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The Amazon effect…

When I started my “adulting” journey, one of my first jobs was at Forrester Research. It was during the end of the last century, wow I’m getting old, and I had a front row seat to the rise of the internet. Those were the days of irrational exuberance both in the stock market but also with technology. While many of the companies that rode this wave to fleeting stardom, remember the likes of Pets.com where you could order anything for your gold fish, basset hound or pet ferret needed from a sock puppet? Or Webvan which was ahead of its time when it came to the online grocery game. Even a surgeon general Dr C Everett Kopp dipped his toes into the dot com game creating Drkoop.com which tried to make a go at the online medical space. One company that was born of this time but has continued to flourish is Amazon.

Why is this man smiling?

The pioneering eCommerce player who started by selling books and CDs is now a market shaper. Their success was in large part built on seizing on the consumers’ growing hunger and desire to access shopping via the internet, keeping the eCommerce player’s cost down since they bypassed the expensive cost associated with retail real estate. But fast forward to 2017, and it appears that Amazon is now going to be aggressively looking to open physical stores. Gasp. What???

According to a piece in Seeking Alpha, it is rumored that Amazon will be targeting the opening of close to 2000 stores. Supposedly up to 400 bookstores, but also appliance stores, furniture, electronics and others. No small feat to say the least. So why is Amazon jumping into the brick and mortar game when so many other retailers are desperately trying to prune their store trees? The reality is Amazon realizes, as do other pure eCommerce players such as Warby Parker and Bonobos, the experience you can provide the consumer online and via a mobile device has limitations. Consumer expectations have evolved to the point where price is no longer the only driver. They know they can get a competitive price at the touch of their fingers. What they are now looking for are the experiences retailers bring to the table. Why do I shop and give my money to retailer A and not retailer B? Experience plays a large part in that decision making. One simply has to look at retailers such as Urban Outfitters that are looking to add experiences such as enjoying a fresh slice of pizza to the in store shopping experience. Or Restoration Hardware that are turning stores into true show rooms – allowing the customer to have a true experience with furniture and home goods. We already know high end retailers such as Barneys, Neiman Marcus and Nordstrom offer such experiences as cafes, salons, personal shoppers to name a few. The shopping experience becomes complimentary to the acquisition of a product.

For Amazon it makes sense to get themselves into the physical store game. First don’t think of Amazon stores as traditional sites to simply buy items. While that will be a major component of the stores, think of them as multi discipline assets. Buying product, picking up product purchased online, returning goods at the store, receiving training or services from the store, even distributed warehousing capacity for Amazon. Second, even if the stores lose money, expect Amazon to push for these stores to be nodes within their digital footprint. Points of data and behavior gathering. How much information can Amazon gather from their interactions with customers in these locations? Finally, is this a marketing gamble for Bezos and company? As certain brick and mortar players struggle with their footprint, is Amazon announcing it will be opening up stores a message to the world declaring that they truly are looking to be the dominant retail giant for years to come?

As a recent headline article in the Economist points out, Bezos and Amazon are trying to create the ultimate customer centric company, but they are also aware that other players are looking to sell something Amazon doesn’t have – that is the experience of physical retail. Traditional retailers still have a card to play, but they better be laser focused on how to differentiate through this channel, because Amazon isn’t standing still.

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