Retailer’s Dilemma: To Chase or Not to Chase Amazon (Or, How Agile Can Change the Game)

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Consider a middle-aged guy running a race against his athletic teen-aged son. Try as he might, the reality is that the adult is not going to run faster than the teenager, and if the two of them keep running races, the teenager will keep winning. The best option for the dad is to change the game to one where he has a chance – say, golf or chess – and where the playing field is not only level, but where experience and skills gained over time can actually be a plus.

The lesson this metaphor holds for traditional retailers competing against Amazon and other digital natives is: don’t try to beat them at their game, because you won’t win. Rather, leverage creativity, innovation and your existing assets to your advantage to provide value, engage customers and enhance the shopping experience.

Let’s take two recent examples:  Sam’s Club is launching a program to ship a free tote bag of various snacks and drinks (valued at around $15) to any shopper who completes an online purchase. While there’s obviously a cost to the giveaway, the samples can be effective ads that spur future in-store purchases and generate new demand for featured brands.

Walmart, meanwhile, is pursuing a strategy to offer lower prices on a wide range of online-only items – provided the items are picked up at the store.  By leveraging Walmart’s logistics and supply chain expertise and store locations together with the digital capabilities of its Jet.com acquisition, the “Discount Pickup” program promotes products that can be cost-efficiently bundled and shipped to store locations. Additional pricing incentives such as discounts for waiving return options are also included.

In these instances, an innovative approach to combining online shopping with real estate assets and the in-store experience creates the potential for a more effective competitive posture against digital natives. Creative thinking, however, isn’t enough to successfully execute such initiatives. Finance must be able to quickly and accurately gauge the ROI of giveaway programs and other incentives. Logistics teams must identify optimal products and locations for shipping, and then integrate marketing input to identify products that customers want. 

These capabilities require seamless integration of myriad data sources and real-time insight into distribution, inventory, shipping and supplies. More specifically, they require agility to develop new applications and nimbly adjust business processes and IT systems in response to constantly evolving business expectations and marketing opportunities.  The application development and maintenance organizations of many retailers today, however, struggle to deliver this agility. Traditional offshore development models – while ideally suited for cost efficiently developing and maintaining stable applications – are simply not equipped to turn on a dime to adjust to new requirements.

For many enterprises, an agile development model offers the innovation, functionality and speed required by today’s retail environment. Agile’s iteration-based approach, coupled with a focus on visibility and communication and collaboration, enables teams to deliver functionality faster, and to rapidly move through the phases of requirements definition, development, QA and DevOps.  Agile solutions, moreover, can be delivered through a variety of sourcing models, including nearshore, onshore and hybrid, depending on organizational structure and business requirements.

Retailers competing in today’s digital age require innovation, creativity and a willingness to take risks. But without the ability to quickly respond to evolving business requirements and customer demands, even the boldest ideas won’t be implemented in a timely manner and will instead wither on the vine. In this context, rather than chasing Amazon, a better option for retailers is to use agility to enable the business to drive real innovation in a way that truly changes the game.

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Topics: Consumer Products & Retail

What is Nearshore?

Nearshore is "the transfer of business or IT processes to companies in a nearby country, often sharing a border with your own country", where both parties expect to benefit from one or more of the following dimensions of proximity: geographic, temporal (time zone), cultural, linguistic, economic, political, or historical linkages.

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