What Amazon understands about offline retail
What can retailers, online and offline learn from Amazon's venture into the brick-and-mortar space? Columnist Florent Peyre explores.
One of the more interesting retail stories that has emerged over the course of the last year is Amazon’s brick-and-mortar strategy.
It started with a single physical bookstore in Seattle last November and has evolved into what will be 300 to 400 more stores later this year — and some not just for selling books. For years, industry watchers have tracked and proclaimed Amazon’s increasing digital toll on offline retail, so the online giant’s move into a real-world location took many by surprise.
The decision to open a brick-and-mortar bookstore reflects an important realization for Amazon: there is something unique and powerful about the real-world shopping experience. Sure, people enjoy the leisure of browsing and value a hands-on experience, but there’s more to it than that. Apple acted on the same realization when they opened their stores.
In fact, an increasing number of online retailers have recently made the move to open offline stores. The popular beauty retailer, Birchbox, opened their flagship shop in SoHo, and Rent the Runway expanded from a storefront in New York to five new cities. Warby Parker, the hip eyewear retailer, opened 25 new showrooms across the nation. Add to that list stores like Bonobos, JustFab, ModCloth and a wealth of temporary pop-up spaces from online brands.
If online stores offer retailers the valuable advantage of no physical overhead, broader reach, personalized recommendations and customer activity tracking, then what added value does the move to physical locations provide? And even more importantly, what are they bringing to the offline experience that they’ve learned from their success online?
From clicks to bricks
Part of the shift in strategy for these e-tailers reflects a larger trend across the US. Big box stores are on the decline, as are American malls. One of the primary advantages of these big box retailers has always been quantity, but with nearly everything available online, inventory size doesn’t matter as much as it did before.
In the space opened up by these disappearing stores, we’ve begun to see a resurgence of what the shopping experience can be. Smaller boutiques are flourishing. These stores take a much more personalized experience to their customers.
Online retailers moving into the real world take this approach. They are not only looking to create a physical presence, but also to create a unique brand experience. The Apple Store’s spartan, sleek design, for example, became an early model of how digital brands can replicate their online appeal for walk-in customers.
The bigger shift, though, is from one-size-fits-all in-store expectations to a more customized shopping experience. Customers today have become accustomed to the online experience of tailored recommendations, far beyond just shopping.
Online companies, like Amazon, are exploring brick-and-mortar installations because they get the best of both worlds. They are able to replicate customer expectations through high-touch in-store interactions that can achieve the best aspects of online personalization in a visceral and tactile experience. In many ways, this is leading us into a golden age of customer service.
The other side of creating that customer experience, however, is what digital retailers are bringing to their businesses in terms of analytics. Online shops live and die by the insights they cull from their analytics, customer information and recommendation algorithms.
Retailers are now applying those same precise methodologies in unique ways to transform the offline experience. Along with customer experience innovations like Bloomingdale’s “smart dressing rooms,” the new breed of clicks-to-bricks retailers are tracking in-store experience data as closely as they do their online customer journeys.
Amazon’s full-stack retail system
On the surface, Amazon’s real-world bookstore doesn’t look very different from the traditional bookstore. Aside from some aisle space devoted to Kindles and electronics, a customer wouldn’t readily acknowledge anything beyond what we’ve come to expect.
However, there are some notable examples of Amazon’s e-tail thinking in the way products are displayed. For example, reader reviews are highlighted on the shelves, and whole sections are dedicated to the highest-rated books. There are also collectively customized sections similar to those you might see on the website, such as the most popular and most wished-for books.
The real innovation in Amazon’s retail space, though, is what happens under the hood. Take the fact that the store encourages shoppers to scan and price-check books with the Amazon app. Not only does this reassure customers they are getting the best price, but also allows Amazon to gauge interest in these items in real time — and understand the price points at which those items will actually move. This could be an easy step towards personalized pricing because the store is able to act on the already built-up profile of your Amazon history and habits. The physical store is a true hybrid experience for the shopper.
Likewise, at checkout in the physical store, the customer experiences the familiar Amazon Web experience. Receipts are emailed, user profiles are further customized, and more data is fed into the overall system. This also creates a natural touch point of post-sale communications that so many offline retailers struggle to achieve. Amazon has naturally established that behavior for their customers already from their online experience.
With the backing of Amazon’s analytics and data, they are able to rethink the in-store experience. They can see which books are selling better locally as opposed to nationally, adjust inventory and target shoppers accordingly, and think in terms of a continuous customer journey that doesn’t just begin and end within the walls of a store.
Amazon understands the physical store experience in terms of a full-stack retail system, one that provides uniquely customized value for customers. They act as an example for all offline retailers to think more analytically, and over the next year, we’ll begin to see more physical stores developing more sophisticated analytics stacks to transform their customer experience. Innovative technology isn’t limited to online, and better customer experiences through smarter analytics need to become foundational to brick and mortar retailers as well.