'E-tailers that try to emulate Amazon are finished', says Buy IT boss

E-tailers should borrow from traditional retail techniques to stay alive, Nick Glynne tells CRN

Any e-tailer trying to emulate Amazon is "finished", according to the managing director of Buy IT Direct, who argued they must borrow from traditional retail techniques if they are to have a future.

Talking to CRN, Nick Glynne said e-tailers must accept that Amazon has "won the war" and said Buy IT Direct itself has overhauled its business over the last 18 months in response to this.

This means Buy IT no longer chases every deal, works only with vendors who are not over-distributed and has employed staff who understand more about retailing than about e-tailing, he explained.

"What I mean by that is that e-tail has traditionally lived and breathed SKUs, whereas retailers have traditionally thought about ranges, and how it makes sense to the customers," Glynne said.

Glynne claimed the effects of the shake-up could be seen in Buy IT's latest annual results, which show pre-tax profits rising 44 per cent to £2.6m on revenues that leapt 16 per cent to £120.7m.

Glynne said Amazon had "destroyed" many of its e-tail competitors, but also picked out the US giant as a player in the market he most respects.

"You've got to respect Amazon, not as a retailer, but ultimately for winning the war in old-fashioned e-tail," he said.

"I think that's changed everything, because they've won the war and clearly they will continue to be the experts in long-tail e-tailing, because of their logistics engine, their IT engine and customer-friendly engine. For easy returns and easy ordering, they've won that war.

"So for those e-tailers out there that are trying to emulate Amazon - and I see this in all sectors, not just IT but also furniture and appliances, for me, they are finished, because you cannot out-Amazon Amazon, and therefore you have to borrow some traditional retail skills around product and people, to differentiate yourself."

Doubling space

Glynne predicted Buy IT Direct - which trades as LaptopsDirect and AppliancesDirect - will grow significantly in its coming financial year on the back of a planned warehouse move this summer that will double space to 400,000 sq ft.

"We are significantly under-trading as a business," he said. "We have the cash and bandwidth internally to deal with a lot more revenue and what's holding us back is the warehouse. Hopefully it will be in the summer, and it will have a significant impact on revenue."

Against the might of Amazon, only those with a certain financial clout will survive, Glynne claimed.

"If you are a sub-£50m player, it is very hard to play in this game, and now we have the critical mass to make those investments," he said. "For instance, we invested just short of £250,000 in ad words and new staff last year and it's now paying results, but very few small companies could make that investment. And getting a mobile site spot on is damn expensive.

"You can't just put a website up and have cheap product on it anymore; those days are gone. Anyone who doesn't invest in true retailing - and that means from a staff point of view around how they buy and a system point of view around how they sell - is doomed."

Buy IT Direct's gross margins rose four times faster than revenue in its full-year 2016, which Glynn said reflected its decision to implement a long-term plan for the first time two years ago.

"It's about looking very carefully at what our customers want - how they buy, how they interact with our website, what they're looking for," he said.

"In the old days, our strategy for networking, for instance, was to list every networking vendor out there like eBuyer and Amazon do. But now that doesn't make sense from a customer point of view, because it overwhelms them, and from a buyer point of view it shows to me that the buyers don't understand the category. So we invested in a more skilled buyer who chose two or three vendors we could work with who aren't over-distributed, and there's a reason to put them on the site.

Glynne concluded: "We traded for 14 years as a business where we just traded for profit, but we never had a long-term strategy. Once you have a strategy, life becomes much easier and it's transformed our business."