Why would Amazon, which is tearing up retail online, be creating real-world retail experiences, popping up Amazon stores all over and paying $13.7 billion for Whole Foods?
When we say tearing it up, we mean it. Last year Amazon vaulted to the lead of US ecommerce sales, grabbing a 28% share, up from 20% in 2013, according to the annual Internet Trends report by Mary Meeker.
Amazon, Meeker noted, is the primary way people search online for products, besting that other search giant, Google. And you don’t even have to click to buy. “Alexa” is poised to sell billions-worth of stuff, according to RBC Capital Markets analyst Mark Mahaney.
Online, Amazon has created “what may be the best customer experience organization in the world,” says Derek Corcoran, chief experience officer at banking software company Avoka.
Offline, retail is muuuuch bigger
Still, that dominance online is but 10% of retail sales overall, according to eMarketer. Amazon knows this, we’re sure.
We bet they also noticed that premium retailers’ revenues soared 81% over the last five years, according to a recent report from Deloitte Insights. One key, they said, was creating great customer experiences in stores – retail experiences.
Is it any wonder, then, that last August Amazon bought Whole Foods, a chain that defines high-end retailing in the grocery space – a realm Amazon wants to dominate?
The Amazon experience
The ecommerce giant has certainly wasted little time in turning Whole Foods shopping into an Amazon experience. At Whole Foods markets, greeters staff entrances with flyers that spell out special deals for Amazon Prime members.
Stepping inside, shoppers at Whole Foods see lockers adorned with Amazon’s smiley swoosh logo from which they can pick up Amazon orders. Customer service desks and dedicated kiosks in the stores offer Echos, Fire TV sticks, Kindle readers, and other Amazon devices. And if that’s not enough experiential integration, Amazon will deliver Whole Foods orders in two hours or less.
And that’s all on top of Amazon’s earlier forays into meatspace. They’ve been placing those branded Amazon lockers in select cities since 2011. Dedicated and popup Amazon retail locations launched in 2014 and today are spread across 20 states plus the District of Columbia.
Amazon has also been testing new concepts with a cashless “Amazon Go” food store near their home base in Seattle, and new stores planned in Chicago and San Francisco. Plus, let’s not forget the booze bar they ran for 10 days last fall in Tokyo. Seriously. How much more real-world experiential can Amazon get than that?
Getting customers to go deeper
The reasons for Amazon’s swoop into the third dimension go beyond a grab for the real-world retail pie. Real-world retail experiences will also help them grow online.
Now that the developed world is close to reaching “peak screen,” retailers online “will have to focus more on creating meaningful interactions and value,” according to TechCrunch’s Josh Constine.
That means Amazon has to get customers to go deeper. Melding the on- and offline experience is a way to make both more enriching – for customers and for Amazon, alike.
As of June, Amazon Prime members can get 10% off hundreds of Whole Foods items and Amazon credit card holders get 5% cash back in the store. Prime is now the Whole Foods points rewards system – and for Prime Day in July, Amazon offered $10 credit and other special deals.
Selling subscriptions by selling offline
Last year, Amazon had 100 million subscribers, behind only Netflix, which had 118 million, Meeker said. The keys to success, she noted, were creating “access, selection, price, experience, and personalization.”
Amazon has been doing all of that, integrating the Whole Foods app with Amazon Prime, reducing the amount that the store unaffectionately known as “Whole Wallet” takes from the pockets of the organically minded, and integrating the off- and online shopping experiences at their dedicated retail locations.
By skillfully extending their experiential skills into the physical world, Amazon stands a good chance of having even more retail success.
Want some evidence for that assertion? Just ask the company that Amazon surpassed to gain the top sales spot online: Apple.
It’s no secret Amazon is a business worth taking cue from. And its success is derived by two things: customer data collection and people-based marketing. Read “Inside Amazon’s Approach To Data And People-Based Marketing” for a few reasons for its meteoric rise.