Peter Chapman, Head of Retail Strategy & Operations at Booodl, explores how the world’s biggest online retailer makes inroads into physical retail innovation, and what it means for the wider industry.
With a recorded net revenue of US $135.99 billion for 2016, it’s clear Amazon are doing something right. Although traditionally regarded as an online retailer, the industry behemoth is stepping up its game, continuing their global expansion plans with further moves into the physical retail space.
Despite many experts incessantly sounding the death knell for the physical retail industry, Amazon’s strategy proves bricks-and-mortar stores are not going anywhere. However, retailers need to ensure they protect themselves against the very real threat of Amazon, and here’s how.
A return to the roots
Launched in 1994, Amazon started out as a humble online book e-tailer. It is interesting then, that more than more than two decades on, Amazon is now opening physical bookstores across the US.
With bookstores globally on a decline and online sales of books soaring, it seems an odd move. However, Amazon stores unique point of difference is their ability to solve one of the biggest problems in online shopping; discoverability.
This is done using a mix of simple and more complex techniques, such as positioning all the books cover-forward to increase visibility, and ensuring they carry popular titles that are highly ranked on Amazon online. Any books they do not carry can be ordered via in store terminals.
Amazon also use significant consumer data to offer a more personalised experience for in-store shoppers, pinpointing what people in specific areas are reading, and tailoring each store’s selection to meet those tastes. Of course, these purchases can still be completed online, but physical stores provide the personal, human interaction that more and more consumers crave.
“Amazon stores unique point of difference is their ability to solve one of the biggest problems in online shopping; discoverability.”
Not only are they the world’s biggest online retailer, but Amazon are also considered to be one of the most revolutionary companies in existence, continuously innovating in new industries with offerings such as Amazon Go, Amazon Echo and Amazon Music to name but a few.
So what’s with their success? Many would argue it comes down to their onus on personalisation in transaction – a key retail trend as identified by Paul Zahra, Global Retail Advisor to PWC. In an increasingly digitised world, consumers value personal knowledge and service now more than ever, and Amazon are masters at using data analytics to respond to and anticipate their customer needs, which in turn drives customer loyalty.
It is important for physical retailers to understand and adapt to this growing need for personalisation, or risk losing sales to Amazon. 90% of sales still occur in physical stores, but shoppers are increasingly seeking bricks-and-mortar retailers that provide a high level of personalisation, or services that make it easier to shop based on personal preferences.
In the context of discoverability, brands in a suburb need to be as discoverable as books in an Amazon Bookstore. Ease, efficiency and visibility are crucial, and Store Discovery Optimisation is the key to this, allowing consumers to find what they are looking for, when they need it.
The only way to compete with retail giants like Amazon is to find efficient and intuitive methods that will meet the personalised needs of today’s consumer.