Are retailers selling their souls and giving away customers to Amazon?


Presented here for discussion is a synopsis of a current article published with permission from the blog of Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive.
In Jim Croce’s classic “You Don’t Mess Around With Jim” he warns “You don’t tug on superman’s cape, You don’t spit into the wind, You don’t pull the mask off that old Lone Ranger, And you don’t mess around with Jim.” If he were with us to update the ditty for some of today’s retailers, the last caution might change to “And you don’t invite Alexa in.”
You see, Walmart, Bed Bath & Beyond, Staples, Best Buy, Fry’s and Target are among the retailers selling the Amazon Echo family of devices powered by Alexa on their store shelves.
Some might think it’s “OK” to regain a few bucks lost to Amazon or “if you can’t beat ‘em, join ‘em,” but these merchants are truly courting danger. Despite any claims to the contrary, with the abundance of innocuous Alexa Skills, the developer program, and third party device/product manufacturers incorporating the interface, Amazon’s fundamental mission for the AI system is to drive purchases of Amazon goods. In a subliminal way (maybe not so subliminal!), she also increases brand recognition, familiarity and comfort with the e-commerce giant.
So when retailers invite Alexa onto their shelves and websites, they summon the very soul of the company that’s leading the disruption of their market and stymying their sales.
It feels as if someone at an Amazon product meeting flippantly made a comment like “Hey let’s get our competitors to sell Alexa!” and after a good laugh, the staff looked at one another and pondered “Why not try?” And here we are today, witnessing the equivalent of Apple stores selling Windows PC’s, Starbucks selling Dunkin’ Donuts, or Chevy dealers hawking Mustangs. Maybe it’s a retailer’s version of Stockholm syndrome?
Bottom line: brand erosion from this kind of “strategy” is unseen at first, but like a tiny fissure in a dam, it grows and when it becomes alarming, is irreversible and accelerates until everyone can hear the thunderous crescendo of failure.
Let’s put a pin in this one and see where things end up in a few years.
DISCUSSION QUESTIONS: Do you see more drawbacks than benefits from retailers selling Amazon Echo devices? What potential risks and benefits do you see?
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29 Comments on "Are retailers selling their souls and giving away customers to Amazon?"
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President/CEO, The Retail Doctor
Totally agree. I did a quick search for a Lands’ End men’s white shirt and up popped a message pointing me to their brand. Desperate times lead to desperate measures but I agree with Ken. Amazon is a data mining company that sells stuff. Help them with their Trojan Horse and expect the consequences. Especially when something like 55 percent of search starts on Amazon.
President, The Ian Percy Corporation
Scary thought Bob, but we are of one mind on this AND on the Walmart Virtual Reality item today.
Co-founder, RSR Research
Interesting question. I keep wondering why retailers are okay with their tech vendors hosting their apps on AWS for the same reason. AWS is the profit engine of Amazon. If it wasn’t there, I think shareholders would be more impatient.
I think it’s a statement of strength on the part of the retailer. It’s time to stop running scared.
Chief Executive Officer, The TSi Company
Interesting point but I don’t see retailers refusing to sell Alexa as stopping consumers from making the purchase any more than retailers can prevent customers from using the Internet. What they must do is to delight and excite every customer that walks into their store, giving them a reason to shop and comeback.
There are clear benefits applicable only to the in-store experience and conveniences that relate only to online shopping. Retailers must understand both and invest in what maximizes both. The in-store experience should be a great one with courteous and knowledgeable associates and the store website should be easy to navigate with an online chat to answer questions. Retailers need to focus more on what they can do that is better than the competition using creativity and powerful marketing and by providing exceptional shopping experiences.
President, Max Goldberg & Associates
It’s naive to think that refusing to sell Amazon Echo devices will slow the retail giant’s growth. Retailers need to find ways to entice consumers into their stores, and enhance their shopping experiences, rather than try to boycott products that allow consumers to buy elsewhere.
Founder and CEO, CrunchGrowth Revenue Acceleration Agency
Consultant, Strategist, Tech Innovator, UX Evangelist
Phil, interesting discussion points, but you need to keep comparisons, apples to apples. I don’t believe Target or Staples makes printers and I don’t see Google Home being sold by Amazon (or Apple), both great consumer brands.
