If you think Amazon’s brick-and-mortar strategy is about books, you’re missing the point.

If you think Amazon’s brick-and-mortar strategy is about books, you’re missing the point.

By Brent Franson | Industry Insights | 04 February, 2016

Amazon created quite a stir this week when The Wall Street Journal reported that the eCommerce  giant plans to open 300 to 400 physical book stores. The news hit like a shockwave. Whether an accidental slip or an unintentional miscommunication, the fact remains that online retailers — from Amazon to Bonobos to Warby Parker — are aggressively focused on building stores in the physical world.

So, why the move from online-to-offline?

While online sales in the United States reached a high of $360B in 2015, offline retail accounted for over $4T (yes, that’s trillion with a “T”).  If the goal is total retail domination (as it seems to be for Amazon), a strong online presence must be complemented by a lucrative offline experience.

This new world of retail is not one where online thrives and brick-and-mortar withers. Rather, the next generation of retail powerhouses will master both domains, creating a seamless and personalized experience for shoppers, regardless of the channel through which they purchase. So, rather than only master online or only offline, brands must master both, including the seamless transition between the two.

The success of online retailers like Amazon has been largely driven by the relentless focus on data to create highly efficient and personalized shopping experiences. Your Amazon homepage is different than mine, with each being a result of our past purchase behavior, supplemented by products purchased by others with similar buying profiles. Data drives personalization, and personalization drives an efficient and highly targeted shopping experience. With this recipe, Amazon will extend its online success into the physical world of retail.  

Data, data, data. This cannot be stated enough.


3 Key Takeaways:

#1 Amazon will take a page out of Apple’s playbook
By creating a significant brick-and-mortar presence, Amazon is now emulating a formula that has been a significant part of Apple’s success. Apple was the first true “omni-channel” retailer that perfectly blended offline and online. With Apple, your online experience is seamlessly complimented in the physical store (and vice versa). Most importantly, customers purchasing an MacBook, iPhone, or iPad can easily seal the deal on Apple.com or in an Apple store. Expect Amazon to do the same. Using data to its advantage, Amazon will remove friction from the buying experience — regardless of the channel.

 

#2 Amazon will provide dynamic fulfillment options for the mobile consumer
Today’s mobile and digitally connected consumer leverages both online and brick-and-mortar to their advantage. Specifically, they will research online and later buy in the store. In the same way, they will “showroom” in the physical store and purchase online later. Most industry experts agree that multi-channel shoppers are significantly more profitable than single channel shoppers. With the rising cost of logistics, Amazon will capitalize on data about its locations to fulfill orders and upsell shoppers. Ultimately, having a physical retail presence will become a core strategy for boosting sales conversions – and profits – as Amazon fights for wallet share among this emerging consumer segment.

 

#3 Amazon will bring personalization to physical stores
Amazon’s brick-and-mortar presence won’t be built on traditional bricks — but rather data.  In every region and in every city, Amazon already knows exactly the most popular products by demographic and by purchase patterns (such as frequency). Armed with this data, they will be able to tailor each store layout and inventory assortment based on the surrounding shoppers. Most importantly, Amazon can validate with in-store technology and quickly iterate inventory with their distribution centers. Finally, Amazon can leverage their Amazon app and in-store wi-fi as the glue that connects the online and offline worlds. With a single view of the customer across channels, Amazon can deliver personalized in-store experiences.

Regardless of the final outcome from this week’s news, Amazon is shining the spotlight on the future of the retail industry. Brick-and-mortar retail is not dying. Traditional retail is dying. And the message to traditional retailers is loud and clear: Be like Amazon or die.

 

To learn more about how retailers and QSRs are building a digital infrastructure in their stores to reach omnichannel customers, read the white paper by Euclid and ABI Research

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Brent Franson

Brent Franson

Brent is the CEO of Euclid Analytics.

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