Guest Commentary: Can a Fast Follower Truly Prevail Against a First Mover in Supply Chain?
by Tom Rentschler
Prior to the “dot com” bubble bursting more than ten years ago, being a “first mover” was considered an unassailable advantage. But over the last decade or more we have seen countless examples of “fast followers,” or second movers if you will, prevailing against the original innovators in countless categories. Witness Samsung’s ability to continue to erode Apple’s dominant share in Smartphone’s as the latest high-profile example of a very rapid follower achieving new levels of success.
A similar battle is now being played out in the supply chain between first mover Amazon.com, Inc. and fast follower Target Corp. According to an article in the November 12, 2013, issue of The Wall Street Journal by Paul Ziobro, entitled Target Fills Its Cart With Amazon Ideas, “…Target this year is spending about as much of its $2.3 billion U.S. capital budget on improving its technology, developing mobile apps and modernizing its supply chain as it is on opening and remodeling stores. Next year, the company will spend more on those investments than on stores, an acknowledgment that future growth will increasingly depend on digital sales.” In other words, a traditional brick-and-mortar retailer is forced to play catch-up with the e-commerce innovator.
The stakes for Target are very high. According to Ziobro, “Target’s Internet sales are puny — less than 2% of its $73 billion in total sales last year. By comparison, Amazon’s North America sales rose 30% last year to $35 billion, most of it in categories of goods that Target also sells. Meanwhile, traffic to Target’s stores, as evidenced by its overall transaction count, has fallen for three straight quarters.” Ironically, Target finds itself in this predicament, in part, because “the discounter outsourced management of its website to Amazon for a decade before pulling the plug on the deal and bringing its ecommerce operations in house in 2011. The following year, Target stopped selling Amazon’s Kindle devices, without explanation.”
In the end, will Target be able to leverage its network of physical stores to not just match Amazon move for move, but actually introduce innovations that will be difficult for Amazon to match? The battles between these retail behemoths will likely play out in their supply chains and in their abilities to make good on the promise of omni-channel customer fulfillment. Advice to emerging and mid-market companies: Pay attention to how the largest retailers pivot and adapt in today’s hyper-competitive landscape, and learn from what they do right and what they do wrong.
Tom Rentschler is VP of Sales and Marketing with MHI Member FORTE. #forte
