Jun 18, 2017Industry experts have been saying for years that the sharp line between Internet-based and brick-and-mortar retailers would disappear, and that there eventually would just be "retail." This past August, Wal-Mart Stores agreed to acquire Jet.com, a fast-growing online retailer, for $3 billion. Then, last Friday, Amazon announced plans to buy Whole Foods Market, an upscale grocery chain, for $13.7 billion.
Many news reports played up the looming battle between the brick-and-mortar retail giant and the online retail giant. No doubt, there is competition between these two retailing behemoths—but the bigger picture is that these companies realized they needed to get into each other's space in order to remain relevant in the future.
Consumers don't just buy online or go to stores. Despite what some think, millennials do shop at stores, and even older shoppers now buy online. So it was inevitable that the line between physical and digital retailers would go away and there would just be retailing. But this natural evolution is disrupting a lot of physical retailers that are finding it difficult to merge their online and physical retailing operations, and it is not a given that Amazon will do well managing physical stores.
The retailers that succeed going forward will be those that effectively eliminate the distinction between selling online and selling in physical stores, and instead simply sell. Effective and innovative uses of technology are going to be critical. Merging online and physical stores requires a single holistic and accurate view of inventory.
"Buy online, pickup in store" (BOPIS) requires accurate inventory (see Get Hip to BOPIS), as does shipping direct from stores. And you can't have accurate inventory without RFID—I don't care what conventional retailers tell themselves. RFID is also going to be critical to the supply chain efficiencies that will enable large retailers to compete on cost.
Other technologies will be important as well, such as big data analytics. Amazon is the king of understanding shoppers' preferences, and if it can leverage that knowledge and technology in stores, it could prove to be a big competitive advantage. Oh, and by the way, drone deliveries will be a lot easier from a local Whole Foods/Amazon store than from a large warehouse.
It will be fascinating to see how this plays out. Will Amazon deploy the technologies used at its Amazon Go experimental store (see Amazon Aims to Revolutionize Brick-and-Mortar Shopping)? Will the company compete only in the grocery market, or will it use Whole Foods' upscale locations to sell other products as well? Will it use what it learns from running Whole Foods to get into other sectors?
What about the brick-and-mortar retailers? How will they respond? My guess is that some will innovate, some will stagnate and many will go out of business. Buying an online retailer, incidentally, is not a cure-all for what ails brick-and-mortar retailers. Most already have online stores, and those stores do OK. It's breaking down the barriers between online and physical stores that is critical. Traditional retailers will need to embrace change and new technologies. Are the up to the task? We shall see.
Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.
