end game. If you can’t do it with good economics, then you won’t be doing it at all.

Amazon Wrote the Textbook on All of This. Better Read It Quick.

Obviously this new retail reality demands a fresh approach and significant investment. Warehouse management, supply chain, and omni-channel infrastructure systems are a great start necessary to seamlessly integrate online with physical where stores act as distribution points and showrooms. Retailers have to attack the external aspects as well. There is no “corner of 5th and Main” store on the Internet. No one drives by your online store. You have to drive them there. That requires a new understanding and approach to marketing as well, as if you didn’t already have enough to do.

Customers want it now. They want it over here, not over there. They want to pay with something your cash register can’t accept. Oh, and you have to make money while doing all of this. Get with it, and fast.

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