With Amazon Opening Food And Book Stores, Clothing Could Be Next
It is supposed to be hush hush, but reports are leaking out from Amazon: the Seattle giant is planning to greet more of its customers in physical stores. There will be Amazon book stores, Amazon food stores, Amazon pop-up stores and maybe even Amazon fashion stores.
Maybe it was the success of its pop-up stores that gave Amazon’s management the confidence to develop a physical store program. The initial idea was to sell some Amazon hardware in small pop-up stores in shopping malls. Kindle readers, Fire TV sticks and Echo speakers as well as accessories were sold in these small units that averaged about 400 square feet. According to Eugene Kim of Business Insider, there are now 21 pop-up stores and there could be as many as 30 locations by the holidays. This means that the stores have been well received by consumers.
Amazon is now preparing a grocery store pilot program. By the end of 2018, 20 grocery units reportedly are slated to open in cities like Seattle, Las Vegas, New York, Miami and San Francisco. These cities will see variations of the concept during an experimental phase. Many will be small convenience type stores. Upon completion of the initial tests, speculation abounds that Amazon will aim to operate 2,000 of these stores by the mid 2020’s. A bold competitive move in the face of the coming onslaught of Lidl and Aldi that I discussed in previous blogs. Lidl’s entry into the U.S. East Coast and Texas is now slated for 2017-18.
Striving to attract customers, both Amazon and Lidl are pouring huge amounts of cash and resources into their expansion strategies. However, Amazon is still examining whether its grocery stores should be open to the general public or to Prime Fresh Club members only. I believe they should open the doors to everyone as this would likely generate stronger traffic leading to higher turnover thereby insuring greater freshness. A sleepy food store would not be attractive since the food will not be as fresh as it would be in a busy high traffic store. These stores will also have the ability to make quick home delivery due to innovative technology – a factor that is driving many food operators to pursue this capability. It is interesting to note that AmazonFresh home delivery is already available in many U.S. cities as well as London, England.
I believe that very shortly we will also hear about Amazon fashion in physical Amazon stores. In my opinion, they will reach more people with their excellent fashion offerings through physical stores. The company has already attracted a number of the best designers and name brand fashions to sell on the internet. Names like Rebecca Minkoff, Diesel, Kate Spade New York, Roxy, Calvin Klein, New Balance, Jessica Simpson and Carter’s are just a few of the brands I recently found on Amazon’s fashion pages. It is an easy extension for some of the fashion merchandise to become available in Amazon stores if the company is successful in attracting customers to buy groceries and books in its stores.
Physical stores are becoming increasingly important to Amazon’s ambition to reach customers in every way possible. Testing various concepts is a sound first step. In the most recent quarter Amazon opened 18 distribution centers. While they cut into earnings in the quarter, these centers represent building blocks for the future. Walmart’s enormous success in retailing has demonstrated the supply chain is vital to insure customer satisfaction. I believe that Amazon is building a base for internet and physical expansion.
Amazon wants to compete with everyone. In fact, Amazon wants a slice of every form of business. Management realizes that customers want to touch and feel fashion, browse for books (their book site now allows you to open books and read a few pages), and test the freshness of groceries. While all of these products are available online, some of them sell best when the customer can see and touch the goods. After achieving internet dominance, it is time to branch out!