Amazon’s Making Retail Look more Like a Zero Sum Game

First Macy’s and Kohl’s, then the Pete Nordstrom “Mic Drop”.

“Comedy is not pretty.” – Steve Martin


Today, retail is increasingly like comedy.  Lots of data and little of it used.  Lots of digital, but little relevance.  Lots of loyalty programs, but little more than transactional offerings.  A joke for so many retailers, though not those who have filed for bankruptcy.

Last week was incredibly telling, as retailers continued reporting poor earnings.   Two former industry leaders, Macy’s and Kohl’s, resorted to the old “let’s change CMOs and then shift the marketing mix” game.  They even did it on the same day. Macy’s said it was shifting more print to digital and conversely, Kohl’s said it was doing just the opposite.  Not pretty in either scenario.

Subsequently, Nordstrom announced a 64% decline in its quarterly profit and lowered guidance for the year, citing Amazon as a key factor for the toughness in its business and retail in general. Interviewed in WWD last Thursday, Pete Nordstrom was explicit about Amazon’s impact:

“Clearly Amazon is a major factor in our industry. No doubt about it. How much does it impact us, I don’t know, but we take it really seriously. They’re a formidable competitor. Our traffic is down. If you look at the brick-and-mortar part of our business, that demand didn’t just entirely go away. Amazon has a lot to do with it.”

Here are three well-regarded retailers, with over three centuries of history combined, all struggling.

Amazon, which started only in the 1990s, has a very clear mission:

“Our vision is to be earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.”

Clearly, the definition of “anything they might want to buy online” includes lots of what might otherwise be bought at Nordstrom, Macy’s or Kohl’s.  It’s also going to include groceries (including Amazon’s own private label brands and – not surprisingly for Nordstrom – luxury goods).

Being the earth’s most customer-centric company naturally means delivering a great customer experience. For Amazon, it means using all the data it possesses to make it incredibly easy for customers to shop and purchase. It's exceeded the marketing strategies of typical retailers who try to win by being overly promotional, or overly transactional or having the same cookie-cutter loyalty program as everyone else. 

Yet, there is ultimately a soft underbelly to Amazon’s business. It doesn’t have the physical retail environment that allows for connecting emotionally with customers the way that merchants and store associates do. Retailers who identify and deliver on the in-store, emotional experience while leveraging the data they have on hand can still win. Macy’s understands this, but it appears Kohl’s still hasn’t figured it out. Nordstrom has made a lot of investments in the omni-channel experience, but the jury is still out on their efforts as they have clearly lost their “Nordstrom way”.

Ultimately, as Erma Bombeck said, “There is a thin line that separates comedy and tragedy.” What strategy will each of these brands decide to take? Our money is on customer-centricity (vs. just good customer service) and a data-driven experience that creates relevant dialogue between the brand and the customer. The future of loyalty goes well beyond loyalty programs, to truly deliver a customer experience that’s true to the brand and true to the customer’s need. No joke.