Down to Business: Amazon hulking over retail landscape

'When elephants dance, mice get trampled'
Amazon already has bookstores in a handful of cities.
Amazon already has bookstores in a handful of cities.

Retailers, take note: There’s a new bogeyman in town and it isn’t Wal-Mart.

In fact, even Wal-Mart is scrambling to stay apace of the ultimate behemoth, Amazon.

That’s according to Ken Ouimet, CEO and founder of Engage3, a California-based provider of retail analytics, who offered advice on a webinar this month on the price wars breaking out in some markets.

“We see a much more fiercely competitive environment,” Ouimet answered when asked to describe current marketplace conditions.

He noted that Amazon, which developed online for two decades, now has a nationwide network of “very modern,” drone- and robot-enhanced distribution centers, and over the next few years could be rolling out a couple thousand brick-and-mortar stores easily supplied by them.

Amazon already has bookstores in a handful of cities and is experimenting with technology to create quick-trip, no-checkout-line “Go” stores. The company’s known desire to become a bigger player in food sales also has stoked recent rumors of interest in Whole Foods and BJ’s Wholesale Club.

With physical stores, Amazon will be “a new competitor for retailers,” says Ouimet.

That will come in large part from Amazon’s “sophisticated, dynamic pricing” — flexible prices influenced by supply and demand.

“Retailers are going to find themselves competing with a competitor that can react within 90 seconds . . . to a price change,” he said. In contrast, most retailers use “very manual processes” that won’t accommodate a price change for three months.

“We’re talking about a totally different game coming right within the next two years,” Ouimet said.

Wal-Mart already has taken note and moved to dynamic pricing online, he said, particularly for grocery items.

His slides cited a news report in February that Wal-Mart planned to make product comparisons in 11 states in the Midwest and Southeast aimed at closing price gaps with supermarket deep-discounter Aldi, which Ouimet said has been using its private-label brands to make inroads into Wal-Mart’s low-price edge in food sales.

For a retailer like Wal-Mart, with a deeply ingrained philosophy of everyday low prices, the move to dynamic pricing signifies that “something important has happened,” according to Ouimet.

Borrowing a slogan from Wal-Mart, he urged retailers on the webinar to remember that “When elephants dance, mice get trampled,” and offered them a five-step battle plan for not getting crushed.

Included in the advice: Look for ways to fly under the radar of competitors and strike hard and fast where they don’t see opportunities. That could mean offering “personalized” promotions to shoppers based on their purchasing history, or using micro-pricing zones to undercut a competitor’s particular store. 

Ouimet’s ultimate message to retailers, though, was this: “If you find yourself in a price war, it’s too late.” Instead, he counseled them to prepare beforehand to be ready when the battle comes — and it will come.

“The race is on,” he said.

Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected].

Categories: -News-, Business, Opinion

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