Figure 5.1 Amazon’s first-ever bricks and mortar retail concept, Amazon Books, launched in 2015
Perhaps what’s most intriguing about the Amazon Books concept, however, is its bold approach to pricing. The books do not feature price tags; instead, shoppers must scan the item and – if they are a Prime member – they will be offered the Amazon.com price while non-members pay the list price. The stores are clearly designed to drive Prime membership and, like Amazon Pop-Ups, to encourage shoppers to interact with Amazon devices, both of which feed the broader ecosystem. Selling books is secondary.
Over the next two years, Amazon continued to experiment with bricks and mortar both as a retailer and technology provider. It would go on to launch new grocery formats such as AmazonFresh Pickup and Amazon Go, which we’ll discuss in the coming chapters, while also partnering with existing bricks and mortar retailers such as Kohl’s, Best Buy and less well-known examples like mattress start-up Tuft & Needle.
Tuft & Needle – another retailer that started life online – has worked with Amazon to enhance the customer experience as it moves further into physical retailing. Its Seattle store features tablets for shoppers to read product reviews on Amazon, Echo devices to answer customer questions and QR codes that allow for one-click purchasing through the Amazon app. Daehee Park, Tuft & Needle’s co-founder, said that after much debate about how to go head-to-head with Amazon, they decided to go in the exact opposite direction. ‘We’ve decided, why not just embrace them? It is the future of retail and e-commerce… We focus on what we’re good at and plug in Amazon technology for the rest.’44
This could be a model for other brands that are already reliant on Amazon for online sales (Tuft & Needle generates around 25 per cent of its sales through Amazon).45 Similarly, we believe that Amazon will look to forge more retail partnerships as a means of addressing the ticking time bomb that is online returns. In 2017, Amazon teamed up with Kohl’s for designated Amazon returns areas in its Chicago and LA department stores. Some would argue that this is too Trojan Horse-like, especially as Amazon builds up its arsenal of fashion brands, but we believe this is one of the least risky co-opetition routes. It’s a unique proposition that drives some much-needed traffic to stores without giving away tons of customer data. For added convenience, there are designated Amazon returns parking spaces near the store entrance, and Kohl’s will package and transport the returns to Amazon for free. We could see Amazon striking a similar agreement with other global department store retailers like Marks and Spencer or Debenhams, for example, who are well represented on high streets but could benefit from a boost in footfall. Co-opetition will be a key theme for the future – though not all will be willing to go down that path.
In any case, if there was ever any doubt over Amazon’s intentions for physical retail, they were squashed in 2017 when Amazon announced the deal of the decade: they were acquiring Whole Foods Market. Overnight, Amazon picked up 21 million square feet of retail space – and said goodbye to pure-play e-commerce.
Notes
1 Thomson, Rebecca (2014) Analysis: Sir Terry Leahy and Nick Robertson on why delivery has become so crucial, Retail Week, 6 February. Available from: https://www.retail-week.com/topics/supply-chain/analysis-sir-terry-leahy-and-nick-robertson-on-why-delivery-has-become-so-crucial/5057200.article [Last accessed 29/6/2018].
2 Fitzgerald, Melanie (2018) Will digital brands spell the death of the physical store? ChannelSight. Available from: https://www.channelsight.com/blog/digital-brands-spell-the-death-of-the-physical-store/ [Last accessed 29/6/2018].
3 Kumar, Kavita (2018) Amazon’s Bezos calls Best Buy turnaround ‘remarkable’ as unveils new TV partnership, Star Tribune, 19 April. Available from: http://www.startribune.com/best-buy-and-amazon-partner-up-in-exclusive-deal-to-sell-new-tvs/480059943/ [Last accessed 29/6/2018].
4 McGregor, Kirsty (2015) Pure-play etail will cease to exist by 2020, predicts Planet Retail, Drapers, 22 July. Available from: https://www.drapersonline.com/news/pure-play-etail-will-cease-to-exist-by-2020-predicts-planet-retail-/5077310.article [Last accessed 29/6/2018].
5 MDJ2 (2015) Ten things we learned at Retail Week Live 2017. Available from: http://mdj2.co.uk/wp-content/uploads/2016/11/Ten-things-we-learned-at-Retail-Week-Live-2017-1.pdf [Last accessed 29/6/2018]
6 Jiang, Moliang (2017) New retail in China: a growth engine for the retail industry, China Briefing, 15 August. Available from: http://www.china-briefing.com/news/2017/08/15/new-retail-in-china-new-growth-engine-for-the-retail-industry.html [Last accessed 29/6/2018].
