Some Amazon physical stores are about to be closed, as recently announced. But this is only part of a continuous revenue optimization strategy, where different business models are improved, adjusted, or simply discontinued.
Besides its worldwide dominating position in e-commerce, Amazon doesn’t seem to settle and constantly rolls new projects out to stay in line with consumer trends in this rapidly changing world.
As specialists in e-commerce, Content2Sell needs to stay up to date with the latest news, just like you do. So, in this post, we’ll go over them to see their impact on global e-commerce. And, of course, we’ll share some insights to better understand them.
Amazon’s diversification
What started in 1995 as a basic online platform for the sale of books has become one of the greatest economic empires. Amazon has had an unstoppable growth in the digital ecosystem, to the point of becoming one of the most important figures in the world.
Part of its success is due to a wide diversification of products and services, which includes other well-known companies, such as Zappos (acquired in 2009), Twitch (in 2014) or Whole Foods (acquired in 2017).
Amazon has also explored other sectors: from advertising, computing, and web services, to streaming, and many others. But, in an inverse process to what we might be used to, it even ventured into the world of physical stores with bookstores, pop-up stores, and more recently with its food business, Amazon Fresh (more on this below).
Following this continuous evolution, the company is now restructuring its network of physical points of sale. Some Amazon physical stores will close down, in sight of the low revenues they’ve reported. Moreover, the idea is to close retail-oriented markets and target large-scale businesses related to the food sector on a – must be said – brilliant strategy.
Amazon’s foray to physical retail
Amazon’s first steps to offline commerce began in 2014, when they opened their first physical store in New York. That was not entirely successful for the company, despite the project’s effort (and ingenuity). With bookstores, for example, Amazon tried to create a hybrid system based on its huge database. By offering a digital link in physical stores, consumers could review and check online reviews given to books, along with other features allowing to keep track of what other people were reading.
Over time, Amazon has progressively integrated its mighty technology to improve customers’ experiences through deep machine learning and sensor fusion, bringing the hybrid world a little closer.
4-star stores
Another of the company’s attempts to bring its best-selling and top-rated products closer to consumers was opening the 4-star physical stores, which featured an exclusive catalog of non-food products with 4 or 5-star ratings on the web.
The first one opened in New York in 2018. And 30 stores later we saw the first one outside of the United States, in October 2021. That was in Dartford, UK. And, surprisingly, it is now sentenced.
Amazon Go stores
There was a big fuss about the Amazon Go stores, which many people saw as the future of the groceries retail market. A project where stores would suppress cashiers forever and operate 100% digitally. And where consumers would simply scan codes and pick up their purchase with barely any human contact. In other words, a digital store in a physical space.
But Amazon Go is among the Amazon physical stores that will remain open.
Amazon Fresh
A similar idea emerged under the name “Amazon Fresh” to enter the groceries market with the focus set on local producers and quick delivery. First launched in 2017, it has rapidly expanded to most major American cities, as well as in other international locations like Berlin, Hamburg, or Rome.
Amazon Fresh sells fresh groceries ranging from eggs, meat, and seafood, to meal kits ready for pick-up or delivery. And it doesn’t seem to be doing bad.
But no. The numbers didn’t add up
All these physical subsidiary projects – which have required large investments – only made 3% of Amazon’s turnover. The little profitability has led to the recent decision to close some of their retail-oriented offline branches. Specifically, 4-star and Amazon Books.
Despite all this, Amazon keeps trying new ways to diversify and expand to other sectors with high demand. Amazon Amp, for instance, seeks to compete in the broadcasting industry by providing an affordable platform for DJs and creators, who will get a large library of licensed songs for their podcasts and radio programs.
Amazon ends up betting on fashion and groceries
Groceries and Fashion are the top-growing categories in e-commerce, and what started with the 2020 lockdowns kept growing afterward.
But Amazon recently announced physical bookstores and 4-star stores will gradually close down. Posters in the stores will notify consumers, and employees will get severance payments or relocation programs.
The point here is that this decision comes at a contradictory moment, since the company also announced the opening of a new physical store model: Amazon Style. A bet on the fashion industry with an innovative and disruptive sales format.
Amazon Style stores will provide consumers with an easy, personalized, and dynamic shopping experience through different technological integrations. Integrations we have seen before, like taking choosing products just by scanning them and finding them ready in the fitting room, product recommendations, or payless pickup – all through a unique Amazon user’s profile.
Nevertheless, there still are some challenges: setting up the physical infrastructure to deliver clothes in fitting rooms, and doing it fast enough, seems like a costly investment. Not to mention the reaction of users or the profitability Amazon expects to get.
We’ll have to wait to see how the public responds, if this ends up in another exploration on how to respond to market trends, or actually creates/reinforces a new stream in the phygital space.
Moving to physical retail seemed like a step back from the innovation that has defined Amazon since its birth. Maybe even a risky move, where the borders of the physical world wouldn’t compare to the profit of a full-on online e-commerce platform.
Needless to say, if there’s a company that could afford such risk, that is Amazon.
What does all this mean for products?
So, Amazon is placing its chips on groceries and fashion, while renowned retailers like Walmart have emerged as mature marketplaces. This only reflects that the big ones are not changing what works for them, but what doesn’t.
So, to answer the question, this suggests the need to diversify and explore new options.
For example:
- New e-commerce platforms and marketplaces. They are blooming. And there are specific channels for specific audiences and categories of products.
- Using Social Media both to promote and sell products. The rise of Social Commerce and livestreaming is worth taking advantage of. Not to go too far, Amazon launched Amazon Live in 2019, and its expansion outside of the US shouldn’t take long.
Along with a growing Direct-to-Consumer e-commerce seem to be clear indicators on the path to follow. - Speaking of e-commerce platforms and DTC, Shopify is one of the preferred among companies of all sizes.
- Hybridization is happening, and even native digital brands are stepping foot, here and there, on physical ground. That doesn’t make going physical a life-or-death condition, but an option worth considering via pop-up stores or venues, for example.
- Working on branding is a necessary extension of the above, as consumers seek for the exact same brand experience regardless of the channel they use.
Conclusion: keep a close eye and diversify
At the very least, Amazon will remain where it is if it doesn’t keep growing and testing new markets as new opportunities appear. But above all, Amazon is in line with consumer trends, and many of the projects and operations it carries out are to be closely monitored by e-merchants to keep their sales going. Amazon physical stores are a part of a wider diversification strategy.
Because diversification is a must, as much as product content needs to be optimized to every new platform. Remember that is our specialty.
At Content2Sell we craft eye-catching content, that is not only made to watch but to sell.
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