This month Amazon opened its first physical bookstore in Seattle’s University Village neighborhood.
Many laughed at this move because it looks ironic for an online retailer to establish a brick-and-mortar book outlet, especially when Barnes & Noble continues closing its stores nationwide.
However, it should be noted that having a physical presence can allow a digital brand to own the entire customer journey from research to purchase.
“Amazon’s bookstore plan is a targeted strategy that is probably as much about PR as it is about selling books. Rumors of offline’s death have been greatly exaggerated. We have many clients who use a combination of online and offline marketing, such as physical stores to extend or complement their efforts, with great success.” says David Rodnitzky, chief executive (CEO) of digital marketing company 3Q Digital.
“Old-school physical locations – even with their high costs – still resonate with consumers,” he adds.
The importance of data
The wealth of data available to Amazon can help the retailer to maximise its impact in a physcial location. For example, it will have a good idea of the kinds of books that are popular in Seattle.
Ecommerce expert Linda Bustos explains:
“Amazon is a bit like Uber. It’s really a data company that happens to sell things. Like Uber is a data company that happens to involve driving folks places. It has enough reliable data to ensure its physical store’s assortment is optimal to the city and location.
“Amazon has the ability to use all its own digital assets and features in the physical store, something Borders (RIP) couldn’t do, Barnes and Noble can’t do that either, and smaller independents have no chance to match. If the experience is enjoyable, it will attract bodies and wallets, and it’s experience that’s really the missing piece in physical retail today.”
A great shopping experience involves online and offline
In 2011, the second-largest U.S. bookstore chain Borders Group filed bankruptcy.
Many factors led to the loss of Borders: one was that the company had too many stores (around 659 stores at the time); and the second reason was that consumers were increasingly downloading e-books or having physical books mailed to them.
But Amazon is not opening thousands of retail locations to replicate Borders’s failed megastore business.
Rather, the bookstore is an extension of Amazon.com: online customer reviews are placed near relevant books in the store; the books are placed cover-out – the same way they are displayed online – rather than the traditional spine-out; and there are even stations for Kindle e-readers!
Amazon is looking to close the loop with offline sales because online shopping is gaining popularity, but the majority of retail sales are still taking place in-store.
This year, a mere 7.2 percent of U.S. retail sales are occurring online, according to eMarketer. And Coupon’s October report reveals that more than 70 percent of 2,000 millennials prefer in store for household goods, beauty and personal care items.
Apple has built its unique retail environment – Apple Store – through the integration of the product, retail, and customer experience. So Amazon is looking to bring online shopping to life via a similar strategy.
“Amazon has done a great job in making money from every single point of its value chain. More than 90 percent of sales are occurring offline. So if Amazon only does online business, it can get at most 10 percent of the market,” says James Green, CEO of technology company Magnetic.
“Apple Store creates an irresistible customer experience. [By the same token,] the bookstore will be a great ad for Amazon. Even if someone decides to just buy online, chances are they’ll buy on Amazon.com instead of other websites,” he adds.
Look beyond Amazon
Amazon is not the only e-commerce company that has offline locations. In July of this year, menswear e-tailer Bonobos opened a showroom in Manhattan, where consumers cannot walk out with any merchandise but they can place an order and have it shipped for free.
Back in 2013, eyewear e-commerce pioneer Warby Parker made its first foray into the world of brick and mortar with a store in Soho. The company is planning to open more stores this year. Also, online shoe retailers JustFab.com and Birchbox have opened physical stores.
“Many of our clients with huge e-commerce businesses are investing in a ‘human connection.’ As Zappos has famously said, they love consumers to call them since someone that calls them for any reason has a lifetime value six times greater than someone that doesn’t. We’re seeing major investments in both telesales and in-store experiences from e-commerce businesses,” says Pete Christothoulou, CEO of mobile advertising analytics company Marchex.
From a data perspective, the landscape for tracking offline has greatly improved. Many companies now offer solutions to measure the impact of offline behavior, including attribution modeling tech companies Convertro (acquired by AOL) and Adometry (acquired by Google).
By opening physical stores, companies can collect conversion data and more email addresses that have become a golden key to connect online and offline.
“In Amazon’s case, besides the obvious consumer benefit of not feeling guilty over ‘web-rooming’ first, the company gets to collect valuable retail behavioral data which will likely fuel and inform future Amazon.com mobile shopper services,” says Phil Barrett, senior vice president of Purch.
Would this work for other online retailers?
While there are advantages in having a physcal location, such as offering click and collect or providing a more rounded shopping experience, the costs of maintaining stores and staff are likely to be prohibitive for most.
As Linda Bustos explains, “retail experiences like this will only benefit online pureplays if they carry exclusive merchandise ( think Warby Parker) or can create a “destination” experience that uses digital in the right way, as a value propostion over other stores.”
While Amazon has deep enough pockes to absorb losses on physical shops other pureplays would not be able to. Also, if they are making profits as an online retailer, why take the risk?
Linda cites the example of Target:
“Expansion is always risky – look at Target’s entry into Canada. Canadians expressed high demand for Target, but never shopped at their physical stores. (Arguably this is due to poor location, but again, this may all come down to using the wrong/insufficient data to make a decision).”
A few thoughts
Consumers interact with a brand not only on digital devices, but also offline: in-store, over-the-phone or on TV. Leading brands like Amazon and Apple are getting rid of siloes that separate their e-commerce and in-store sales, becoming more focused on an integrated omnichannel experience.
I think, though we are likely to see other online brands experiment with stores as Amazon has done, most online brands will look for other way to have a physical presence, such as temporary pop-up stores, or offering services like click and collect.
Images via Flickr
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