7 Wynne-Jones, Stephen (2017) Shoptalk Europe: an eye-opening journey through the future of retail, European Supermarket News, 12 October. Available from: https://www.esmmagazine.com/shoptalk-europe-eye-opening-journey-future-retail/50514 [Last accessed 29/6/2018].
8 Simpson, Emma (2017) New John Lewis boss says department store needs reinventing, BBC, 30 March. Available from: https://www.bbc.co.uk/news/business-39441039 [Last accessed 29/6/2018].
9 Amazon UK Analyst Briefing, London, July 2018.
10 Simpson, Jeff, Lokesh Ohri and Kasey M Lobaugh (2016) The new digital divide, Deloitte, 12 September. Available from: https://dupress.deloitte.com/dup-us-en/industry/retail-distribution/digital-divide-changing-consumer-behavior.html [Last accessed 29/6/2018].
11 Del Ray, Jason (2016) 55 percent of online shoppers start their product searches on Amazon, Recode, 27 September. Available from: https://www.recode.net/2016/9/27/13078526/amazon-online-shopping-product-search-engine [Last accessed 29/6/2018].
12 Garcia, Krista (2018) Consumers’ trust in online reviews gives Amazon an edge, eMarketer, 7 March. Available from: https://retail.emarketer.com/article/consumers-trust-online-reviews-gives-amazon-edge/5a9f05e9ebd4000744ae415f [Last accessed 29/6/2018].
13 Kowitt, Beth (2018) How Amazon is using Whole Foods in a bid for total retail domination, Fortune, 21 May. Available from: http://fortune.com/longform/amazon-groceries-fortune-500/ [Last accessed 19/6/2018].
14 Accenture/Salesforce joint report (2016) Retailing, reimagined: embracing personalization to drive customer engagement and loyalty. Available from: https://www.accenture.com/t20161102T060800Z__w__/us-en/_acnmedia/PDF-28/Accenture-Salesforce-Retail-Exploring-Loyalty-ebook.pdf [Last accessed 29/6/2018].
15 Reagan, Courtney (2017) Think running retail stores is more expensive than selling online? Think again, CNBC, 19 April. Available from: https://www.cnbc.com/2017/04/19/think-running-retail-stores-is-more-expensive-than-selling-online-think-again.html [Last accessed 29/6/2018].
16 Meyersohn, Nathaniel (2018) Walmart figured out its Amazon strategy. So why’s the stock down 13%? CNN, 17 May. Available from: http://money.cnn.com/2018/05/16/news/companies/walmart-stock-jet-amazon-whole-foods/index.html [Last accessed 29/6/2018].
17 Transcript of Alexandre Bompard’s speech (2018) Carrefour, 23 January. Available from: http://www.carrefour.com/sites/default/files/carrefour_2022_-_transcript_of_the_speech_of_alexandre_bompard.pdf [Last accessed 29/6/18].
18 Bohannon, Patrick (2017) Online Returns: A Challenge for Multi-Channel Retailers. Oracle, 27/1. Available from: https://blogs.oracle.com/retail/online-returns:-a-challenge-for-multi-channel-retailers [Last accessed 29/6/2018].
19 Cochrane, Matthew (2018) Why 2017 was a year to remember for The Home Depot, Inc, The Motley Fool, 28 January. Available from: https://www.fool.com/investing/2018/01/28/why-2017-was-a-year-to-remember-for-the-home-depot.aspx [Last accessed 29/6/2018].
20 Ellis, James (2017) Online retailers are desperate to stem a surging tide of returns, Bloomberg, 3 November. Available from: https://www.bloomberg.com/news/articles/2017-11-03/online-retailers-are-desperate-to-stem-a-surging-tide-of-returns [Last accessed 29/6/2018].
21 ibid.
22 Ikea website. Available from: https://www.ikea.com/ms/en_US/this-is-ikea/ikea-highlights/Virtual-reality/index.html [Last accessed 29/6/2018].
23 Stern, Matthew (2018) Boxed CEO ‘definitely’ sees physical stores in its future, Forbes, 24 January. Available from: https://www.forbes.com/sites/retailwire/2018/01/24/boxed-ceo-definitely-sees-physical-stores-in-its-future/#619ff68c7cf3 [Last accessed 29/6/2018].
