Specialty Retailers Step up Tech Stacks to Compete With Amazon

As specialty retailers look for ways to hold their own against Amazon’s growing lead, many are rethinking their tech efforts to be more competitive.

Take, for instance, Guitar Center, which announced Tuesday (July 9) the appointment of Adolfo Rodriguez, who has held leadership positions at companies including IBM, Citrix and Advance Auto Parts, as its executive vice president and chief technology and information officer.

“Adolfo’s extensive experience and exceptional ability to harness emerging technologies make him a phenomenal addition to Guitar Center as we forge ahead with our transformation,” Guitar Center CEO Gabe Dalporto said in a statement. “His expertise in core retail systems and processes and his passion for transforming the customer experience make him a perfect fit at Guitar Center.”

The move came months after the retailer’s rival, Sam Ash, closed all of its stores as Amazon continues to gain share in the category, per PYMNTS Intelligence’s study “Whole Paycheck Report: New Consumer Spend Data Finds Amazon Way Ahead of Walmart.” The report, which estimates Amazon’s market share in various categories based on earnings reports in conjunction with  U.S. Census Bureau and Bureau of Economic Analysis data, found that in 2023, Amazon held a 34% share of total consumer sporting goods, hobby, music and book retail spending, an increase from its 20% pre-pandemic share in 2019.

Amazon’s advantage lies in large part in its tech infrastructure. Its network of warehouses, coupled with logistics algorithms, allows for efficiency and speed in order fulfillment. Additionally, Amazon uses its troves of customer data to personalize product recommendations and target advertising. This combination of factors creates a convenient shopping experience for consumers, making it challenging for traditional retailers to compete.

However, specialty retailers are not going down without a fight. They are capitalizing on their unique strengths — curated product assortments, brand expertise, and a focus on customer service — and amplifying them through strategic tech investments.

For example, beauty retailer Sephora invested heavily in artificial intelligence and augmented reality. The company’s Virtual Artist tool allows customers to try on makeup products virtually using their smartphones. By providing a personalized and interactive shopping experience, Sephora differentiates itself from Amazon’s more generic offerings.

The Click-and-Mortar Advantage

To compete effectively with Amazon, specialty retailers are also focusing on strengthening their omnichannel strategies, integrating their online and offline channels to provide a cohesive shopping experience across all touchpoints. This approach enables them to differentiate themselves against Amazon, which is less established in brick-and-mortar retail.

Many consumers are Click-and-Mortar shoppers, preferring to engage both digitally and in the physical store, per The PYMNTS Intelligence study “2024 Global Digital Shopping Index: U.S. Edition,” created in collaboration with Visa Acceptance Solutions. The report, which drew from a survey of more than 2,400 United States consumers, found that 1 in 5 shoppers prefer to make purchases in stores with the assistance of digital technologies, and 11% prefer to make purchases digitally for in-store pickup.

Retailers ranging from Home Depot to Dick’s Sporting Goods to Best Buy have been boosting their focus on the omnichannel experience.

Andrew Laudato, chief operating officer at The Vitamin Shoppe, told PYMNTS in April how Click-and-Mortar is transforming shoppers’ retail journeys.

“More than half our customers start their journey on digital,” Laudato said. “Everybody starts with education and learning. … Some customers start in the store because we have a lot of expert knowledge in our stores, and then once they understand exactly what their regimen is, they will purchase online. … It’s all about omnichannel. Most customers have a digital component to their shopping journey.”

As Amazon continues to set the standard for eCommerce, specialty retailers must innovate and adapt to stay competitive. By investing in advanced technologies and enhancing their omnichannel strategies, these retailers can offer differentiated shopping experiences that attract and retain customers. While the battle against Amazon is far from over, specialty retailers are proving that with the right tech investments, they can carve out a successful niche in the competitive retail landscape.

For all PYMNTS retail coverage, subscribe to the daily Retail Newsletter.