Retailers can’t out-Amazon Amazon, but they can change the rules

By BJ Mendelson

June 22, 2018

I work in marketing, which means I’m always trying to sell you something. It’s a tough business, made even more so by the fact that people react negatively to persuasion. Worse yet, for many consumer brands and retailers, “marketing” entails various forms of data tracking, another practice that (if we’ve learned anything from Facebook’s recent travails) isn’t exactly popular among ordinary consumers.


But it’s no surprise that retailers are turning to it anyways. When it comes to marketing and selling goods in the digital age, Amazon now determines the rules of engagement, including for physical retailers. Analysts estimate that Amazon generated over $1 billion in sales on its best day last year, an achievement made possible largely because the tech behemoth collects and analyzes vast quantities of data on customers’ shopping history, then funnels those insights into its sales and marketing operations. As a result, many smaller retailers (brick-and-mortar, digital, and hybrids alike) are following suit, rushing to collect their own data on customers in order to compete.

The problem is, most can’t possibly win against Amazon by playing the e-commerce giant’s game. To survive (and thrive) in a marketplace where price and convenience rein supreme, retailers of all stripes need to provide something that Amazon can’t: high-quality, human-touch customer service.



Now brick-and-mortar stores are tracking you, too

You might not realize just how much your favorite “local” store is tracking your behavior. Those rewards cards that grant you freebies or a discount once you spend over a certain amount? That’s data tracking right there. Many such retailers link your credit card information to proprietary databases that store your purchase history, location, and more. Over time, they can accrue a remarkably complete picture of your shopping habits. Stores use these insights to craft targeted advertising and special offers to lure you back in, and they analyze your purchases in hundreds of different ways.

Physical stores track you in even less conspicuous ways, too. IBM’s “Presence Zones” system uses location-based sensors to pinpoint shopper locations inside stores, recording where people linger and browse, and which areas they ignore. The company is also pushing an opt-in plan that would allow retailers to serve targeted ads to shoppers based on where they’ve previously spent their time inside stores. (In fact, IBM has been pretty open about this practice; the company commissioned a sponsored piece in the Atlantic describing its data-driven retail practices.) Apple has a similar program involving its iBeacon devices, which can send push notifications through compatible apps to shoppers’ phones.

Stores are also using facial recognition to profile customers as they shop, deploying sales staff to different departments based on customers’ age and gender, CNBC has reported. Retailers claim that they don’t connect these data to personal information, but consumers might be forgiven for hearing echoes of ad-targeting practices that landed Facebook in hot water even before the Cambridge Analytica scandal boiled over. Indeed, privacy researcher Safiya Noble points out in her book Algorithms of Oppression that this type of surveillance can, and in many cases does, create data that leads to racial profiling and discrimination.



Data can’t replace customer service

From retailers’ point of view, the logic here is straightforward: The more they know about your shopping habits, the better they can predict your behavior and make connections between your offline and online purchasing patterns. The problem is many retailers–and not even Amazon–have figured out how to use all this information effectively. For example, if you buy a vacuum cleaner on Amazon, you’ll probably continue to see ads for vacuum cleaners for the next few days, even though you now have absolutely no need for one.

But for smaller retailers scrambling to embrace a data-driven marketing landscape, the ecosystem’s shortcomings actually represent an opportunity. Wherever the digital network of cookies and data-scraping algorithms come up short, that’s where savvier retailers can jump in to provide the missing component that even a customer-obsessed tech giant like Amazon can’t always deliver seamlessly: real-life customer service. A salesperson can read your body language, negotiate with you on price and features, and use their personal experience to guide you to a purchasing decision. Alexa still can’t do that, no matter how attentive it seems.

The same goes for digital retailers: Paying real humans to respond to customer complaints on Twitter or by email is far more effective than funneling online shoppers to a chatbot. Making these analog investments may seem counterintuitive now; many e-commerce companies have pushed data as the future of shopping, and a huge market for buying and selling that data has grown up around the industry.

But human behavior is messy and complex, and even the simplest transactions can’t be boiled down to having the right profile for a customer. It’s also easy for companies to become data-dependent, convinced that algorithms will solve their sales problems as long as they feed them enough. That’s one of those hypothetical computing problems that one day might be proven true, but chances are it’s not going to happen for a very long time–particularly not when legions of customers are pushing for more data privacy, not less of it. In the meantime, dependence on data may lead retailers to make more wrong maneuvers than right ones.


For all the panic in the retail sector about Amazon replacing traditional sales, I don’t see the person-to-person experience going away anytime soon. With a few exceptions, people like leaving the house. They like the experience of shopping, discovery, and interacting with each other. No matter how advanced the online experience becomes, or how deep the discounts become with Amazon Prime (whose annual subscription rate is rising, by the way), there are still things that a human being can do better. The fact is that humans are irrational creatures, and trying to pin down and predict their behavior is, at best, a fool’s errand. Or Amazon’s, anyway.

B.J. Mendelson is the author of Social Media Is Bullshit (St. Martin’s Press) and, most recently, Privacy: And How We Get It Back (Curious Reads). Follow him on Twitter at @BJMendelson.