Competing with Amazon: Innovative Products are Key to Brick & Mortar Future

Lately I’ve seen writing that suggests retailers can’t win long term competitive advantage with products. To be fair, retail IS incredibly complicated and success depends on smart strategies throughout the eco-system. Steve Dennis, for example, recently discussed the importance of “the story” that leads consumers to your store. And although I believe Steve is too dismissive of products in this instance, I agree with the importance of story.

But… Wait…What? No competitive advantage in products? Retail ONLY exists to sell product!

It’s true that retailers gain no strategic advantage when buyers merely load up stores with products (any products) or search for “best products” without a plan for how they contribute to strategic success.  The buyer’s job must be more than filling in a spreadsheet of products.

Still, since selling product is the only reason stores exist, a product based strategy must be a key focus in order to survive and thrive. But how?

One Strategic Option:  Leveraging Innovative Products

One way to build strategic power with products is with a program around innovation. In this strategy, retailers seek out innovative products, put them prominently on the shelves…and advertise them at significant levels of spending – usually with TV.

In 25 years of working with programs like this, a reliable and consistent innovation program will:

  1. Bring very large numbers of new shoppers into stores.
  2. Bring very large numbers of existing shoppers back more often.
  3. Make shopping more interesting and entertaining.

All that adds up to higher foot traffic, more spending per visit, higher product margins, improved brand preference, and better shopper retention.

In fact, using Steve Dennis’ term, done right these products become a core part of your story. They also make your store a place people want to shop.

Innovation Also Creates a Competitive Advantage Over Amazon

It should be obvious that retailers need product based strategies to box out Amazon. But since Amazon can offer “all products”, how can that work?

Remember Amazon’s weaknesses:

  • It is an incredibly noisy environment which makes it impossible for new products to cut through – Amazon does best with known, regularly consumed products.
  • With few exceptions, Amazon only thrives AFTER consumers know about your product.
  • Amazon can’t offer consumers the opportunity to see and hold new products before buying.
  • Perhaps even most importantly, retail delivers enough sales volume to justify advertising, whereas Amazon sales don’t.

Look no further than Amazon itself to see this. When Amazon wants their own new products to sell (e.g. Alexa) they advertise on TV and put them in stores. Clearly Amazon has found problems driving their own new product sales via ecommerce.

These Programs Won’t Succeed without Advertising

In my experience, retailers often start well and put excellent innovation on the shelf…but fail when it comes to advertising. How? They fail to get across compelling product messages and fail to put enough media weight behind the ads (sliding innovative products into digital ad threads is a recipe for failure).

Advertising must be based on a critical truth:  Consumers won’t understand or buy innovation by osmosis. You need to tell them why the product is important before it builds any advantage for you.

Some might say “but we put the product in the circular!” Remember that consumers need to be told why they should care about the product, and circulars can’t do that. Others might say “but we put the product in our brand ad!” Unfortunately, brand ads can’t do justice to a product in a way that brings consumers into your store.

That means you need product-based ads. And in our TV work we’ve found that this product oriented advertising not only connects the innovation to your brand, but it develops store impact quickly – usually starting in the first week on-air. As a result, this advertising isn’t “overhead” but a key part of daily operations in the store. Some retailers even work it out to pay for the ads with product margin rather than as overhead expense.

Innovative products, well advertised lead consumers to increased brand awareness and commitment.

Remember, consumers don’t buy brands – they buy products that have brands. So if you offer the right distinctive products, with the value the brand brings to the product clearly explained, you achieve more, quicker than with brand advertising.

And the right innovative products have tremendous ability to create what Byron Sharp calls “mental availability” because they are important to consumers – they live powerfully in the consumer mind.

Partner with Your Vendors

Vendors also benefit from innovative product programs, and that creates potential to share risk on these programs. With retailer commitment, vendors can even take responsibility for advertising (as long as the retailer gets guaranteed levels of spending on excellent product oriented advertising).

Retail commitments can lead to product exclusivity as a barrier against competitors. A team of vendors can regularly deliver innovative products to maintain your program over time.

For vendors, know that you can approach retailers today and discuss these types of programs openly – and ask for retail commitments in return for innovation and advertising.

Succeeding with innovative products is critical to survival.

Smart retailers will embrace programs like these – programs that make their stores more meaningful to consumers, build brand and bring tremendous economic reward today and in the future. In doing so, success will require serious work to find innovative products that are important to consumers.

But consider your options. Without products drawing consumers to your store along with your brand story, there’s little hope for surviving the retail changes we face today.

So make the commitment to a program – you’ll see payback today, and you will be building a foundation to ensure your stores have a powerful future.

I have spent my career working with innovative products – working on rockets, missiles and the space shuttle in aerospace then selling innovations in the tech business. In 1993 I moved to advertising – focused on innovative products at retail. I’ve worked with a wide range of products from brands including Lowe’s Kobalt, Briggs & Stratton, DirecTV, DuPont/Teflon, Sears/Craftsman, Rubbermaid, and more. For the past seven years Atomic has executed ad campaigns for Lowe’s private brand Kobalt Tools.

Copyright 2017 – Doug Garnett – All Rights Reserved

Comments are closed on this post.