If you ask any big box retail chain who their biggest rival is, you may be surprised with the answer. It may seem obvious to think Walmart and Target are bitter rivals, like the Red Sox and Yankees, but executives at each company would tell you otherwise. Head to head competition among brick and mortar retailers is mostly a thing of the past. Now these companies have focused their sights on the one entity who seems to out maneuver them at every turn, Amazon.

Amazon’s fulfillment dominance has sent shockwaves through the retail industry. With their Prime subscription becoming a household necessity, retailers are being forced to reinvent their supply chains or close up shop. With their back’s against the wall, big box chains have started an arms race of sorts to keep their heads above water and keep their customers coming back. Although free two day shipping has been a longstanding offer from many retailers, despite the usual monetary limit caveat, this race has forced many into exploring new services to get products into consumer’s hands faster and more efficiently than previously thought possible. 

In the past, long waits and delivery fees drove consumers to support local businesses instead of shopping online. But today, Amazon’s fulfillment capabilities can get products into consumer’s hands as quickly as a few hours. Its same day delivery service has been launched in over 5,000 cities leading many to question the purpose of brick and mortar retailers at all. So what are big box chains doing to stay relevant?

Acquisitions

If you’ve ever been shopping at Target, you may have seen other shoppers sporting green Shipt t-shirts. Shipt is a subscription based same day delivery service costing $14 per month. Used mostly for groceries and household products, Shipt sends workers to shop for you and deliver your order the very same day. The valuation of this type of same day delivery service was set in December 2017, when Target acquired Shipt for $550 million, showing just how serious the company was about revamping its fulfillment process. 

Shipt is a direct competitor to Amazon Fresh and Instacart, both same day delivery services intended to replace a trip to the grocery store. The popularity of these services has forced retailers to pursue this model, but it also comes at a cost. Brick and mortar retailers make a significant amount of money on impulse purchases. In fact—according to a survey from slickdeals.net—consumers may even spend up to $5400 per year just on impulse buys! Eliminating the need to physically shop in a store can cut back on impulse buys and shrink basket size. But based on the trends, retailers are betting on these services to increase traffic enough to offset this hurdle.  

Supply Chain Investments

To keep up with the competition and consumer demand, many successful retailers are renovating their stores to double as fulfillment centers. Planting micro fulfillment centers closer to consumers allows retailers to minimize shipping costs and deliver products faster than ever before. This approach increases the ratio of margins to shipping costs more than ever, and—with a strong online presence—can generate serious business and revenue for retailers whose in store sales may be hurting.  

Along with this, investments in technology are crucial for those seeking to keep pace with Amazon. It is no secret Amazon uses the most sophisticated technology working to maximize their supply chain’s efficiency, but other retailers are attempting to grow off their model. This requires putting the latest tech in the hands of employees and using science—specifically artificial intelligence—to minimize the time it takes to select and fulfill orders. In some cases, retailers are turning to automation to cut back on human error and identify and build on efficient patterns. This technological frontier represents serious revenue potential for any retailer who can perfect it. 

Traditional Fulfillment Services

While online sales and fulfillment are growing rapidly, so are in store and curbside pickup services. Companies like Walmart are innovating these traditional services with features such as “fulfillment towers” to increase efficiency and reduce labor costs. Amazon has taken a similar approach with Whole Foods’ grocery pickup lockers. These services are not going away, and finding ways to innovate and make them even easier can be seriously profitable. 

Building on In Store Intangibles

While this fulfillment arms race is raging on, many brick and mortar chains are also maintaining traffic by focusing on providing services that online retailers cannot. Some shoppers still love interacting with store employees or prefer professional assistance to online reviews. While online apparel shopping is a growing segment of the market, it’s still a hassle to send back clothes that just don’t fit right, so consumers will still visit shops and interact with their employees. Now more than ever, customer service and visual merchandising can make or break a brick and mortar store. Therefore it’s critical these chains invest in training their employees and are focused on hiring the right talent. 

Summary

Retailers racing to compete with Amazon’s seemingly unrivaled fulfillment capabilities is ultimately great for the consumer. While Amazon fights for even more market share, brick and mortar retailers are fighting just to keep the lights on, and in order to stay operational in this climate, investments in technology and human capital are more important than ever.