Executive Briefs

How Can I Compete in an Amazon e-Commerce World?

You can tell it’s a revolution when heads roll, and “heads” (brick-and-mortar stores) are rolling in retail. Sears and Kmart filed for bankruptcy. Toys R Us and The Bon Ton have gone out of business and many large chains are closing up large numbers of store fronts.

 

This is the continuation of a revolution that began 30 years ago. Wal-Mart brought low-cost goods to the shelf. At the time, retailers were rarely known for their investment in innovation and technology, but Wal-Mart went against the grain in the 1990s when it introduced the idea of high service level to customers at a low cost—offering a wide range of products with very high availability. Wal-Mart also pioneered the concept of service-level agreements with suppliers, in exchange for promises of high-volume purchases. These strategic vendor partnerships drove streamlined, integrated supply networks offering “everyday low prices” to consumers. They also led the way in providing vendors with point- of-sale (POS) data via RetailLink, so they could view demand as it unfolded to better meet their service agreements.

 

Amazon is now driving the next retailing revolution, bringing low-cost goods—and the shelf—to the consumer's home, via low-cost fast service times—that is, rapid fulfillment at low cost. In the past, consumers could get courier shipment of product to the home, but it was a costly luxury. Now, Amazon Prime offers customers one day, and even same day delivery in major cities. Amazon is using their economies-of-scale logistical efficiency to drive fast delivery e-commerce customer service.