One of the dominant trends that we’ve been talking about and seeing for a while in the retail domain is the end of pure-play single-channel retail. Amazon’s purchase of Whole Foods is a giant step in that direction and a validation of the fact that omni-channel retail is the future. While many industry watchers were caught unaware, Amazon has been toying with the idea of brick-and-mortar retail for a while now. Its efforts in this space can be traced back to the launch of its Amazon Books stores and more recently, its futuristic checkout-counter free concept called Go.
While every retailer talks about omni-channel and ‘physital,’ the fact remains that most of them – especially those that were only brick-and-mortar – have struggled to get their digital strategies right. In contrast, it’s been an easy and a natural transition for Amazon – an online-only company with a business model built for the new age of digital – to brick-and-mortar.
One of the problems that this omni-channel endeavor poses for retailers is a single view of the customer. Or simply put, how do shopping habits and preferences change across channels? Amazon’s entry into physical retail is a marriage of convenience and a natural solution to this problem. The Amazon Books stores combine elements of the ‘Amazon’ UI and create a seamless experience for shoppers and consumers that is consistent with what one expects of Amazon online. Think of a table stacked with books with a label on top that says, ‘Highly Rated.’ Or a physical version of its recommendation engine. Or a label with a barcode on it that directs shoppers to the customer reviews page on the Amazon app. Easy, right? Oh, and pricing requires an Amazon Prime membership – which can also be purchased in-store.
The other interesting thing to be noted about Amazon is that it is not only a retailer but also a devices’ and services company. By bundling products, content, and other services, it has managed to solve another problem that exists when it comes to retail – customer loyalty. Just think of future versions of the Alexa-powered Dot or the Echo that knows you’re out of milk because they’re both connected to your refrigerator and your ‘smart glass’ and know exactly how much milk you consume daily. And imagine a scenario where either of them can place an order for a carton of milk at the nearest Whole Foods which gets delivered to you via a drone. The idea is to make Amazon such an integral and easy part of your life that it feels like a natural extension of your daily routine.
Another aspect of this strategy is content. What is the rationale for an online streaming company like Netflix to produce TV shows? The idea is that if you have content, you’ll have subscribers. And subscribers stick, more than consumers. And when you combine Amazon Prime Video with its shopping platform, you’re effectively able to buy – at the click of your mouse or a single tap of your finger – Elsa’s outfit from Frozen for your child while watching the movie on Amazon Prime. Interestingly, a lot of grocery chains – specifically in the UK – are experimenting in this area by creating platforms where users can share recipes and other content, with the functionality to instantly buy the ingredients of that recipe online.
While Amazon has conquered product categories like consumer electronics and to an extent white goods, it is yet to experience the same kind of breakthrough success in fashion and grocery retail. While its Prime Wardrobe is attempting to solve the problem of trials and returns (and we’ll see some AR action here in the coming few months), its purchase of Whole Foods is giant step to conquer the final frontier of grocery retail.