Inside an Executive Meeting at the 2018 Supply Chain Leadership Forum
By Jim Tompkins
CEO, Tompkins International
Chairman and Chief Executive Officer, MonarchFx
At this year’s Tompkins Supply Chain Leadership Forum (SCLF) two executives from a retailer asked me if they could meet for 15 minutes to address a question their board had asked them. We met at 7PM at the Tuesday evening, Night at the Ballpark, event. We grabbed a corner table. After a few pleasantries the CEO opened his notebook, it was clear our meeting had started.
Reading from his notepad he asked:
“What are the secrets to competing with Amazon? We cannot understand how they do what they do.”
This is a great question and one that has stumped many retailers. In fact, this is a question I asked myself many years ago and have been answering consistently for the last four years. To answer this question, you must understand who Amazon is and how you can beat Amazon when it comes to retail.
Everyone knows the answer to, who is Amazon? Many fail to investigate the details of this answer to uncover the secrets to competing with Amazon. The correct answers to who is Amazon are:
- The genius Jeff Bezos
- The most customer centric firm in the world
- Amazon Prime is the world’s greatest loyalty program
- A huge, successful business
None of these answers help us understand the secrets to competing with Amazon. The correct answer to who is Amazon from, a secrets of competing perspective is, Amazon is a profitable firm with the following businesses:
- Amazon is a very well run 3PL. Their logistics ecosystem is huge and very profitable.
- Amazon is a very well-run cloud service. The Amazon Web Services are also very profitable.
- Amazon is a very well run online retailer, that is not profitable, and in fact is very unprofitable.
Therefore, the answer to the secrets of competing with Amazon and understanding how to beat Amazon in retail are:
- Evolve to having a logistics ecosystem that applies automated distributed logistics that support quick, inexpensive delivery, while being scalable and agile. Few companies alone can achieve the efficiencies of the Amazon logistics ecosystem. Therefore, companies in part need to deploy a multi-client alliance approach, such as the one provided by MonarchFx.
- Each retailer must do a great job of retailing. This obviously requires a customer value proposition that brings the customer to your door and/or to your website. This reminds me about the speech a new McDonald’s President made at an annual meeting, when introduced for the first time as the new President. Hundreds of McDonald’s executives and franchisers sat in anticipation of what the new President would say in this long-awaited speech. He stood at the podium and said five words and then he sat back down. The crowd gave him a standing ovation. What were the five words? He said, “It is about the food.” My eight words on you doing a great job of retailing are, I believe it is about your value proposition.
- Amazon is a great online retailer who is trying to learn how to be a great offline retailer. You too must do the same. It is not about bricks vs. clicks. It is about bricks and clicks. It is not about being multi-channel or omni-channel, you should have unichannel capabilities. To do this you need to figure out how to leverage your online and offline offerings.
My recommendation to you on the secrets to competing with Amazon is:
Focus on your customer value proposition, while making your logistics ecosystem and your unichannel business model, best-in-class.