June 25, 2012
Amazon, many people’s favorite online shopping destination, is about to extend its brand to brick-and-mortar stores. According to news reports, the company plans to open a test store in Seattle later this year with an eye toward growing a chain. Here’s why the online company has a leg up on traditional retailers:
1.) There’s no shortage of financial capital.
It takes a lot of money to build an amazing retail experience, from design to fixtures to inventory. Target invests about $10 to $20 million to open one new location, according to a source in the Property Development department. And once the store is built, more investment is needed to drive traffic with events, community relations, and advertising. Amazon is no stranger to the need to drive traffic to its website, so it is unlikely to skimp on this investment for its physical locations.
2.) Amazon already knows how to put the customer first.
Amazon is almost as legendary as Zappos (owned by Amazon) for customer service. Its online self-help tools mitigate the need to contact the company, but if you do need to reach out for returns, repairs, or replacements, the customer service representatives are second to none in putting the customer first. Amazon’s real-world stores could rival Nordstrom’s famous brick-and-mortar customer service.
Training human resources can be one of the toughest challenges for retail stores, given the high turnover, low wages paid, and demanding customers (like me). But you must serve them to keep them coming back. Amazon already has experience in training and keeping quality staff.
3.) Few companies know consumers like Amazon.
Amazon has seemingly unlimited data on consumer behavior. The company knows the prices people will pay, what items bundle together well, and can even provide “helpful” recommendations to drive basket size. Imagine the effectiveness of any coupon program the brand develops or the hyper localized newspaper advertising it could create using that data. Amazon can also learn a few lessons from Target’s recent PR misstep. The latter company was perceived as big brother when it sent coupons for expecting moms to a teen whose father didn’t know she was pregnant yet.
The data Amazon has could also be used to determine the categories of items that are most frequently returned, such as technology or cosmetics (implying that customers prefer to touch and feel them before committing). The biggest obstacle, of course, will be selecting which products within the chosen categories should be featured in store. Amazon has become famous as an aggregator, not a curator. This works well online when inventory is held by vendors, but it runs into challenges with the square-footage limitations of traditional retail spaces.
Amazon just might become the chain to rival Apple or Sephora, or finally put Best Buy out of business.
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