Emmanuel Combe published in the newspaper L’Opinion on August 24, 2021 a column on Amazon’s evolution towards physical stores.
Amazon: on the way to physical stores !
According to the Wall Street Journal, Amazon is considering opening physical stores of a significant size in the United States, around 3,000 square meters. In fact, Amazon is already present in the world of physical distribution, with the chain of organic stores Whole Foods, twenty bookstores, “Four stars” stores (in which are sold successful products) and food stores like Amazon Fresh and Go. But this physical footprint has so far remained very measured: in 2020, sales in physical stores represented only 6% of Amazon’s total revenue, compared to 50% for online sales, to which we must add marketplace commissions (19%) and Amazon Prime subscription sales (7%).
Beyond the specific case of Amazon, what reasons lead pure players to move towards brick-and-mortar commerce?
First of all, even if online commerce is growing strongly -especially in the age of the Covid-19 crisis-, it is still a minority in the retail industry: out of every 100 dollars spent, 85 are spent in physical stores. This fact is even more significant in food distribution: in France, e-commerce has a market share that is certainly growing strongly but represents only … 9%.
Secondly, if e-commerce also offers online advice and facilitates the return of purchased products, physical commerce is still ahead in terms of customer experience.This is especially true for very personal, new or non-repetitive products: before making a choice and buying, customers want to try on a new line of clothing from a major brand, for example.
Thirdly, pure players have advanced skills in digital data analysis, which they can mobilize in physical stores. For example, with its Just Walk Out technology, Amazon offers its customers in Go and Fresh stores to scan a QR code at the entrance so that payment is made automatically, without having to go to the cashier. By doing so, Amazon will be able to follow very precisely the purchasing path of its customers within the store in order to better understand their expectations and respond to them. If the customer in the physical store is also a customer on the website, Amazon will be able to mix the data and thus refine its profile.
Fourthly, there are strong synergies between the off-line and on-line distribution channels. For example, if a product is not available in the physical store, it could be proposed to order it on the website. Symmetrically, if the customer is hesitating to buy a product on the Internet, the website can suggest him to go to a showroom to try it on. Synergies can also take the form of an order on the Internet, which will be collected in a physical point of sale, in the form of a click and collect.
In short, after the digitalization of physical commerce, we could well see tomorrow a “phygitalization in reverse”, consisting of pure players going … to physical stores.