24 Permission received from Tim Yost.
25 Reagan, Courtney (2017) Think running retail stores is more expensive than selling online? Think again, CNBC, 19 April. Available from: https://www.cnbc.com/2017/04/19/think-running-retail-stores-is-more-expensive-than-selling-online-think-again.html [Last accessed 29/6/2018].
26 ibid.
27 Carey, Nick and Nandita Bose (2015) Shippers, online retailers seek way around rising delivery costs, Reuters, 15 December. Available from: https://www.reuters.com/article/us-usa-ecommerce-freeshipping/shippers-online-retailers-seek-way-around-rising-delivery-costs-idUSKBN1432ZL [Last accessed 29/6/2018].
28 Sender, Hannah, Laura Stevens and Yaryna Serkez (2018) Amazon: the making of a giant, Wall Street Journal, 14 March. Available from: https://www.wsj.com/graphics/amazon-the-making-of-a-giant/ [Last accessed 29/6/2018].
29 Amazon 10-K for the fiscal year ended December 31, 2017. Available from: https://www.sec.gov/Archives/edgar/data/1018724/000101872418000005/amzn-20171231x10k.htm [Last accessed 28/6/2018].
30 McGee, Tom (2017) Shopping for data: the truth behind online costs, Forbes, 10 August. Available from: https://www.forbes.com/sites/tommcgee/2017/08/10/shopping-for-data-the-truth-behind-online-costs/#53fdecdfc9d7 [Last accessed 29/6/2018].
31 Death of Pureplay Retail report (2016) Gartner L2, 12 January. Available from: https://www.l2inc.com/research/death-of-pureplay-retail [Last accessed 29/6/2018].
32 Walsh, Mark (2016) The future of e-commerce: bricks and mortar, Guardian, 30 January. Available from: https://www.theguardian.com/business/2016/jan/30/future-of-e-commerce-bricks-and-mortar [Last accessed 29/6/2018].
33 Death of Pureplay Retail report (2016) Gartner L2, 12 January. Available from: https://www.l2inc.com/research/death-of-pureplay-retail [Last accessed 29/6/2018].
34 Shelton, Kelly (2017) The value of search results rankings, Forbes, 30 October. Available from: https://www.forbes.com/sites/forbesagencycouncil/2017/10/30/the-value-of-search-results-rankings/#fab4b6b44d3a [Last accessed 29/6/2018].
35 ibid.
36 ICSC (2017) The socio-economic impact of European retail real estate. Available from: https://www.businessimmo.com/system/datas/112816/original/europeanimpactstudy-2017_.pdf [Last accessed 29/6/2018].
37 Khan, Humayun (2016) Why the top ecommerce brands are moving into physical retail (and what you can learn from them), Shopify, 10 May. Available from: https://www.shopify.com/retail/why-the-top-ecommerce-brands-are-moving-into-physical-retail-and-what-you-can-learn-from-them [Last accessed 29/6/2018].
38 Worldwide Business Research (2018) Putting the customer in the center of your business [Online Video]. Available from: https://slideslive.com/38906045/putting-the-customer-in-the-center-of-your-business [Last accessed 29/6/2018].
39 ibid.
40 O’Keefe, Brian (2017) What’s driving Walmart’s digital focus? Paranoia, top exec says, Fortune, 7 December. Available from: http://fortune.com/2017/12/07/walmart-penner-amazon-alibaba/ [Last accessed 29/6/2018].
41 Bhasin, Kim (2012) Bezos: Amazon would love to have physical stores, but only under one condition, Business Insider, 27 November. Available from: http://www.businessinsider.com/amazon-jeff-bezos-stores-2012-11?IR=T [Last accessed 29/6/2018].
42 Denham, Jess (2015) Amazon to sell books the old-fashioned way with first physical book shop, Independent, 3 November. Available from: https://www.independent.co.uk/arts-entertainment/books/news/amazon-to-sell-books-the-old-fashioned-way-with-first-physical-book-shop-a6719261.html [Last accessed 29/6/2018].
43 Kurtz, Dustin (2015) My 2.5-star trip to Amazon’s bizarre new bookstore, The New Republic, 4 November. Available from: https://newrepublic.com/article/123352/my-25-star-trip-to-amazons-bizarre-new-bookstore [Last accessed 29/6/2018].
44 Del Ray, Jason (2017) One of the most popular mattress makers on Amazon is building an Amazon-powered store, Recode, 31 July. Available from: https://www.recode.net/2017/7/31/16069424/tuft-needle-seattle-store-amazon-mattresses-echo-alexa-prime-delivery [Last accessed 29/6/2018].
45 ibid.