Three ways local businesses can survive the on-demand threat
How worried should brick-and-mortar businesses be about companies like Amazon? Columnist Adam Dorfman weighs in with some thoughts on how local players can stay competitive.
Is there any business that Amazon can’t disrupt?
In recent weeks, I’ve seen Amazon entering businesses ranging from home furnishings to banana distribution to grocery stores. The company that arguably introduced the on-demand economy continues to spread its influence across multiple industries: fashion, entertainment, home automation… you name it, Amazon is there.
Furthermore, Amazon has seemingly triggered the rise of an entire on-demand economy in which people can order what they want and when they want it without having to pay a premium for convenience and speed.
And the key season for retailers — the winter holidays, when consumers are more time-sensitive than ever — is coming right up.
The major players in this market include names you know, such as Lyft (which Amazon is competing with for drivers) and Zappos (which Amazon acquired). New entrants are bursting on the scene, too, such as Instacart, the Internet-based grocery service.
For businesses that operate brick-and-mortar locations with traditional models of generating revenue, the rise of the digital on-demand businesses can look disheartening.
If it seems like no company is safe from on-demand disruption, it’s because no company is safe. That said, some businesses stand a better chance than others to counter the on-demand tide.
Here’s how I break down the factors that can help local businesses successfully compete:
Convenience and cost
There remain a host of services and products where it just makes more sense to leave your home and go to them. Personal services often fall into this category. Although it’s possible to get a haircut and manicure at home, the barbers and stylists delivering these services would charge such a premium that the time saved wouldn’t be worth the extra cost.
The same holds true for getting your automobile serviced. It’s more convenient, as well as necessary, for you to hop in your car and visit a mechanic to have access to specialty equipment required for services like this.
On a more serious note, even though more healthcare than ever is being delivered at home, receiving extensive healthcare usually requires you to visit a facility where the providers and equipment are under one roof.
Businesses can survive the on-demand world by making it easier for consumers to get access to specialty products and services clustered in one place. But such businesses are not immune; if we’ve learned anything about technological change, it’s that tools of production can be consolidated into smaller, more portable devices or become obsolete.
Ten years ago, who thought we could complete complex tasks on our mobile phones? And as on-demand transportation services continue to take hold, consumers will require gas stations and auto repair shops less frequently.
High-touch businesses rely on personal interaction to attract and keep people. Personal services often fall into this category.
Many hair salons gain a following because of the popularity of their stylists, who get to know their customers, families and lives through the interaction that comes with getting your hair done. The same holds true for personal care and fitness categories where getting to know the people in the facility enriches the experience and makes it more likely that you will spend time where they are.
High-touch businesses play off the emotional and intangible appeal of human interaction, not convenience or price. One of the reasons retailers have been disrupted by the on-demand economy is that they often lack this high-touch factor — mostly due to their inability to retain talent on the front lines of customer service. I don’t go to my local big-box retailer because I have a particularly warm relationship with the staff. I don’t remember their names, and they don’t remember mine.
The exception is family-owned retailers that retain a stable employee base year after year: that indie bookseller where everyone on staff knows you and your family, or that shoe store that has been in the same family for decades.
High-touch does not mean “independent,” either. Many Starbucks coffee shops rely on the high-volume, repeat nature of their business to make it possible for the baristas to get to know their customers personally, even if for but a fleeting moment of greeting each customer by name.
But high-touch does not necessarily mean personal touch. With its effective algorithms, Amazon has demonstrated it can get to know you as well as your local retailer and offer recommendations based on your purchase history. But an algorithm can’t provide the personal touch. Businesses that understand how to form relationships based on the human touch will withstand the Amazon threat for quite some time.
If you’ve ever been to an Apple store or Bass Pro Shop, you understand the value of an experience. Bass Pro Shops are experiences in and of themselves. They immerse you in an environment that celebrates the great outdoors, featuring aquariums, archery ranges, fly-fishing demos and restaurants.
On the other hand, Apple stores don’t overwhelm you with a lot of bells and whistles. They provide an experience in more subtle ways, such as their elegant design, use of comfortable furniture, and an open layout that encourages shoppers to stay and browse.
In fact, they’re doubling down on the power of the experience with their recently announced “Today at Apple” program. Through this program, Apple will give shoppers access to hands-on educational sessions with artists, photographers and musicians:
We’re creating a modern-day town square, where everyone is welcome in a space where the best of Apple comes together to connect with one another, discover a new passion or take their skill to the next level.
Both Apple and Bass Pro Shop demonstrate what might be the ultimate advantage that brick-and-mortar businesses have in the on-demand world: the experience. Amazon does many, many things for me, but providing a special experience is not one of them.
The user experience is fine, but does anyone ever get thoroughly immersed in Amazon like you do when you step foot into a Tiffany’s jewelry store or a Shinola watch boutique? Amazon can design for efficiency, but not for experience (so far).
Ultimately, I don’t think any business is immune from the on-demand world. Advances in artificial intelligence, augmented reality, and virtual reality alone promise to reinvent the online world into the kind of immersive and playful experience you get at the best brick-and-mortar locations.
But those days are far off. There are too many near-term obstacles to overcome (such as access to the equipment and a lack of content) for on-demand businesses to compete on experience.
For now, brick-and-mortar businesses can compete by focusing on their proprietary assets — among them their experiences, the human touch and their unique services — and amplifying those assets with the right data and content to stand apart at the location level.