Regarding your statement “…they do not have anything proprietary that sets them apart from another retailer.” check the RW archives, we’ve had infinite discussions surmising that brands that want to survive/thrive especially against Amazon, need to have unique (non-commodity) products.
Retail Transformation Thought Leader, Advisor, & Strategist
I think a better comparison would be how Amazon chose not to sell Google Chromecast or Apple TV for much the same reasons we are discussing here. I don’t think that hurt sales of either product. Consumers have plenty of avenues to buy products and if they want one of these devices they’ll find a way to buy it. Of course today we’re expecting to hear that the Amazon Video app will find its way to the Apple TV and, in exchange, Amazon will start selling Apple TVs again. So I’m not sure this concern really is a significant one when we look at the big picture.
Founder and CEO, CrunchGrowth Revenue Acceleration Agency
I agree Ricardo. Selling the device is not the problem for the retailer. The bigger problem is the vulnerability they have created.
Founder and CEO, CrunchGrowth Revenue Acceleration Agency
Consultant, Strategist, Tech Innovator, UX Evangelist
Ricardo and Phil: I appreciate your perspectives.
“…retailers are vulnerable to losing their customers to Amazon because they have not spent the last 20 years focused on their customers like Amazon has.” – many comments on RW where I’ve said the same. However, it’s not about the marketplace, it’s about a retailer opening a gateway for their customers to Amazon (including the marketplace). It has been claimed that Alexa limits products in categories of Amazon’s choosing. One example: every physical device has a unique MAC address, so if it chose to (speculation) Amazon could track what device came from what retailer and use that data to tailor Alexa responses to limit a retailer’s customer’s choices, give loss-leader prices, or take those customers away.
The discussion is not about keeping the Alexa genie in the bottle (no competitor can), it’s about retailers effectively choosing to put their customers in the bottle too.
Founder and CEO, CrunchGrowth Revenue Acceleration Agency
Managing Director, StoreStream Metrics, LLC
Alexa will become modern history’s voice of Helen of Troy and Amazon’s Echo (and similar devices) are today’s Trojan Horse. Traditional retailers are selling their competition. These devices are like an invasive species and inviting them into your home and selling them through your store is expediting your further loss of privacy and the relevancy of your brick-and-mortar store. These sensors will suck up any bit of insight and data in your home and it is all being collected, curated and logged into a vast collection of servers around the planet. You will become a “person of interest” to every brand — leveraging all this data to sell you more stuff.
Retailers selling these devices and services are not thinking about their future. Unless they get access and intelligent use of all the data being collected they are helping expedite the success of the opposition.
Strategy & Operations Delivery Leader
President, The Ian Percy Corporation
I don’t know how Ken wrote this insightful article without once referring to a “Devil.” Such an entity is usually a core part of any discussion about selling one’s soul. No one talks about selling one’s soul to God, or Truth or Integrity or Innovation or all those other values dutifully posted on websites and staff-room bulletin boards.
I’m sure those who fashioned the iconic Trojan Horse had a jolly time too with more than one builder asking in amused skepticism, “do you really think they’ll go for it?”
President, b2b Solutions, LLC
Most of these retailers saw the short-term gain from selling Alexa and ignored the long-term pain that is likely to follow. The question is, did they even think about the consequences of their actions or was it simply a competitive reaction? Were they thinking, if X sells Alexa they may get traffic that we won’t so we’ll sell it too and negate any advantage they hoped to gain? This reminds me of the story of putting a frog in a pan of cold water and slowly raising the temperature over time. We know who the frogs are.
Retail Transformation Thought Leader, Advisor, & Strategist
I see this as similar to a department store selling Ralph Lauren apparel knowing that Ralph Lauren has stores themselves competing for the same customer. Does that mean the department stores should stop selling Ralph Lauren apparel based solely on this fact? No, I don’t think so. I agree with Phil Masiello on this one — retailer brands have been built on selling other brands’ goods, so why should this be different? While many retailers produce their own house brands to try and maximize margin on select items, the ultimate goal for the retailer should be to create an amazing in-store experience that leaves a memorable, positive impression on the customer so they keep coming back and keep buying. If selling an Amazon device helps do that, then so be it. In the end, these brick-and-mortar brands are not going to make a big dent in Amazon device sales such that if they stopped selling these devices Amazon would lose any customers for it.
