Amazon is an undisputed leader in digital retail, but soon the online giant will venture into the realm of physical stores. This isn’t so much a choice for Amazon as it is a necessity if the company plans to remain a leader in retail. Modern retailers need an omnichannel strategy that understands and caters to every channel that customers shop in.
So what will these physical stores look like? I predict they’ll be clean cut in the front and a bit hectic in the back — call it the Amazon mullet. By that, I mean stores will have a showroom up front with a limited selection of inventory and engaging multi-touch displays, while the distribution center will take up real estate in the back. The storefront showroom will be stocked with products chosen purposefully by data mining Amazon customer purchases for the surrounding micro-geography. The distribution center in the back will hold the less-sexy, repeat purchase products that local customers could want for instant delivery — or instant pick-up. And why not a drive-thru window for your Amazon order?
Retail is moving towards this model already
You’ve probably already seen this “mullet” concept in the wild. The most notable example is Service Merchandise (remember them?), a jewelry store turned full retailer. It translated a tactic of its early beginnings (keeping jewelry securely in storage, save for a showroom model) where shoppers browse and get a hands on experience of products without having to lug them to a cash register. In the pre-smartphone era, customers received a paper ticket at checkout that they’d redeem by driving to a pickup area behind the store. This proved to be a hassle for many consumers, and Service Merchandise shut its doors in 2002. It was an unlikely retail pioneer before its time. Then, of course, big box retailers took over.
More recent examples that have aped this mullet-like strategy include brands like Advance Auto Parts, which has leveraged its distribution strategy to enhance customer experience (and increase sales, to boot). Then there’s the rise in BOPIS (Buy Online, Pickup In Store) shopping among consumers. Retailers like Home Depot have embraced this, nurturing the omnichannel experience with great success that’s resulted in 40 percent of online purchases being picked up in store. And finally, glancing at trade journal headlines reveals several top retailers that are reorganizing store strategies to better take advantage of distribution while enhancing the store experience.
How Amazon’s stores will differ
Amazon first tiptoed into branded stores with the launch of its first physical bookstore in November 2015, with several more locations being announced earlier this year. More recently, the company revealed its checkout-less convenience store (c-store) in downtown Seattle as well as a pair of AmazonFresh Pickup locations for grocery (produce) orders. So any way you look at it, Amazon has been planning a physical store strategy for a couple of years now at the very least. If you think the company is content to stop with books and c-stores, you’re crazy.
It’s too early to say exactly what products Amazon’s stores will carry or how those stores will be positioned as competitors to specialty shops. But there are plenty of observations you can make if you keep one important retail trend in mind: the attempt to merge the experience customers have online with one they’re physically interacting with.
Amazon stores will be the physical equivalent of an app. We’ve already seen some of the more newsworthy elements of this approach, such as Amazon Books products having no pricing label (since prices change in real-time) or not having to wait in a checkout line to make a purchase at the concept c-store. These things harken back to the online Amazon shopping experience, where prices do change often and purchases can be made with as little as one click. It’s ‘Buy now with 1-Click’ in real life.
Warehouses and distribution will be very flexible. Customers who prefer to make purchases online that will be picked up in store can do so more efficiently — as Amazon can either instruct customers where the item is available or ship it directly to a particular location from a warehouse. It’ll be about expanding options to customers. From a distribution standpoint, Amazon’s sales and customer data should help make sure the most in-demand products are available based on location.
The sales floor will be a showroom. You’ll likely see a sales floor geared toward showrooming, and an ability to purchase items in-person from the back distribution portion more easily. However, when something isn’t in stock, you won’t need things like paper “raincheck” vouchers that contain an estimated date when the item will be available. Instead, you will be able to make the purchase and wait for it to be shipped directly to your home. All of those purchases will be delivered the next day — whether or not you’re a Prime member.
We’ll see a new kind of sales associate. Amazon will have no problem hiring sales associates. Prior retail experience will not be relevant, only excellence in online shopping. Associates will be trained on two things only: the ability to greet the customer well and being the best Amazon sifter of ratings and reviews. That’s it. Amazon store associates will, of course, encourage customers to browse products on their mobile devices. And only the products with the most stars in their product reviews will be shown on the big in-store screen.
Stores will feature localized customization. For Amazon, it should be easy to customize inventory and sales initiatives for specific locations since the company will have sales and behavioral data that is far more focused than other retailers.
Amazon’s long-game strategy for physical stores: waiting
Why hasn’t Amazon kicked off this strategy already? The most plausible explanation is that it’s simply waiting for the right time — even delaying the public opening of Amazon concept stores. And that’s the smartest move.
Amazon is essentially able to create a chain of stores from scratch, giving it time to choose ideal locations, refine technology that will enhance store experience, and determine what areas of brick-and-mortar retail will best serve its business overall. At the same time, there may be additional elements to consider, such as the widely reported rumors of Amazon creating a parcel delivery arm on par with UPS and FedEx.
Eric Feinberg heads marketing strategy for customer experience analytics company ForeSee. He is a frequent speaker on customer experience analytics and marketing best practices. He is also a board member of the Digital Analytics Association (DAA) and an adjunct professor of mobile marketing at the University of California, Irvine Extension.
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