Amazon: The biter bitten?

The various theories built around the concept of the wheel of retailing seem to be bearing fruit in the case of Amazon. In November it opened its first ever physical retail store outlet in Seattle in the USA. On the face of it, this would appear to be a contradiction in terms. Amazon has been the “trailblazer” in the area of online retailing and has set the standard for others to follow. Retailers across the different categories have embraced “e-tailing” as shoppers appear to flock to this channel. Now the circle has turned full circle: rumours indicate that Amazon might open over 400 stores in the USA alone, in the coming years.

Retailers such as Waterstones are expressing concern at the likely impact that such physical stores would have in the UK market.

Why the about turn to this strategy? For years Amazon has never physically met any of its customers. Instead, due to the power of the “big data” that it collects on the purchasing patterns and habits of its customers, it has been able to provide a value proposition that is customised to individual needs. It has involved its customers in the process by encouraging them to post reviews of books, movies and other product categories. This has been of enormous help to others in determining what items they should buy. From a marketing perspective it also provides the opportunity for Amazon to “shape” and direct its customers to particular purchases. Why should they revert back to the traditional way of selling books and other complementary products? Especially when it would appear as though opening physical outlets will add to the overall cost of the value proposition and potentially make it less price competitive?

Initial evidence would suggest that Amazon is attempting to harness the detailed data to provide a store experience that is more attuned to the preferences and requirements of book purchasers in particular. The Seattle store highlights books that have received top ratings and reviews on the online channel. Thus it can be argued that it provides shoppers with a pleasant in-store experience that is built around items that are relevant to them.

It also has long moved away from being a simple bookseller: books make up a small percentage of its overall product offering on the web. It can be argued that opening some bookstores will have a negligible effect on its overall sales on the online channel.

Amazon will be attempting to change the face of physical store book selling. For instance shoppers can choose a book and leave the store without have to pay for it at a checkout desk. Technology will ensure that the amount charged for the item will be automatically transferred from the customer’s account to Amazon.

Maybe Amazon are not going “off the rails after all”. There is evidence to suggest that sales of paperbacks and hardbacks are increasing in the UK (Retail Week). This is the first time that such an increase has been tracked since 2012. One of the largest booksellers in the UK: Waterstones, increased the number of stores over the past two years. It is worried about the likely arrival of Amazon to this market.

How are we to assess this development? Perhaps it reinforces the importance of retailers increasingly moving to an “omni-channel” approach; where shoppers can in theory benefit from an integrated and seamless experience across different retail channels. I would welcome some comments on this move by Amazon. Over to you!

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