Well it finally happened. Upon reporting surprisingly positive second quarter results, Amazon’s market value surged above $250 billion, surpassing Wal-Mart for the first time. Investors clearly see a much brighter future for Amazon than they do for Wal-Mart since Amazon is worth more than Wal-Mart despite having only $89 billion in sales compared to $486 billion for Wal-Mart. Given that only 7% of retail sales in the U.S. occur online, this is a story about the future of retail. So if you are a traditional retailer does this mean you should raise the white flag and declare defeat? And, what does it mean for the future of retail POP displays?
While the media is quick to hype Amazon’s market value rise as a changing of the guard, there are several things to keep in mind. First, much of the credit for Amazon’s stellar Q2 performance belongs to their cloud-based computing business which is a distinct business from its online retail business. Second, Amazon’s online growth has been impressive in selected categories such as books, electronics, toys, and baby products, but its market penetration in numerous other categories has been less significant.
Third, human nature will ultimately serve as the limiting factor in the penetration of online sales. That is, even if it is cheaper and more efficient to purchase online, it’s part of our nature as humans to be interconnected and to interact with other humans in a way that cannot be satisfied through digital means alone. It’s one of the reasons movie theaters have not gone out of business. The majority of humans do not just want to sit at home and stream movies even though it might be cheaper and more time efficient than going out to a movie theater. Rather, they want the experience of getting out of the house, interacting with others, and being part of something larger. It’s the same with shopping at a traditional retail store. It’s about the shopping experience and the interaction with people and our culture, neither of which can be satisfied through online purchasing to the same extent.
So what does it mean for retailers? It’s safe to say that Amazon and online retailing are here to stay. But, it is not time to throw in the towel just yet. Most retailers already have a significant online presence and have been pursuing omnichannel retailing strategies for quite some time. What it means for the brick and mortar side of the business is that retailers need to focus on creating shopping experiences that surpass the experiences that are available online. This can be done in many ways, but good old fashion customer service and having a knowledgeable sales staff are good places to start. Unfortunately, many retailers are doing exactly the opposite- trimming sales staff and compromising the shopping experience to make up for lost sales.
Apple retail stores are a good example of what is working in physical retail. Apples stores are always buzzing with activity. The shopping experience is fun, cool, efficient and enjoyable. It makes it worth the trip and is way better than just ordering an Apple product online.
And what about the role of retail POP displays? As online sales continue to grow, the need for effective, engaging, and transformative retail POP displays will become even more important. POP displays need to educate, captivate, and motivate shoppers to buy, but more importantly they need to present products in a way that adds to the shopping experience and makes it worth the shopper’s time and energy.
This is a direct call for the POP display industry to innovate, evolve, and understand the importance of its role in creating the connection that is vital for traditional retailers to establish in-store.
Jim Hollen is the owner and President of RICH LTD. (www.richltd.com), a 35+ year-old California-based point-of-purchase display, retail store fixture, and merchandising solutions firm which has been named among the Top 50 U.S. POP display companies for 9 consecutive years. A former management consultant with McKinsey & Co. and graduate of Stanford Business School, Jim Hollen has served more than 3000 brands and retailers over more than 20 years and has authored nearly 500 blogs and e-Books on a wide range of topics related to POP displays, store fixtures, and retail merchandising.
Jim has been to China more than 50 times and has worked directly with more than 30 factories in Asia across a broad range of material categories, including metal, wood, acrylic, injection molded and vacuum formed plastic, corrugated, glass, LED lighting, digital media player, and more. Jim Hollen also oversees RICH LTD.’s domestic manufacturing operation and has experience manufacturing, sourcing, and importing from numerous Asian countries as well as Vietnam and Mexico.
His experience working with brands and retailers spans more than 25 industries such as food and beverage, apparel, consumer electronics, cosmetics/beauty, sporting goods, automotive, pet, gifts and souvenirs, toys, wine and spirits, home improvement, jewelry, eyewear, footwear, consumer products, mass market retail, specialty retail, convenience stores, and numerous other product/retailer categories.