With a current market value of over $400 billion, Amazon is the undisputed king of online retailers. After successfully beating back other brands that have attempted to compete in the e-commerce arena, it also is giving brick-and-mortar retailers a new reason to be concerned: Amazon is looking to develop its physical store presence. The retail giant hopes to win over customers with new, and sometimes unconventional, ideas, designed to change the shopping experience overall. Through these efforts, it also hopes reach an untapped market of consumers who remain hesitant to shop online.
The grocery sector, a $770 billon dollar retail category, is a particular market that Amazon has ambitious plans to attack. Its current online grocery offering, AmazonFresh, has struggled to achieve profitability. Issues with ordering and delivering fresh meats and produce continue to hinder the overall success of the endeavor. Amazon hopes the secret to success in this area may be the growing India market. Most Indians currently do their grocery shopping with street vendors, often finding subpar produce and dusty cuts of meat for sale. Emboldened by the Indian government’s new efforts to promote foreign investment to help strengthen the country’s food chain, Amazon has plans to spend billions of dollars in India to help change the way this country shops for food. Amazon’s first grocery store in India is slated to open in Bangalore, and it hopes that many additional store locations will follow.
In addition to these international expansion efforts, Amazon is testing several new grocery concept stores in the United Sates. The company continues to work to perfect its cashier-less Amazon Go convenience store experience, which uses tracking software to charge a customer automatically as items are removed from shelves and taken out of the store. The company also is in the process of opening a few initial drive-up grocery concept stores, called Amazon Fresh Pickup. These stores allow customers to order products online and then drive up to the store for curbside service. Another new Amazon concept store would give customers a means to make in-person selections of produce, meat, and fish, but still have other grocery items saved on their shopping list to be fulfilled by a warehouse worker. Thus the picky consumer could peruse and make careful selections of more perishable items, but an employee could grab the dry goods, offering added convenience compared with a traditional grocery store encounter.
In addition to new inroads to the grocery market, Amazon is exploring several innovative ideas that would marry the online shopping experience with a brick-and-mortar presence. Current online customers are wary of purchasing large-ticket items such as furniture and home appliances, so Amazon is considering opening up product showrooms where such items could be viewed and tested in person. Customers then can order the products, either in the store or at home later online, for home delivery.
Another innovative store idea would emerge as a sleek, high-tech electronics store, similar to Apple Stores. Electronic Amazon devices such as the new Echo smart home speaker could be displayed and purchased. The company also continues to invest in its physical book stores, having recently opened a fifth location in Chicago.
With so many new and innovative ideas for physical storefronts, Amazon seems poised to capture a significant number of consumers looking for physical store experiences that are convenience driven. One thing is for sure though: Brick-and-mortar retailers need to get ready to compete now, if they hope to survive in the future.
Discussion Question:
- How is Amazon using technology in the bricks and mortar arena?
Source: Nick Wingfield, The New York Times, March 25, 2017