Is Amazon Breaking Into Brick-And-Mortar?

  • October 17, 2014 at 3:00 AM EDT
  • By Alicia Esposito
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Amazon has been recognized as an innovator and retail industry game-changer, helping to make online shopping the norm for consumers worldwide. But will the online giant be putting a new spin on brick-and-mortar?

Representatives have confirmed that Amazon will open pop-up kiosks in San Francisco and Sacramento, Calif., next week that will remain open through the end of the holiday season. The locations will sell Amazon-branded hardware, including Kindle e-readers, Fire tablets and Fire Phones.

Most conversations, however, are centered on reports from The Wall Street Journal indicating that the eTailer plans to open a brick-and-mortar location in New York City in time for the holidays.

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Up to 40% of consumers said they are open to purchasing any kind of product on Amazon, according to the Future Of Retail study from Walker Sands Communications. Should the eTailer create an in-store experience, Mike Santoro, President of Walker Sands Communications, believes there is an opportunity to “move the needle on the 60% opposed to purchasing products such as beds, couches and other items without seeing and feeling them first.”

Although an Amazon representative told Retail TouchPoints that the company has made “no announcements about a location in Manhattan,” The Wall Street Journal provided in-depth details regarding the store, its purpose, location and even inventory assortment.

The more permanent location reportedly will be located across the street from the Empire State Building, at 7 West 34th St. — placed one block east of the Macy’s flagship store in Herald Square. 

Initially, the store will serve as a mini warehouse to facilitate same-day delivery in New York, product returns and exchanges, and online order pickups. Amazon eventually will add a more diverse assortment of its branded hardware.

“It makes sense to focus on same day delivery items and items that differentiate Amazon from its competitors, said Michael Dart, a partner in the Private Equity practice at A.T. Kearney and co-author of The New Rules Of Retail — Competing In The World’s Toughest Marketplace. Current reports will “undoubtedly not reflect the full plans or how the concept will likely revolve,” Dart added.“In the long run, this platform should give Amazon the ability to maximize all aspects of its business.” The platform potentially could one day include marketplace brands and partners.

Improving Customer Satisfaction

The clear focus of the New York City store is to accelerate order fulfillment and delivery times in order to create a more enjoyable customer experience.

This move could be part of “a major shift, notonly for Amazon, but for retail at large,” Santoro noted. Results from the company’s Future Of Retail study indicated that two thirds of consumers are more willing to shop somewhere with one-day shipping, and another 44% with same-day shipping. “If Amazon’s store could facilitate faster shipping speeds for more mainstream shoppers, that would certainly make an impact on the market.”

There are additional benefits. With the new store, Amazon also will have an opportunity to engage with customers in a more intimate, one-to-one fashion, which isn’t as easy to create through the web.

“The store will give Amazon a new vehicle to interact more closely with their customers and collect more valuable feedback than they have historically been able to do,” explained Jason Goldberg, VP of Commerce Strategy at Razorfish, a marketing and experience agency. “A physical store will allow Amazon to observe portions of the pre-shopping process that they don’t have access to online.”

Amazon has developed a reputation for having an exemplary customer service team, but if the location is more focused on order fulfillment and logistics, an entirely different skill set may be required.

“It has been easy for Amazon to have a strong brand voice because they’re speaking through one channel or megaphone,” said Jim Dion, President and Owner of Dionco. “But there’s something about having someone stand two feet in front of you explaining the product. It’s a whole different world that Amazon has never experienced.”

Dion added: “I’ve had customer service reps respond minutes if not an hour after I reach out to Amazon and I have always been very happy and pleased with their customer service. But you have to wonder which side will own the retail experience, customer service or the operations side, which is made up of tough taskmasters. They have an entirely different culture.”

Generating Brand And Product Buzz

Many facts regarding Amazon’s brick-and-mortar location are still up in the air, however, the store will undoubtedly generate buzz for the brand.   

“Brick-and-mortar stores are great advertising vehicles for online businesses,” Goldberg said. “Online retailers with regional brick-and-mortar presences always see the majority of their traffic come from the regions where they have stores. While Amazon obviously already enjoys great brand recognition, the physical store will still be a powerful reminder to New York City shoppers that Amazon can fulfill their needs.”

Opening a brick-and-mortar location also allows Amazon to have more points of contact with customers — a concept Dart calls “pre-emptive distribution.”

With pre-emptive distribution, retailers can “always be ahead of competitors,” Dart said. “Opening exciting new stores in New York City and elsewhere is part of this pre-emptive distribution strategy. Amazon also is creating a neurological connection with consumers by creating buzz and excitement around the brand, and making itself increasingly relevant to every shopping occasion for its customers.”

Although consumers can touch and feel Amazon hardware by visiting partner stores, such as Target and Walmart, having the products in a branded environment with knowledgeable associates may help the eTailer generate more sales for its line of products.    

“Clearly some Amazon-branded products, such as the Fire Phone, would have benefited from better first party physical merchandising,” Goldberg said. “Features like Dynamic Perspective require an in-person demonstration to appreciate, and Amazon was totally dependent on third parties to deliver that demonstration experience. A physical store will give Amazon its own laboratory to test and learn how customers want to pre-shop for physical goods.”

Needless to say, the retail industry is anxiously waiting to find out what Amazon has in store for the 2014 holiday season and beyond.   

 

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