Amazon’s latest gambit: Stores!  

In July 1995, a book retailer went online. Based in a garage in Seattle, the company's early logo touted itself as "Earth's biggest bookstore." The original name for the company was to have been "Cadabra," but when Jeff Bezos' lawyer thought he said, "cadaver", the name "Amazon" was chosen instead, not only to suggest scale, but also because the word "Amazon" would come up early in alphabetized website listings. 

In 1998, Amazon expanded into selling CDs and DVDs and in 1999 Amazon added toys and electronics to its offerings. After that came more and more products, retailers, and customers, as well as becoming a marketplace for vendors, a technology support facility for other businesses, and much more. 

Amazon grew and prospered, selling products from "A to Z", with a smiley logo, while becoming more and more competitive with other established retailers, not only on ecommerce price comparisons, but on convenience, product availability, speedy, efficient service and delivery.

Since "Ideas are very encouraged" at Amazon, hardly a week goes by without a new Amazon experimental foray. Over the years we've seen Amazon lockers, same-day delivery, drone delivery, a dirigible-based warehouse, Amazon Fire phone, private label products, entry into the food business, plus dozens and dozens of other ideas we don't hear about or that don't turn into reality.

This week, however, the media were abuzz about Amazon's latest innovation: Stores! How's that for chutzpah? Like a python, Amazon continues to squeeze the breath (and life) out of many stores -- and now... Amazon wants to open stores... to cover some of the last products for which physical stores are needed: Appliances, furniture, food -- i.e. items that the customer still feels a need to have nearby, to touch, taste, envision in their home, or try on before buying.

The New York Times article: "Amazon's Ambitions Unboxed: Stores for Furniture, Appliances, and More" (whose URL reads: Amazon-wants-to-crush-your-store-with-its-technology-might) said, "The stores would serve as showcases where people could view the items in person, with orders being delivered to their homes," according to an anonymous source quoted in the article.  

Strategy and management consultant, Randy Burt, said, in the NYT article: "The ability to create experiences is going to be critical for them (Amazon) to continue to get share ... I think they are recognizing, for certain things you can't digitize and replicate online all the experience one has in a store."

It's not as if Amazon doesn't already have a king's ransom of the online market share: Right now the figures show: With regard to overall retail ecommerce sales growth in 2016, Amazon garnered 53 percent of the internet sales, and other retailers COMBINED garnered 47 percent.  (BloombergAmerica's Retailers Are Closing Stores Faster Than Ever (whose URL reads: "...stores-are-closing-at-a-record-pace-as-amazon-chews-up-retailers").

 

The NYT article (Amazon's Ambitions Unboxed) also talked about Amazon opening stores with concepts similar to Apple's, emphasizing Amazon's services and devices such as Echo smart home speaker and Prime Video streaming service.

Groceries represent another huge area that Amazon would like to conquer, with easy pick ups, quick deliveries, and automatic checkouts (using sensors and artificial intelligence). A related piece of news has it that Amazon is planning to open online and physical food stores in India.

Amazon's effect on (lost) sales and value has many retailers rushing to reduce their store footprints, increase their presence on the internet, or just go out of business. Retailers experiencing these options these days include Sears Holdings Corp., Macy's Inc., Payless Inc., HHGregg Inc., Gordmans Stores Inc., Gander Mountain, RadioShack, and many, many more.    

Still, according to Cowen & Co. analyst, Oliver Chen (in the Bloomberg article), the Class A (high end) malls continue to thrive. One factor in defining a mall's classification as either A, B, C or D, is the sales-per-square foot that their in-line tenants generate.

 

"Class A malls, also known as fortress mails, which are able to attract premier tenants, have performed well from both a fundamentals and valuation perspective... Successful Class A malls are often located in high-income, heavily trafficked areas, and bank on upscale clothing and technology tenants (like Neiman Marcus, Nordstrom, and Apple) that only cater to a subset of the population to drive foot traffic and sales. Additionally, Class A malls tend to be destination properties with an entertainment component not easily replicated online. (For Elite Class A Malls, It’s Good to be King and “These Malls Didn’t Get the Memo They’re Dying.”)

Chen says, Retailers should “refocus on customers.”  According to Cowen research, most Americans continue to do shopping in person... Customers prefer physical stores 75 percent of the time. “Management needs to be fixated on speed of delivery, speed of supply chain, and be able to test read and react to new and emerging trends.”

The key is creating the right experience, whether it’s online or off. But how can a retailer focus on customers when it's just one major facet of the fight of their lives to stay in business?

Another negative of Amazon's latest foray into physical stores is loss of jobs for the retailers who downsize, go out of business, or focus on re-emerging as e-commerce brands. Either way, the more automation used, the more employees that will lose their jobs.

We don't know how this story ends, but it is an evolutionary, revolutionary tale, probably accompanied by a lot of antacid consumption in retail boardrooms these days. 

"Stores, as we know them, have disappeared... It's not cyclical, it's secular," said a retail expert in a Bloomberg video.  

References: 

New York Times: "Amazon's Ambitions Unboxed: Stores for Furniture, Appliances, and More"

Bloomberg: America's Retailers Are Closing Stores Faster Than Ever 

Ten-X.com: For Elite Class A Malls, It's Good To Be King 

Upstream Commerce blog posts about Amazon:

Does Amazon Eye Its Own Marketplace Vendors' Best Sellers? 

Amazon Pursues Profitable Fashion Sales With Own Private Label ... 

Vendors: If You Have A Product True… Amazon May Go To School On You… And Sell It Too! 

Upstream Commerce Research Reveals Amazon Regularly Raises Prices For Cyber Monday 

"Yesterday Shipping": How Retailers Are Fighting Amazon For Same-Day-Delivery Success (Humorous Video) 

 

 

 

Share this post
Naomi K. Shapiro, Strategic Market Communications

About Author

Seasoned strategic market communicator, Naomi headed public information for several academic and professional associations as well as founding Creative Brilliance Associates Market Communications. She created and published Brilliant Ideas for Publishers Magazine and authored popular newspaper trade reference, The Brilliant Book of Promotions, Sales Tools & Special Events. Simultaneously, Naomi savored the world as an adventure travel writer that included trekking on glaciers, fishing with saltwater crocodiles and swimming with piranhas. Naomi holds her M.A. from the University of Wisconsin, including participation in a unique industry-science-technical writing program.
Follow us

Comments are closed.