warehouse assembly line full of packages

Industry experts say that Amazon's enhanced shopping experience, including next-day shipping and customer reviews, is forcing traditional brick-and-mortar retailers to up their game, moving from a product-focused to customer-centric business model.

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As Amazon's market cap heads to $1-trillion, Canadian retailers are divided on behemoth's impact

The online marketplace’s recent forays are challenging retailers, but may end up a boon for consumers: analysts

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As Amazon takes over the retail world, transforming it with its behemoth online presence and its newly introduced web and fulfilment offerings, retailers are realizing their industry is under serious threat. Bricks and mortar stores are closing at a rapid pace in Canada and the U.S. and retailers are struggling to carve out a space in e-retail.

Amazon’s market cap is on track to hit $1-trillion within five years, according to Morgan Stanley. In February, Amazon announced Q4 sales were up 38 per cent to $60.5-billion U.S., and Amazon accounted for 53 per cent of U.S. e-commerce growth in 2016, according to receipt mining company Slice.

Retailers are left wondering: what’s next? Is survival possible?

Myles Gooding, partner and national retail leader at PwC in Toronto, certainly thinks so. “Is the [Amazon effect] going to be a death knell? No,” he says. “Is it going to reshuffle and force retailers to rethink how they approach business? Absolutely.

“There will always be a need for brick and mortar space but how retailers approach that is changing.”

Changing too are perceptions. Research shows retailers are divided on whether Amazon’s retail prowess constitutes a threat—or an opportunity. “The Amazon Effect: How Retailers Are Adapting Their Businesses to Better Compete With The Industry Leader,” conducted by Total Retail IBM, found that 38 per cent of respondents see Amazon as competition—and 38 per cent see the firm as a partner.

Tom Quinn, national retail and wholesale distribution leader for Deloitte, says retailers have an opportunity to improve, and that the Amazon effect has the potential to make them better overall. “It’s challenged them to up their game,” he says. Because Amazon provides customer reviews, next-day shipping and an overall enhanced customer experience, other retailers are being forced to do the same.

Influenced by Amazon, many are investing heavily in their e-retailing platforms and augmenting their customer communication.

Gooding feels those are good, albeit small, initiatives. But he believes that in order to survive, a larger mind shift has to happen. Organizations need to ask themselves: “How do I transform from being a product organization to being a customer organization?” he says, adding that the retail experience is moving beyond selling a product, to offering a customized, personal customer experience.

Thomas Quinn, national retail and wholesale distribution leader for Deloitte, agrees. “You have to differentiate yourself as a retailer,” he says, adding that providing a unique experience—and product—is paramount.

Quinn feels Canada is better positioned than the U.S. to survive the shifting retail landscape. “We’re not as overstored in Canada [as in the U.S.],” he says. “It won’t be a shake-up.”