Amazon is at it again…
In the last week, they’ve had not one, but two major announcements.
The first — last Friday — was their announced agreement to buy grocer Whole Foods. That’s a total coup on the grocery business. And a sign that the one major consumer industry that hasn’t been totally disrupted by ecommerce is well on its way.
And then today, another big move — that doesn’t have a billion-dollar price tag, so it’s not sending the same shock waves. Although it may have similar long-term impact. Amazon announced today that they’re going to send you clothes before you buy them, as part of a new program called Prime Wardrobe.
Here’s the basic details.
— If you’re already a Prime member, you’ll automatically have access to this new program at no extra charge.
— You pick between 3 and 15 items of clothing that you are considering buying, and place your “order,” probably a lot like any other order — with one big exception. You don’t pay for any of the clothing.
— Amazon ships the clothing to you in a resealable box, with prepaid return shipping label included.
— You try on all the items you requested, and decide what you like, and what you want to keep. You ship the rest back.
— Your credit card is only ever charged for what you keep.
Last week I wrote a post with an example of How to create an irresistible offer. Amazon nailed that concept with this one. Try it, and if you don’t like it, you never pay for it.
Amazon was on the cusp of becoming the world’s largest clothing retailer anyway. This will likely seal the deal.
The biggest friction point when it comes to online clothes shopping is the “dressing room experience.” Basically, if you shop for clothes in person, you can try them on first, and make sure you like them before you purchase. Amazon just recreated that in the comfort of your home.
This represents the disruptive force that’s killing local retail…
In the last 90s, before the rise of Amazon (and other lesser ecommerce forces), local retail was thriving.
High-end shopping malls were being built in suburbs across America.
Retailers were doing as well as they’d ever done.
We saw the rise of the big box store.
Gentrified urban areas were getting brand new shopping districts.
Retail was the place to be.
Today, roughly two decades later, retail is dying.
Stalwarts of both niche and mainstream retail have declared bankruptcy. Those that haven’t yet have sold off assets, downsized, and are struggling to compete in today’s ecommerce economy.
And as we’re seeing with Amazon’s recent moves, even industries like groceries and clothing that have managed to to stay afloat due to the consumer preference for in-person experience are now being jeopardized.
This is creative destruction at work…
In the early 20th century, the automobile was taking America by storm.
Henry Ford added the moving assembly line (common in other industries, such as meat packing) to auto manufacturing. That and a few other shrewd business moves, and Ford’s cars were suddenly available to the mainstream American consumer.
We don’t think about it now, but this was incredibly destructive to other American industries.
For example, the horse and buggy industry.
As cars replaced travel by horse and by horse and buggy, suddenly entire industries were irrelevant and put out.
Massively creative technological and business forces invariably destroy what they replace.
The end result is usually faster, cheaper, better ways of doing what you did before.
But the transition is painful.
Businesses that don’t innovate to keep up with changing tech (whether we’re talking Amazon Wardrobe or the whiz-bang Ford Model T) die an agonizing death.
Today, we’re seeing many of the hottest retail locations from the late 90s boarded up and closed, as Amazon has taken their shoppers and offered better selection faster, cheaper, better.
And yet, there are some who will thrive…
If you were in the “horse ride experience” business, Ford’s Model T couldn’t touch you. Because people don’t buy an automobile to replace a horse ride experience.
Today, a horse ride has become a premium, a luxury. People pay more for it.
That’s what will win tomorrow when Amazon and other forces use digitization and collapsing supply chains to disrupt clothing, grocery, and other industries.
A local grocery store chain is experimenting with restaurants in the grocery store. While at the same time, they’re delivering groceries to your home in vans.
They’re both competing with what is likely to be Amazon’s new business, and simultaneously refusing to compete by getting customers in the store for an experience, rather than just to buy food.
Expect boutique stores that represent experiences to thrive, even as a bigger and bigger portion of our grocery list is bought and paid for online, dropped off at home.
Discount grocery chains will suffer. Farmers’ markets will only grow.
What about retail clothing?
A few years back, I had a crazy idea. I think it was when I was sitting on an uncomfortable chair outside the fitting rooms at some clothing store while my wife was trying on 15 different outfits.
Make the dressing room the central experience of the clothing store.
Build your entire clothing store around a runway, with seating. Serve drinks. If appropriate, have a bar.
Don’t make it about buying clothes. Make it about the social experience of going out with friends, and putting on a show as you model the different clothing. Turn clothes shopping from an errand into a social event.
Does this work for all clothing stores? Absolutely not. But in an era where most clothes shopping is moving online, the only way to fight back is to do it on your terms, not theirs.
So… What the heck does this have to do with your business?
All the same forces that have led Amazon to grab an ever-increasing share of retail are going to keep disrupting industry-after-industry.
A good summary can be found in Peter Diamandis’s 6 Ds of Tech Disruption.
— Deceptive growth
Basically, starting with the moment you can make anything digital (everything from the shopping experience to medical diagnosis to writing sales copy), it’s on a first-slow-then-fast exponential path to becoming practically free.
There’s a famous old Radio Shack ad that circulated around the internet a while back. It was a page full of technology with a total retail value of probably at least $5,000. The point it made was that most smart phones you get today contained all the same tech for around $500, and the phone made all of it faster, easier, better. If you’d told Radio Shack execs this would happen when they ran the ad, they would have called you crazy. Now they’re out of business.
It’s not enough to sell products or services going forward — you only compete by selling experience…
Forces like internet technology, collapsing supply chains, distributed manufacturing, and more will all lead to an ever-shrinking margin on products and services.
Things that used to command massive premiums will become cheap or free. Things that were rare will become ubiquitous. The coveted will become commonplace.
This doesn’t mean you should get out of those businesses. In many cases, they will be the first opportunity you have to start a customer relationship.
But they will no longer be profit centers. Products and services will no longer be all you need.
The businesses that succeed going forward will be the ones that create experiences.
If you were in books or mass retail, the time to do this was 10 years ago.
If you are in groceries and clothing, your clock is ticking.
Those of us in more niche markets or specialized industries? We will get ahead by moving toward creating experiences (not just products and services) right now.
Yours for bigger breakthroughs,