Retail Strategy - UST Global
At the rate that Amazon is taking customers and revenue away from every other retailer, killing off more than a few in the process and severely wounding others, is there any question that aiding and supporting Amazon in any way is a bad strategy for a retailer?
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
The only question is “by not selling Alexa, will it stop people from purchasing Alexa?” If Alexa is the future then retailers have bigger problems than selling Alexa-enabled products. Not selling Alexa is Maginot Line thinking.
CEO and President, Walking TALL Training & Consulting, Inc.
Isn’t this simply a matter of giving consumers what they want in one place, bringing them into the store where they will make other purchases and as a result potentially become a loyal customer?
Retail and Customer Experience Expert
Amazon Echo is definitely a stealth shopping device. The question is whether retailers not selling Echo will make a difference. Consumers are going to buy Echo if it fits their lifestyle, whether it is from a retailer or directly from Amazon.
Personally, I don’t need Echo to tell me how to shop. I use Siri on my phone to get information the same way someone would use Echo.
President
Reading the comments, I think the best one was the Trojan Horse thought. Future enhancements of this product will gain more knowledge about the user and direct them to Amazon products. Welcome to the future. Also agree that retailers need to do more to entice customers to come to their stores.
Founder and CEO at Orkiv.com
This is certainly a dilemma for retailers, but what I do not see anyone talking about is using the Alexa platform as an advantage for their own brand. Not only can a retailer earn the revenue on the product through their stores, but theoretically they can create their own Alexa apps to actually bring in more customers from it. Why not teach Alexa a skill which searches and displays or announces your store locations, or easier ways to buy, or even buying from you (probably not possible in the Amazon-owned ecosystem)?
In any case, I would advise retailers to look into stealing some market share from Amazon by creating their own similar product, Alexa skills, or other methods. It is surprising as well that more retailers have not come together to build a marketplace connecting them all together to provide a fighting chance against Amazon, yet they have not. If there is anyone that wants to, I’m happy to lead the tech end of that endeavor. 😉
Director of Marketing, OceanX
Retailers like the ones listed are focused on consumer demand for products from other brands and suppliers. If Alexa was not sold at Target and consumer demand is there, they will just purchase it from someone else. As refusing to sell them will not stop the tide of sales, they might as well turn some short-term profit since that is what retailers are now judged on by Wall Street.
The people who should be even more concerned that the retailers are the brands who now with Alexa are becoming less and less important. Try ordering batteries on Alexa and see if dominant brands Duracell and Energizer are even options.
CEO, President- American Retail Consultants
Perhaps this is a concern. However, retailers are truly in the business of filling their customer’s needs. Great retailers recognize this and have factored this into their success. Offering Alexa (at full pricing) can be used to get customers into the store and demonstrate how great your retail pricing, performance, customer service and model is, as well as showing off Alexa. Great retailers should think of themselves as a phone store, rather than a dedicated store for just one type of phone.
Director, SaaS Marketing, Zebra Technologies
This is not about the tiny amount of incremental revenue gained as a seller of a device. When a retailer sells Alexa or sells products on Amazon.com it is validating these services to the consumer, making it easier for the shopper to shop its competitor, and further minimizing its own brands’ reach and value. For a retailer to use AWS as its hosting provider is to provide funding for a competitor. I don’t understand why any retailer who wants to have its own channels and support its own brands would participate in any of these activities.
Director of Marketing, Wiser Solutions, Inc.
This is certainly a catch 22: selling a competitor’s product gets you in on the profits and traffic, but the goal of product in question literally is to sell more of that competitor’s products. Either you sell it and potentially doom yourself in the future or don’t sell it and miss out on those dollars now. It seems like a bad call for retailers, since there’s no telling what financial impact it might have.
If shoppers want one, they will get one. But whether it’s better to sell them yourself or let Amazon handle it will remain to be seen.
Owner, Horticultural Advantage
What is the cost of missing all that customer base — which is really everyone’s customer base anyway? With Amazon commanding such a huge percentage of shoppers search (55% and growing rapidly), we have to ask, “Is it viable in the future to not be found there and still be in business?”
It is time for the government to step in. You can see Amazon taking steps in anticipation of this, and backdoor deals in Washington are surely underway. Anyone remember when Microsoft and the government cut their deal? You could hardly tell today, could you?
Managing Director, Azoya USA