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Amazon’s Move to the Real World

What it Means for Consumers and Retailers

By Kyle Priest, kpriest@crownpartners.com

Pinch yourself: We really do live in a real world where sometimes you just need to touch stuff.

Amazon has recently stumbled upon an innovative way of not only gaining marketshare, but also gaining total customer wallet share: existing in the physical world. With its planned Seattle brick-and-mortar retail concept, Amazon seems to be succumbing to a nagging suspicion that sometimes customers just need to see and feel things before buying.

Amazon has managed to rule the market by letting select product categories act as loss leaders (thereby eliminating competition in those categories, i.e., books, and lowering prices in others). And with innovative site recommendation, a constantly improving online strategy, and an endless number of products, it can offer customers an easy one-stop shop for entertainment, gifts, clothes…you name it. But none of its online tactics — no matter how brilliant — meet customers' unwavering demand for a real-life, tactile experience of their products.

The physical may not always be important when it comes to buying things like books or magazines, but there are just some things that just seem to demand a one-on-one interaction. Like motorcycles. You can look at them online, research them to death, get the stats, expert commentary, and reviews. But you don’t get the visceral context that matters most of all: the feel of the bike beneath you, the depth of the paintjob, the proportions, the size, the attitude. The same applies for apparel: Does it look good on me?

Amazon claims this experiment is, among other things, a profitability test, but I believe it’s much more. A confirmation that the customer may just always be right? Maybe. A new dimension in the world of brick-and-mortar? Definitely.

At first glance, this new dimension might seem scary for smaller independents. After all, imagine the benefits of a mega e-tailer, providing a full multichannel experience where you can try and buy the way you want, at the best price, with the most selection, and the most convenience for a vast array of goods and services…at a store near you.

Yet, as big market behemoths have driven independents out of business for years, there is an array of new possibilities here:

1.    Amazon may be your new BFF. Just as ABC Carpet & Home in New York City provides boutiques, or stores within stores, at its Broadway location, it’s quite feasible that upstarts — en vogue brands and new innovative products — will have prime opportunities to launch within Amazon. That is, assuming that the Amazon store is not just another big box, big parking lot, Saturday chores destination.

2.    Sell beyond your walls. Amazon’s move should serve as a wake-up call for independents that are late to the digital space. With multi-channel sales and interactions, successful independents inculcate customers, and create new ones both offline and online. Step up your differentiation on products and convenience by making your offering available on all channels (brick and mortar, web, mobile, and for some, social). Just because you can’t fit it into the store, doesn’t mean you can’t sell it! Work with product manufacturers to provide an expanded offering online, and on creative direct-ship models to avoid inventory management issues.

3.    Play to your strengths. Independent retailers typically have higher quotients of charm and customer service. Their convenience, quality, and unique merchandise, combined with knowledge, personality, and distinction create affinity. Provide customers with quality guarantees and make it easy to receive and return merchandise at your store OR online as they prefer.

4.    Offer different experiences to different customers. Think through the varying customer personas of your most loyal customers.  What do they value in their relationship with your store? What more could they want? What can technology provide that would turn them into raving fans who evangelize your store? By tapping into this, you create valuable services that draw even more people into your circle of zealots.

5.    Jump into Amazon’s fray. Go a step further, if you haven’t already, go and get an Amazon marketplace. By embracing this channel, you’ll increase your volume of business. Be sure to manage your product selection across channels because you’ll get less margin here, so you should clearly delineate your niche offering in stores from this. And don’t get a big head when it takes off; many experience a tremendous increase in topline sales. Those retailers who don’t adjust for the reduced margin, and invest based on the topline revenue growth, will find themselves at break-even, or even losing money by not accepting this channel for what it is: a way to move merchandise at reduced costs and to build up a customer base that can be converted to higher margin, more direct relationships over time.

6.    Captivate customers online. What can you offer customers digitally that will improve their lives and create more allegiance to you? If you sell skiing equipment, then provide them real-time apps and information on slopes, skiing, what’s hot, and what’s not. You’re in the value business now, not just the product sale business. Hold on to customers, and attract more with high-value niche information.

There are also a few obvious and not-so-obvious opportunities for the consumer to win here:

1.    Physical interaction. As mentioned, now customers can interact with goods before purchasing. Saving the time and hassle, not to mention the disappointment, when an online purchase doesn’t work out.

2.    Brand affinity. Amazon has a clear brand persona and its customers, the world over, identify with the brand on many levels. Now, by adding a face to the name, they’re also introducing a huge opportunity to increase brand affinity.

3.   Customer experience. The customer’s ultimate vote will depend on whether Amazon introduces a game-changing retail/e-tail experience. If this is just another shop, it will be a disappointment. But if Amazon can accomplish what Apple did with its geniuses and classes — or what Starbucks did, creating a retail world far beyond coffee — it could become something special that can likely move faster than any other retailer to claim this space.

4.    Returns & exchanges. FedEx may need to watch out here, too, because one of the biggest merchants in the world is going to be more directly hands-on in the return/exchange business with physical points of presence.

More than anything, this Amazon news is a vivid reminder that we are human, we are social, and sometimes we simply need more than an image on a computer screen. Without a doubt, multichannel interactions and transactions are the future, and they are now, but we do value more in some of our experiences than simple convenience.

Amazon’s test, to me, is already a success because once again it validates the importance for retailers and e-tailers to covet these customer experiences and meet their consumers wherever they prefer to do business, anytime, anywhere. I, for one, believe the world of multi-channel retail is just getting warmed up and we are in for some amazing breakthroughs.

Kyle Priest is general manager, eBusiness for Crown, a digital marketing and technology agency. He can be reached at kpriest@crownpartners.com.

© 2014