Retail Sales Shocker: Amazon Rumored To Open 100s of Stores
By Bob Phibbs
When it came to bookstores, the dirty little secret was that customers would come into the indie or chain bookstore, then secretly purchase on Amazon.
Why is the web agog today at the news leaked from Sandeep Mathrani, CEO of General Growth Properties? He was quoted in The Wall Street Journal, speaking about mall foot traffic, "You've got Amazon opening brick-and-mortar bookstores and their goal is to open, as I understand, 300 to 400."
After lots of speculation, Mathrani released a statement Wednesday afternoon saying that his comment “was not intended to represent Amazon's plans.”
If it comes to pass, I can imagine pickets in front of the rumored opening of Amazon bookstores, blogs filled with hate at the online giant, interviews with booksellers offering how they can’t compete.
We’ve heard it all before but it has never been so blatantly a challenge to a specific business. In fact it is more akin to what I experienced with my radical business makeover of a coffee retailer over 20 years ago taking on two Starbucks, one just 100 feet from their front door. You can read about it here Creating Buzz for your Small Business [Case Study].
But the Amazon story goes deeper...
As I said in this Adweek story about the rumored new stores, "It validates that people still want a brick-and-mortar store, and it shows you should never underestimate Amazon.”
I can't think of any retailer or business out there able to capitalize on all their Big Data so well. Amazon has roughly a quarter of a billion online customers; it knows an incredible amount about Jane and Joe Shopper. They know what the best customers spend so they know the best products to be featured.
Amazon can map out the cities and neighborhoods where people spend the most money and then open a store.
Doug Stephens with Retail Prophet added, "Bookstores are merely a convenient Trojan horse to get [its devices] into people's hands. These devices are the ultimate gateway to all that Amazon has to offer and a key component of future growth.”
Nicole Reyhle with Retail Minded added, "What will be interesting to observe is how Amazon may shift their pricing in their stores versus online with the overhead of physical stores certainly impacting this."
In a RetailWire discussion, Ken Morris with Boston Retail Partners added, “What intrigues me more is the potential to leverage these locations as distribution points for same-day or shorter delivery time within a store radius.”
The Atlantic had ten theories themselves today about why the company might want to build physical bookstores
Make no mistake, Amazon possibly opening stores is big news.
I don’t know who wants to have a relationship with their shopping cart.
Let’s be honest, Amazon isn’t a brand profile you want to emulate like Reese Witherspoon's Draper James or Gwyneth Paltrow's Goop.
There’s no style profile you’re looking to aspire to like Prada or Ralph Lauren.
Amazon is a means to an end, not the end. For that reason these stores aren't a slam-dunk.
Microsoft famously opened stores in the wake of Apple to hope for a piece of their pie.
Have you ever been in a Microsoft store?
Excuse me, have you ever passed by a Microsoft store? Name once the shoppers outnumbered the employees.
Oh and by the way, as Amazon changes prices frequently during a day based on demand, it is expected you will have to scan the item with your mobile device.
Not exactly a compelling reason to put down your iPad and drive out of your way to their stores.
All of that said, make no mistake, this is a harbinger of even greater disruption to retail.
According to Recode Amazon's retail store patent application suggests a possible feature is the ability to automatically charge people's credit cards on file when they walk out the store -- no need to pass through the checkout counter. It’s not yet clear what those stores will sell or how they will be formatted, but Recode reports the retail team’s mission is to reimagine what shopping in a physical store would be like if you merged the best of physical retail with the best of Amazon.
A rude awakening is sure to be coming your way if you’re smugly reading this thinking our customers all love us, we’re leagues ahead ofour competitors because they are all terrible and that our employees areall wonderful.
Lessons for other retailers
Ruthlessly cull your merchandise. One of the most intriguing aspects of their current Seattle bookstore is they only carry 4-star rated and above books. Brilliant use of the data from their own site of actual readers integrating in such a smart merchandising role. You could do the same thing with your products. Don’t limit yourself to only five star reviews as many feel they cannot be trusted. If you have enough volume, use your own ratings, if not scope the web.
If expanding, examine your database. Locations will be built presumably around the shopping interests and deep pockets of their Prime users removing one of the most common hangovers after a retailer signs a long-term lease – doubt that you choose the right location. If you are looking to expand, either pay someone to analyze your data or do it using a spreadsheet but use all your tools. I know a retailer who took an ad out asking people to call a number for information about his upcoming store. He plotted every call from its origin and chose his location using that information. He is very successful.
It’s not about price. Amazon originated as the lowest online price. While their gross profit margins are 31.8%, they are no longer the cheapest. But they are the most convenient. That's where the danger really lies. Amazon is the starting point for 44% of consumers searching for products. They have a relentless focus on removing friction from the sales process. Look at your own bottlenecks from your website, abandoned cart rescue strategy, your emails, your wait queue, your staffing – the works. Whatever adds time or frustration for a shopper should be eliminated – and that goes for your Bitter Betty or Brusque Bill you allow to work behind the counter too.
There is a great divide when it comes to retail in 2016.
On one side are those screaming it is all about the digital natives and influencers. Those wed to the smartphone app. Those afraid of human contact. Click and it’s done. Those believing employees are a necessary evil and they’re too hard to manage. They don’t do anything but cost the business money. They believe in a shiny world where Amazon is the norm.
On the other side are the few saying it is all about customer service and face-to-face communication. That you can’t feel a pixel. That shopping helps us form the spider web of community between actual people. That working and shopping in brick and mortar stores helps people realize we’re more alike than different.
Obviously I’m firmly in the latter camp.
Yes it is a big deal Amazon is looking at hundreds of stores.
No, putting a sign on your front door that reads “If you see it here, buy it here and help us stay in business” won't work.
And yes, that means the weak will go out of business.
But that doesn't have to be you - no matter what your size.
There’s only one thing you can control – your own four walls.
That means you have to hire better.
And be better than anyone – not just the struggling competitor down the block – anyone.
If you’d like some help, consider my complete retail sales training program, SalesRX.com.
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