Technology
Why Is Amazon Going Brick-and-Mortar
Isn’t it counter-intuitive?
Amazon is one of the most successful businesses in the world and we are used to its trend-setting moves and increasing online retail supremacy.
Jeff Bezos started the company back in 1994 surfing the first internet waves and overcoming the 2000’s dot com crisis that made the most promising companies shut down. Amazon is a digitally native company that begun selling books online when everybody else was building stores.
After two decades of thriving in the online world and pushing other businesses to the web, Amazon decided to go brick-and-mortar. It may seem odd at first sight but it actually makes sense.
From Online to Offline, But Not Really
In 2015 Amazon was opening its first store, an Amazon Books. It was joining the retailers that were suffering from the extremely competitive prices in amazon’s online products.
To goal was to be closer to customers and provide the feeling of owning something the second they purchased it, which is not possible when shopping online.
But is was not only that, there was a secret behind it… of course.
In 2012, when Charlie Rose asked Jeff Bezos if Amazon was going brick-and-mortar, he said:
We would love to [open physical Amazon stores] but only if we can have a truly differentiated idea. We don’t do a me-too product offering very well.
This is the mindset that made Amazon one of the top retailers and one the most valuable companies in the world generating 280.5 billion dollars in revenue.
Behind a physical book store was the huge amount of data generated by many years of online sales that not only helped find the bestselling tittles but also the buying behaviour of the Seattle population, where the store was located. That brought the competitive advantage for stock management and product offering that no other brick-and-mortar retailer had.
Since its first store, Amazon has been inoculating new concepts and experimenting new formats reinventing the shopper experience at each step.
Currently Amazon’s physical stores are:
- 487 Whole Foods Markets (508 including Canada and the United Kingdom),
- 25 Amazon Go cashierless convenience stores,
- 1 Amazon Go Grocery store,
- 21 Amazon Books stores,
- 12 Amazon 4-Star outlets and
- 6 Presented by Amazon locations
Every physical format has its own product mix and targeted audience. Underlying their offert is the large data powerhouse and the technological features that delights any tech freak or innovation enthusiast.
From the Just Walk Out technology that “enables shoppers to simply enter a store, grab what they want, and just go”, to the autonomous robots running the warehouse, to the newest Dash Cart, Amazon’s value proposition is enriched by a customer-centered mindset driven by technology.
4 Reasons Amazon Is Betting on Brick-and-Mortar
1. One of the biggest Loyalty programs in the world
Amazon Prime has 150 billion people successfully engaged customers to the most valuable brand in the world topping $400 billion.
The company fulfills almost any need of the human being and does it with a sense of customer satisfaction and positioning itself as a market leader.
The happy customer engages in multi channels and gets deeper into a never ending web of products and services. This is the recipe of a profitable and long relationship.
If Amazon enters in the physical space being closer to the urban buyers and builds upon its digital tools improving convenience and accessibility, loyal customers will follow the lead and stay loyal.
2. Brick-and-Mortar Retail Needs Disruption
Following previous thoughts, Amazon can deliver a shopping experience that other retailers find hard to follow and are laggards in that game.
The physical stores become a showcase of technology and progress.
3. Online Is Not Enough — Shoppers Are On the Street
Roughly 90% of retail sales across all categories are made in physical stores.
Even with ecommerce conquering an increasingly bigger slice*, brick-and-mortar sales cannot be ignored and for Amazon not being present it represents a huge opportunity being missed.
*Didn’t consider the estimated rise of 18% of the online sales due to Covid-19 because it’s uncertain how much of that will continue after the pandemic.
4. Reduce Pressure in Supply Chain Due to Shipping
By accessing store space and offering a self-service delivery system, Amazon can cut a big chunk of its costs in shipping products.
This means that the customer is being exposed to Amazon’s products which can generate unexpected sales.
These reasons are some of the many that make this “in progress” move an intuitive one.
Building an ecosystem, providing a multi channel experience to customers, promote technological breakthroughs and seek business efficiency, are good enough reasons for one of the most successful companies out there to go brick-and-mortar.
