Why is Amazon taking to the High Street?

Amazon.com is to open its first ‘bricks and mortar’ store in New York City. We look at three big reasons why it’s taking the business offline.

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In the heart of New York’s retail and tourist district, just around the corner from the world famous Macy’s, there will be a new name in town; Amazon.com. San Francisco will also have a store before Christmas.

But in an economy where High Street stores continue to struggle and online retail continues to thrive, many will wonder why such a successful online brand would invest in a retail unit in one of the most expensive cities in the world. However, there are three big reasons why:

Consumers still want click and collect

800px-Amazon_Locker_at_Baltoro,_345_West_42nd_st,_Manhattan_NYC

As we identified in our Consumer Electronics Intelligence Report, click and collect is in huge demand from consumers.

Delivery is one of the biggest barriers to conversion in online retail, adding uncertainty, time and cost (the most common reason for basket abandonment, according to the 2013 eCustomerServiceIndex) to the buying process. Click and collect addresses those barriers.

Amazon Lockers have been one of the e-tailer’s responses to the challenge, but consumer surveys suggest that adoption of the service is far from reaching the mainstream. One survey, released in July, found that almost three quarters of UK consumers had yet to use an “alternative collection service”, such as Amazon Lockers or Collect+, with the main reason being that those surveyed did not know of their nearest or most convenient collection point.

A physical store, slap-bang next to Macy’s department store in Manhattan, certainly addresses that challenge (albeit at a notable cost), creating a destination venue in which people can interact with the brand – not a stack of metal cupboards in the local petrol station.

Digital and physical don’t compete, they work together

instore digital

It’s oft said that retailers that aren’t online are at a huge disadvantage, but the same can be said for online brands with no physical presence. The experience of trying on clothes, measuring up a TV or asking an advisor whether that gadget is compatible with your iPhone is not going to go away, and probably never will.

Online and offline have never been closer, with consumers jumping from digital to physical at the touch of a button and expecting a consistent and seamless experience as they do so. Stores are more digital than they have ever been and retailers have finally accepted that digital is an opportunity, rather than a challenge.

This is likely to be a huge data mining exercise for Amazon, allowing them to really understand how consumers transition between bricks and mortar and digital retail. That provides them with a huge opportunity to understand more about their customer and personalise the service that they provide.

Any Amazon store is likely to me much more about experience than it is about hard sales, much like a typical Apple store. Until now, it has been incredibly difficult to experience an Amazon product without handing over your credit card number. A store in the heart of New York changes that.

Amazon needs showroomers, but the showrooms are vanishing

Inside An Amazon.com Distribution Center On Cyber Monday

“Showroomers” are the bane of most traditional retailers. These are the people that come into store, measure up that new TV set and take up a sales assistant’s time to get the answers to various questions, before making their excuses and finding the discounted price online.

For as much as content can help, online retailers like Amazon rely quite heavily on this part of the buying process. The difficulty is that Amazon has absolutely no control over these showrooms and, perhaps worse, there are plenty of suggestions that Amazon is the very reason why many of these ‘showrooms’ are closing down. In America, book retailer Barnes & Noble mooted the idea of closing a third of its stores in 2013. Best Buy was forecast to close as many as 250 stores and RadioShack as many as 550. In the UK, both Jessops and Comet took swipes at Amazon when they closed down, highlighting the impact of showroomers on the High Street.

Amazon having its own storefront gives it that degree of control. The brand has ownership over how it merchandises the products, how it sells them and how it allows customers to experience them. That’s not something that it can achieve by relying on its customers walking out of their local branch of Curry’s and then heading online.

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