Amazon.com already dominates retail online, a sector with enormous growth recently and forecasted for the future. With everything going so well, why would Amazon CEO Jeff Bezos make the shift to begin investing in retail stores such as Whole Foods and Amazon Go? With their dominant online retail position and growth rates projected to exceed their expectations from a few years ago, Amazon is in a great position to ignore brick-and-mortar and focus completely on online retailing.
It may seem odd that Amazon has decided to go against expectations and invest in physical retail stores. Perhaps it’s because 90% of worldwide spending still comes through traditional – rather than online – channels, but it’s more likely that Amazon is simply leveraging their physical locations to experiment and gather the most important asset in their ever-expanding arsenal: shopper data.
Online Shopping and Amazon’s Domination
Offline shopping remains popular with a large segment of global shoppers: individuals who are unwilling to give up the control available when they walk into their local store and make a purchase. The growth of eCommerce is double that of brick-and-mortar shopping, as Americans are looking for the most convenient and trusted option for their purchases. For some items, shoppers are perfectly comfortable conducting deep research and purchasing online. For other items, such as fresh grocery products, many individuals still prefer to walk into their local retail store and see and touch the item before purchasing.
The 24/7 access of online shopping and the ability to compare prices are balanced by the ability to speak with a knowledgeable store associate or avoid the shipping costs for certain items at local retail establishments. Shoppers continue to be concerned that items will look different in person than they are online, and delivery time is also often quoted as a reason for sticking to online retail stores. Amazon has been working to overcome these problems by introducing live video, adding multiple images to their product listings, creating a robust online review platform and offering a return system that removes much of the perceived “uncertainty” of shopping online.
Brick-and-Mortar is Still BIG
Even though Amazon continues to be the online retail giant, they comprise only a small fraction of global retail spending. Brick-and-mortar retailers are making strong strides to align their business to the wants and needs of their core shoppers. Consumer confidence is at an all-time high, with tax cuts and an improved job forecast giving them more reasons to visit their favorite retailer. According to Forbes, a tech transformation that leverages AI, deep customer data and digital integration will also drive an improved in-store shopper experience.
In addition to these improvements, shoppers still overwhelmingly choose to shop locally in brick-and-mortar stores for the following reasons:
- Tactile exploration of goods that simply isn’t possible online
- Return to a slower way of life
- Local retailers offering niche items
- A true enjoyment of the experience of visiting a retail store
- Concerns with security
- Challenges with the online return process
Retail marketers are also using tactics such as experiential marketing and exceptional targeting to encourage shoppers to physically visit the store and lure them away from the ease of online shopping. There are also some distinct differences in the ways that shoppers perceive the retail experience, with women being more likely to want to touch an item before making a purchase, while men are interested in taking products home immediately instead of waiting several days for a delivery.
Overcoming Shopper Concerns
Amazon’s stellar customer service and easy returns are all aimed directly at overcoming shopper reluctance to buy online. They are expanding these benefits to their trial Amazon Go stores, Whole Foods and retail stores throughout the country. They are leveraging the best of brick-and-mortar, along with their deep knowledge of purchase behavior tied to individual accounts.
While it’s difficult to provide the ability to touch and feel the quality of a product when you are shopping online, Amazon attempts to overcome that challenge through their strong network of product reviews from real people – many of whom are listed as verified purchasers of the product. Extensive product metadata that includes sizes, specifications and more also help add to the comfort level of shoppers who are willing to purchase online.
Amazon continues to impact our lives – from the Alexa-powered devices in our homes to our local shopping at Whole Foods. As this trend continues and expands, local retailers need to be ready to create multi-channel shopping experiences at scale, allowing shoppers to seamlessly move between the physical and digital world without technological roadblocks or inconsistencies. That means a renewed focus on maintaining tight control of inventory levels, supplier relationships, and data. Shoppers will soon come to expect in-store AI where they can find out more information about an item with a quick scan, or the ability to order an item online if it’s out of stock in the store. Self-checkout is also becoming more popular, especially as the technology matures. Online shopping with in-store pickup option is another major value-add for those who are not interested in shopping inside a local retailer.
The real story? Amazon continues to invest in retail because their leadership sees the true value of having a personal connection with their shoppers. This face-to-face model is where traditional brick-and-mortar establishments have gained an edge – even over the retail behemoth that is Amazon.