As consumers return to stores, why would Amazon shut the door?
Amazon has decided to close its physical stores, even as consumers return to in-person shopping. The pandemic accelerated e-commerce, with online sales expected to surpass $1 trillion. Despite this, most consumers still prefer physical stores. Surprisingly, Amazon closed all its bookstores, 4-star stores, and pop-ups, leaving only the Amazon Style apparel store. Amazon stated that the closures were to focus on other physical retail and tech offerings. Experts believe that while Amazon excels in e-commerce, logistics, and advertising, it struggles with brick-and-mortar retail. Amazon’s non-grocery stores were often criticized for being unfocused and not well-curated. The company continues to expand its grocery operations, such as Whole Foods and Amazon Fresh and has recently ventured into the apparel sector with its Amazon Style store.
The article “As Consumers Return to Stores, Why Would Amazon Shut the Door?.” by Daphne Howland.
E-commerce vs. Physical Retail
Despite the surge in online sales, the majority of consumers still show a preference for physical stores:
| Reason | Description |
|---|---|
| Tactile Experience | In a physical store, consumers can immediately obtain the product they purchase without waiting for delivery. |
| Instant Gratification | Some retailers offer promotions, discounts, or products exclusive to their physical stores. |
| Personal Interaction | Consumers can interact with sales associates, ask questions, get recommendations, and receive personalized service in-store. |
| Social Experience | Shopping in physical stores can be a social activity, where consumers go with friends or family, making it a leisure or bonding experience. |
| In-store Exclusives | Shopping in-store allows consumers to avoid shipping fees associated with online purchases. |
| Easier Returns | Returning products can be more straightforward in a physical store, as consumers can directly hand over the item and often receive immediate refunds or exchanges. |
| Avoiding Shipping Costs | Shopping in-store allows consumers to avoid shipping fees that might be associated with online purchases. |
| Product Availability | There’s no waiting time for a product to be in stock online or for it to be shipped. If it’s available in the store, consumers can buy it immediately. |
| Sensory Experience | For some products, especially perfumes, cosmetics, and food, the sensory experience (smell, taste) is crucial and can only be fully experienced in-store. |
| Trust and Authenticity | Physical stores can provide a sense of authenticity and trust, especially for high-value items, as consumers can see the actual product and verify its authenticity before purchasing. |
These reasons underscore the multifaceted value of physical stores and why they remain an integral part of the consumer shopping experience, even in the digital age.
Amazon’s Retail Strategy
The challenges Amazon faces in establishing a solid presence in brick-and-mortar retail despite its dominance in e-commerce:
| Challenge | Description |
|---|---|
| Store Curation | Amazon’s non-grocery stores, especially the 4-star stores, were criticized for being unfocused. Unlike independent bookstores that curate for browsing and discovery, Amazon’s bookstores mainly featured bestsellers. |
| Retail Expertise | Running physical stores requires expertise in merchandising, branding, and operations. Amazon has not proven its competency in these areas compared to its e-commerce operations. |
| Omnichannel Integration | Amazon did not effectively integrate its online and offline operations. Features like checking stock levels before visiting or ordering online for in-store pickup were missing. |
| Site Selection | The choice of store locations suggested a lack of understanding of optimal site selection for brick-and-mortar retail. |
| Consumer Expectations | Consumers have certain expectations from physical stores, such as immersive shopping experiences. Amazon’s decision to close its physical locations might not align with these expectations. |
| Brand Identity in Physical Retail | Amazon’s brand is strongly associated with online shopping. Establishing a clear and compelling brand identity for its physical stores can be challenging. |
| Competing with Established Retailers | Amazon’s non-grocery stores, especially the 4-star stores, were criticized for being unfocused. Unlike independent bookstores that curate for browsing and discovery, Amazon’s bookstores mainly feature bestsellers. |
| Supply Chain and Logistics | While Amazon excels in e-commerce logistics, the supply chain for physical stores, especially for perishables in grocery stores, can be different and challenging. |
| In-store Technology Integration | In physical retail, Amazon competes with businesses with decades of experience and refined their in-store strategies. |
These challenges highlight the complexities of transitioning from a predominantly online to a physical retail model, even for a giant like Amazon.
Future of Retail
Amazon’s experimentation with different retail formats and what it indicates about the evolving landscape of retail and consumer preferences:
| Amazon’s Retail Experiment | Indication about Retail Landscape | Consumer Preferences |
|---|---|---|
| Closure of bookstores, 4-star stores, and pop-ups | Diversifying into sectors where the company has a significant online market share can offer new opportunities for in-person engagement. | Consumers still value curated in-store experiences, especially in sectors like books where browsing and discovery play a significant role. |
| Opening of Amazon Style apparel store | Grocery remains a sector where physical stores are crucial due to the perishable nature of products and consumers’ immediate needs. | Consumers appreciate technology-driven in-store experiences that offer personalized recommendations, even in fashion. |
| Expansion of grocery operations (Whole Foods, Amazon Fresh) | Grocery remains a sector where physical stores are crucial due to the perishable nature of products and immediate needs of consumers. | Consumers value the convenience of physical grocery stores, especially with added tech benefits like walk-out payment. |
| Venturing into walk-out payment tech in grocery stores | Integrating technology into physical retail can streamline the shopping process and enhance user experience. | Speed and convenience are paramount, especially in routine shopping like groceries. |
| Closure of non-food locations but expansion in grocery and apparel | Not all sectors offer the same value proposition for physical retail. Some sectors might be more suited for online-only models. | While consumers might be comfortable buying certain items online, sectors like groceries and apparel still benefit from in-person touchpoints. |
Amazon’s experimentation reflects the broader shifts in the retail industry and the nuanced preferences of consumers across different sectors.