Will brick-and-mortar Amazon stores be as seamless as online shopping?
Amazon’s plan to open multiple brick-and-mortar stores this year is leaving many scratching their heads. After all, why would one of the largest, most successful online retailers focus on physical stores when so many retailers are struggling to keep their doors open? Here’s a look at the new store formats Amazon is quietly rolling out across the country — and why they’re betting on this innovative cross-shopping strategy to increase market share and profits.
Amazon GO: A Store Without Lines or Cash Registers
The first of its kind grocery and convenience store recently opened in Seattle with plans to expand to more cities later this year. To shop at Amazon GO, customers must download the store app and swipe a code on their mobile device at a turnstyle upon entering the store. As they walk through the aisles, shoppers simply take their desired items off the shelves — and walk out of the store. Using sensors and technology, customers are identified, along with the products they take off the shelves. Items are added to a digital shopping cart and automatically charged to the customer’s account as they walk out the door, eliminating the need to stand in line and interact with a cash register.
The Marketing Strategy Behind Amazon GO
Amazon executives spent years imagining what shopping would look like if they could track customers in a physical Amazon store using technology similar to what they use to track online shoppers. Initially open to Amazon employees as a beta program, Amazon GO uses a hybrid of the technologies that the retailer used to successfully build its online shopping experience, including location-based app services, one-click shopping, QR code IDs and integrated payments.
Amazon Bookstores: What’s Old Is New Again
Amazon has quietly opened several brick-and-mortar bookstores across the country with several more slated to open this year. Interestingly, only a few thousand books are available in the physical locations. Amazon is banking on the idea that its brick-and-mortar bookstores will entice shoppers to discover items they didn’t know they wanted.
A/B Testing Drives Unique Marketing Strategy
Amazon considers the physical bookstores to be an extension of its online presence. On the shelves, every book faces out so that its cover is on full display. Contrary to most plan-a-grams, A/B testing found that displaying all the books face out is more appealing to shoppers.
Another unique approach to Amazon’s strategy? They stock their bookstores based on quality rather than quantity, since they know customers can still order any book title they want online and likely get it shipped for free. Book selection is based on data that shows which books are most highly rated from online rankings, as well as the most popular titles for that geographic area. In addition, on the shelf below each book title is a card that includes an excerpt from a customer review, along with a recommendation for a similar title.
Amazon also uses its physical bookstores to promote Amazon Prime memberships by offering member pricing. The two-tier pricing strategy is used as another tactic to get more people to sign up for a Prime membership.
Amazon Is Popping Up in Malls
Several 300-500 square foot Amazon pop-up stores are appearing in the middle of shopping malls throughout the country. They feature Amazon’s electronic devices, including Amazon Kindle, Fire TV, Fire tablets and Echo. Customers can try out the devices, ask questions, and then make a purchase at the pop-up store or online.
Amazon’s Pop-Up Marketing Strategy
The pop-up stores give Amazon an offline channel for their most popular electronic devices and provide another way for Amazon to boost its brand and drive sales. Similar to the way Apple opened physical stores to let customers touch and test drive devices, and ask questions, Amazon’s strategy is to get its products into the hands of consumers through on-site as well as online home delivery. Another goal of the offline pop-up stores? Driving traffic to their online store.
Grocery Shopping Reinvented
As an extension of its Amazon Fresh grocery delivery service, Amazon is testing a new concept that lets shoppers order and pay for groceries online, then schedule a pick-up time, usually within two hours. It’s designed to be efficient and cost effective: Shoppers drive to a designated covered parking stall where groceries are loaded into their car for them, or, they can choose to go into the physical Amazon store to pick up their purchased items. Another option is for shoppers to walk into the grocery warehouse, order and pay for items from in-store mobile tablets and wait while a staff member collects their groceries.
Amazon’s Marketing Strategy — More Grocery Shopping Options
Amazon has been gathering data and experimenting with ways to expand the grocery concept ever since launching the Amazon Fresh grocery delivery service 10 years ago. And just as they do with their other retail formats, Amazon relies heavily on customer data to improve their products and services based on the theory that has guided them since the beginning — consumers want fast delivery and low prices.
This strategy is also consistent with Amazon’s business model to utilize minimal staff and low overhead to sell more products and services at a profit. A natural next step for Amazon’s foray into the grocery format might include using customer data to make recommendations or offer special pricing to customers. After all, the more customers they can attract to their physical grocery stores, the more likely they’ll be able to offer volume discounts to keep prices competitive.
Amazon’s Homegrown Science Lab: Testing and Innovation In Their Backyard
Part of Amazon’s unique marketing strategy is to quietly plan and test concepts for years before launching new formats to the public. Employees are expected to take part in the testing phase — and staying close to headquarters means that Amazon executives are nearby to quickly analyze data and make adjustments. Rolling out new concepts in their hometown first allows Amazon to respond quickly to customer feedback and grow faster in the early stages.
One of Amazon’s most interesting retail experiments currently being tested in their hometown of Seattle is the Amazon Treasure Truck. This roaming delivery truck with carnival-style lights lets customers pick up items from flash sales through the Amazon mobile app. The truck has sold everything from fresh fish to paddle boards to video games.
Data-Driven Decisions Lead to Innovative Marketing Strategies
A big part of Amazon’s competitive edge is the tremendous amount of data it collects on customers. While all retailers collect customer data, Amazon fervently relies on its customer data to drive marketing strategies — by continuously experimenting and optimizing until they get the formula for success just right.
One of Amazon’s strategies for collecting additional data is to convert more customers to Prime members. Prime members account for 60 percent of the total dollar value of all merchandise sold through Amazon online and spend about four times annually what non-Prime members spend. As Amazon continues to add program benefits to its Prime membership, including access to content and video streaming capabilities, it’s using its physical stores as an additional channel to promote the membership program. And more Prime members not only leads to higher profits, but also gives Amazon access to even more data about what customers are looking for and purchasing.
Amazon’s Recipe for Success: Explore, Test, Learn, Grow
Staying true to its roots, Amazon still maintains a startup mentality, unafraid to fail and take risks, while reinventing the retail shopping experience. So far that approach has served Amazon well. By betting on brick-and-mortar stores to boost its brand and sales by providing an extension of its online experience, Amazon hopes to attract shoppers in multiple consumer categories — and capture a bigger share of the market. Ultimately, Amazon wants to sell consumers every product it can and get it to them as soon as possible at the most competitive price. With offline Amazon stores that cater to varying shopping styles — as well as their online store — they’re well on their way to doing just that.
CCG’s retail CRM and loyalty marketing team includes experts in data analytics, research, strategy, program management and more. Contact us today for a free consultation and find out how we can help improve your customer engagement strategies to boost profits.
