The retail industry is abuzz with the news of Amazon opening up a new physical store in Seattle. At first, it seems counterintuitive for one of the biggest e-commerce stores in the world to open a retail store, however, there is a strategy behind the opening of Amazon retail branches, one that is going to improve their earnings. There are several lessons that smaller retail stores can learn from the expansion of Amazon into the physical retail space, here are just some of the lessons to learn from it.
Shipping has been an integral part of Amazon’s success, but the costs are starting to pile up. Research indicates that the shipping costs have grown to 27.7 billion in 2018 compared to $5 billion in 2012. To bring these costs under control, Amazon is opening up the physical store to encourage people to come in and buy their goods in person. The lesson to be learnt here is that shipping costs are a huge burden – for example, coordinating logistics and paying for delivery are costly services that smaller stores can do without. Therefore, retailers should look for ways to work around the expenses for shipping by providing incentives for customers to come into their store or at least make the management of deliveries more time-efficient using EPOS software, for instance.
The fact that the largest e-commerce platform launched a physical store should tell us that there is still value in retail shopping. In fact, it is possible to say that the future of retail blends the best of e-commerce where customers shop from the comfort of their home and visit the store to pick up their purchase in-person. This method is commonly known as click and collect or buy online, pick up in-store (BOPIS). Small retailers can set up a similar system to enjoy the best of both worlds, using EPOS software.
One of the biggest objectives behind the physical store is to build up loyalty to the Amazon brand and ultimately increase the number of Amazon Prime memberships. Amazon is hoping to accomplish this with differential pricing, where Prime members get the same prices they would get online, while others would have to pay a slightly higher price. Undoubtedly, many customers would be tempted to get an Amazon Prime membership. Retailers can adopt a similar strategy with EPOS software, by offering a program similar to loyalty programs offering certain perks, like lower prices, so they can build up more subscriptions, which can and most likely will increase earnings.
Amazon is opening up a physical store because they want to dedicate display real estate for their products. Certain products, like Kindles and Amazon Echo, will be prominently displayed in the store, so customers who may not otherwise buy these products will be more tempted to consider them. Smaller retailers should be able to adopt a similar strategy to give attention to products that are selling well or struggling (provided there is a discount).
Furthermore, a physical retail store allows Amazon to break into new sectors where their digital-only platform was an impediment to success. An excellent example is fashion and clothing, customers are not comfortable buying clothes on an e-commerce platform because there several factors to consider, like the size and fit. However, a physical store makes clothing an easier sell because customers can try the products for themselves before purchasing them.
The main lesson for smaller retailers is that some products sell better online and others sell better at the physical store. Retailers can use the EPOS software to find out which products are selling well in their store and what is selling online. They can also use the information to optimise their selling strategies. For example, with a BOPIS strategy, retailers can entice customers to buy something in-person they wouldn’t buy online.
On the surface, Amazon’s expansion into physical retail might be intimidating to some retailers. However, there is a treasure trove of information that can be gleaned from Amazon opening a physical store. Retailers can learn a lot about the way Amazon uses its retail stores to increase product sales, brand loyalty and ultimately revenue. Retailers looking to expand their business should look into a versatile asset that can help them realise the lessons from Amazon.