I wanted to start my blog by blogging about the eCommerce Juggernaut we all know; Amazon and its retail plans.
Roughly a month ago, I made a brief analysis for my retail marketing strategy class about Amazon’s plans to open up a physical retail outlet in Manhattan, New York, just in time for the holiday shopping season. It had already opened pop up stores in San Francisco and Sacramento. I concluded my article by saying, “I wouldn’t be surprised if this was another publicity stunt from Amazon”. The holiday season is over and there was never signs of Amazon opening a retail outlet in Manhattan.
Amazon has been planning to embark the brick and mortar retail for years and it has been frequently under a discussion in the media. Amazon’s strategy is typically to disclose little to no information about its new initiatives. Amazon is a giant company, and a the trailblazer in eCommerce, so when the company itself or any other facet hints that it’s about to do something, the people and the media start on speculating on the topic, and so the snowball starts rolling.
“We want to do something that is uniquely Amazon, and if we can find that idea, and we haven’t found that idea yet, we would love to open Amazon stores.” -Jeff Bezos
I guess yet the time wasn’t right. Perhaps Amazon is never going to do retail, but rather just initiate a buzz around the company. We all remember the buzz about the drones, coincidentally on Cyber Monday? This year the timing was not too bad either as we were getting closer to Black Friday, Cyber Monday, and Christmas shopping season, initiated by Manic Monday. I would call this “Online Guerrilla Marketing”.
So lets take a quick analysis about why Amazon should or should not embark brick and mortar retail:
Three distinct organizational goals could be considered as Amazon’s motivators: First of all, Amazon’s new desire could be to capture more sales of electronic gadgets like tablets through the physical outlets, since more hands-on experiences would lead to more sales. Amazon’s own devices such as the Kindle and the Fire smartphone are of higher margins, hence making it reasonable for the eCommerce giant to take such kind of actions to boost their sales. Secondly, Amazon could also try to complement its fulfillment by offering its customers the option to pick up and return items in a physical outlet. The third goal of Amazon would be to engage more with the relationship retailing by marketing the Amazon brand, and to increase the brand personality through the in-store experience.
Amazon’s long-term strategy could be shifting from a “Web-only retailer” to a multi-channel retailer, which would dramatically interfere with their core business model as an online merchant. There is lots of room for speculation about Amazon’s “new” marketing mix, such as the retail locations, merchandising and assortment, e.g. how streamlined their selection would be. No matter the concept, the retail outlets are at least going to be devised to promote and communicate the brand of Amazon.
I would consider Amazon’s physical outlets as a pilot scheme, through which it tries to figure out if it could have a foothold in the physical retail. For Amazon, there would be definitely a learning curve. Amazon, which relies heavily on data and automation in the online environment, does not have information about their consumer’s offline shopping behavior. Hence, the new initiative could be considered as a way to harvest the offline consumer data. Amazon’s excellence and value proposition are based on factors like “the world’s biggest assortment”, low prices and various fulfilment options, all of which would be very challenging to duplicate in the physical world. Furthermore, running a physical retail outlet causes overheads, and increased costs and that’s something that the investors would not be happy to hear about, since Amazon has been trading off its profits for growth for a long time.
The question is, that since most of the brick-and-mortar retailers have struggled in creating a seamless omnichannel retail experience, how would an online retailer thrive in it?