Results Count ... everything else is conversation.: Can traditional retail survive the pending FANG attack?

These best of times for consumers could be the worst of times for retail

There have been some absolutely amazing headlines this past week. In case you missed it, based on quarterly earnings of just $92 million, Amazon now has a market cap larger than Walmart! What? Perhaps without realizing it, we are plunging into a new era of "blurred lines" of commerce. A record pace of growth has been recorded by the gang comprising FANG (Facebook, Amazon, Netflix, and Google). But, the story beyond the numbers is far more significant. These are the best of times to be a consumer. And, woe be to the retailers without a strategy to compete with the disruption of the fearsome foursome comprising FANG.

Why this is important: In the unfolding "Clash of the Titans" we are witnessing unprecedented change that will disrupt the very foundations of traditional retail. The "e" in ecommerce today literally means how to connect with consumers everywhere.

Wall Street loves the numbers of fearsome foursome comprising FANG

Image Credit: Nokhoog Buchachon

Jim Cramer, host of Mad Money on CNBC, is credited for coining the acronym FANG. It is comprised of the famous four internet stars: Facebook, Amazon, Netflix and Google. Cramer has been bullish on these internet companies, and they have delivered some impressive returns for investors year to date:

Facebook up 22%
Amazon up 55%
Netflix up a whopping 125%
Google up 27%

Why are these companies doing so well? One trait that they all share in common is leading the way with innovation. Another reason they are doing well is because of YOU the consumer. Consumers are increasingly turning to mobile devices to shop, purchase, and consume media. And in turn, our mobility habits are driving huge increases in mobile ad revenue. The by product is that these companies have created new and multiple ways how consumers can connect and consume … they are dominating consumer relationships and engagement across multiple commerce platforms.

Amazon now worth more than Walmart? … Changing rules and metrics

Bezos has received continued criticism about Amazon investing in the future and not turning a profit. Well, Bezosinga! Amazon reported a profit last quarter of $92 million in contrast to a $126 million loss a year ago. All sounds pretty good until you look at Walmart's last quarter with a profit of $3.34 BILLION on quarterly sales of $115 BILLION. By sheer numbers, Amazon is just a fraction of Walmart's size. So, how come analysts now value Amazon's market cap at $248 billion versus Walmart's cap of $233 billion?

Image Credit: Stuart Miles

The short answer is that the rules are changing, and changing rapidly! Bigger is not always better in the eyes of the analysts and consumers. While Walmart is still the largest company in gross sales, sales and profits have not been growing.

Amazon has become the darling of Wall Street for a number of reasons:

Amazon is adding customers at a rate of 14% year over year
Amazon grew 27% year over year on Q2 (up from Q1's 22%)
Amazon has 44 million US Prime members paying $99/year
International Prime sign-ups are outpacing those in the US
Amazon sold more units on Prime Day than last year's Black Friday
Prime Now same day delivery has expanded to 9 cities
11 Emmy nominations for Amazon's "Transparent"
6 new kids videos developed
350 Amazon web services, including scheduled install & repair in select cities
Agreements for new solar and wind farms

FANG is changing the playing field by engaging YOU everywhere

While Amazon is typically described as an online retailer, the other FANG members are typically not associated with retail. Yet, their laser focus on consumer relationships and engagement is directly impacting consumer behavior, and ultimately retail itself.

Case in point – "Buy". Facebook may not have the right combination yet, but their "Buy" button reflects a growing trend in enabling consumers to make an immediate purchase with one click when they encounter something they like. Netflix is talking about a parallel "Buy" option with video content. And, let's not forget Google with the most widely watched video channel in the world – YouTube, which has both ad and buy options.

The only rule of retail today … There are NO rules!

In the "old days" of retail a mere 20 years ago, there were defined "Classes of Trade" or lines of business. There were department stores, consumer electronics specialists, fashion stores, shoe stores. Much of retail was defined either by the nature of the products sold, or the physical type of store such as department stores, strip malls or mass merchants.

There is no sacred ground or defined turf for today's retailers. Retailers such as Amazon are selling everything, and even developing their own media content. Beyond books and media, Amazon is now selling all kinds of fashion, as well as install and repair services in major cities. Yet, Amazon is also piloting delivery of products sold to both lockers in stores, and to physical store like sites for pickup. In short, Amazon is all about "you having it your way"!

What all this means for consumers – You are the King and Queen!

I have said it many times and will continue to underscore the dramatic shift we are watching unfold. Traditional retailers are NOT the ones orchestrating the change. It is you the consumer armed with a smartphone that is changing the paradigm of shopping anytime and everywhere. What this means is unprecedented empowerment and choice.

Greater, almost unlimited choice in products and services available
Greater choice in where you shop, when you purchase, and how
Choice of delivery to door, pickup in store, or at a location of choice
Choice of speed … two days free, next day, same-day and even within hours
"Clubs" bundling value … e.g. versions of Prime online, in store or both

And, the list goes on. These are truly the best of times to be a consumer in terms of choice, selection, price and the overall value equation.

The most "challenging" of times to be a "retailer"

As evidenced by Amazon now having a larger market valuation than Walmart, size doesn't matter if you are not growing or adapting to change quickly enough. As I mentioned in a previous post, a big part of the future of retail will be "logistics" that can adapt to the changing behaviors and demands of consumers.

If Walmart is nimble, it has the capital and thousands of stores where it could more effectively compete on BOPIS (Buy Online Pickup In Store) than an Amazon, which currently doesn't have physical store locations. But, that's a big IF in terms of whether Walmart can offer the same Amazon- like quality of seamless service beyond BOPIS.

And, what if you are not the size of Walmart? What if you are a traditional bricks and mortar retailer without a significant web presence? What if you don't have the logistics, systems … and culture to be able to offer the consumer centric services that FANG can?

3 Core essentials for retailers to survive the FANG attack

IF you traditional store based retailer, or a classic ecommerce website, the current FANG results and trends should be keeping you up at night!

Engage consumers where they are and how they want to engage.

Consumers now shop anytime and everywhere … not just in stores and not just online. Retailers need to connect during the consumer purchase journey, and more importantly, after the initial sale. Consumers want choice, and they want to drive.
It's no longer just about sales … the future is about ongoing relationships.

Retailers focused on selling "products" will be the first to fail. Right behind Amazon and Walmart is the new player Jet.com, which promises even lower prices. If we have learned anything from FANG, it is about establishing relationships and value beyond selling products at the lowest price.
People and customer experience are still the trump cards!

Does this mean the demise of the retail store? No, not yet. But, the law of retail survival is more critical than ever … Differentiate or Die! FANG is on an all-out campaign to differentiate through choice, services and options. If you are a store owner, you have one huge potential differentiator – live customer experience. But, to leverage that requires investment in the people who can make a difference.

The underlying message here is that change is inevitable, and it is being driven by empowered consumers who are realizing the value of choice and flexibility. FANG is not some new super breed of "retail killers". FANG is an example of 4 very innovative companies finding ways to monetize engaging with consumers anytime and everywhere they want to consume.

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Sources:

Morning News Beat: Friday Morning Eye-Opener: Numbers Game, Kevin Coupe; July 24, 2015
Retail Customer Experience: Amazon earnings reveal big sales, accomplishments across business lines, Judy Mottl, July 23, 2015
Twice: Jet.com Takes Flight, July 21, 2015
USA Today Money: Will FANG (Facebook, Amazon, Netflix, Google) strike again?, Jessica Guynn; July 24, 2015
Buy Button Image: Nokhoog Buchachon; Freedigitalphotos.net
Computer Image: Stuart Miles; Freedigitalphotos.net