While the media focused on the downward spiral of the physical retail sector, it seems Amazon was busy ramping up its roll-out of physical stores

While the media focused on the downward spiral of the physical retail sector, it seems Amazon was busy ramping up its roll-out of physical stores, a development that many observers have perceived as merely test-marketing or experimenting. Based on studies done by the International Council of Shopping Centers (ICSC), Amazon is on track to become a juggernaut in the bricks-and-mortar retail business with eventually as many as 3,600 physical stores. With such a strategy, they are trying to become Walmart. While most of the retail news during the pandemic has been focused on the rise of online shopping, the decline of traditional retailing and the hollowing out of malls and shopping centers, Amazon has been building out physical stores in multiple retail categories.

According to Amazon’s website, the company currently operates nearly 100 retail locations under distinct sub-brands:

• Amazon 4-star has 31 locations, including one in Manhattan’s high-end Soho neighborhood. It is a sleek retail space that offers customers only those products that are very popular and have earned an average of four stars or above.
• Amazon Go with 28 locations in the US and UK is a chain of convenience stores.
• Amazon Go Grocery has 2 locations and is a grocery store without cashiers.
• Amazon Books lists 24 locations in the US and sells the product that first put Amazon on the map and destroyed much of the retail bookstore presence.
• Amazon Pop Up has 7 locations and sells Amazon’s top brands.
• Amazon Fresh has 5 locations.
• Amazon also owns Whole Foods, which currently has about 500 locations.

What’s driving Amazon’s move into retail is a series of costs that nobody foresaw that have not only removed the advantage of not having stores but have shown that having stores is the most cost-effective way to do the two most important things in retail: acquire the customer and get the customer the goods. Retailers like home goods online seller Wayfair spend upwards of 15% of revenue on customer acquisition. The problem of product returns is another huge cost. Amazon’s already sophisticated consumer and product research capabilities becomes more robust all the time, leaving traditional retailers who aren’t investing in getting to know their customers standing at the starting gate.

In the coming months and years, Amazon could possibly lean heavily on it’s web services (AWS) for critical insights such as popular items by demand at various geographical locations, consumer behavior, changing lifestyle preferences, shift in retail trends (are more customers returning to stores or are they placing orders online) to name a few, and will use these as inputs for strategic expansion of their brick and mortar locations, while at the same time, planning for mergers and acquisitions, if they deem the cost of competing in emerging markets would pose too much of a financial risk.

I perceive Amazon striving to become the “go-to” retailer for all needs, be it regular groceries and buying clothes, requiring simple in-store visits, or niche items, where buyers prefer online customization, all coupled with the luxury of multiple delivery options, as per the customer choice. They intend on taking their “customer obsession” leadership principle to new levels, by providing so many product, service and delivery options to shoppers, that people indeed feel pampered, a feeling which not only promises return customers, but also generates more first time buyers