Amazon Diversion

 

Amazon have recently announced that they will be opening their first bricks and mortar clothing store in California. They are already well established in the physical store realm with Amazon 4 star (merchandise, books, devices), Amazon Books, Amazon Fresh (groceries), Amazon Go (convenience & prepared meals.

Their current physical stores are carefully curated with their top selling lines to limit the risk of old stock sitting on the shelves.

However the whole concept of this original online retail behemoth now having a physical presence intrigues me. Several years ago as Amazon online was coming to Australian shores, brands were strongly being encouraged to jump on board because you needed to be on the Amazon platform to survive. They spruiked that your products would have great exposure to a huge buying base. It was marketed so strongly that many brands were too scared not to be listed with Amazon. So they signed up.

Back then the retail game was tough; and it still is. Throw in the global pandemic and everyone is learning to play by new rules. Oh, but how Amazon have learnt thanks to the sales data generated by all the brands and manufacturers who sell with them.

To me it seems the line has definitely blurred. The online giant who did exactly that- “Online”, seems  to have decided “stuff it”, now we’re going to play in the physical world also.

Were brands signing up with Amazon in blind faith and assuming Amazon would always stay in their corner of the ring or were they going in with one eye open? By entering the arena of physical stores, is Amazon now eating the same suppliers who use their online platform?

It will be interesting to watch this play out. So far the Amazon physical stores have not reached Australian shores. They have established in North America which has a much larger market than here.

The new Amazon clothing store is planned to be larger than an average department store. This gives Amazon amazing lease negotiating power when dealing with landlords. They would be seen as an anchor tenant (will attract lots of shoppers to the shopping centre) and most likely be on a very reduced rent rate per square meter as a result.

It’s easy to go on line and find the same clothing item stocked by several different retailers and easy for online retailers to be competitive with prices, but paying rent is a major overhead for physical stores.

This also brings a myriad of issues. How do brands structure their net pricing band to ensure an equitable end price between their items sold at Amazon stores vs a smaller retailer? Will smaller retailers selling the same items become obsolete, beaten in the pricing game by Amazon who will have great negotiating powers with the suppliers? Will suppliers have to come up with product lines exclusive to Amazon stores, so that this double up scenario doesn’t occur?

One of the reasons that department stores have been struggling for many years is that the brands they once exclusively stocked have now opened their own stores. The presence of physical Amazon stores could create similar scenarios by offering the same products within the same shopping centre.

Watch and Wait. The fact that Amazon are testing the water in the massive US market and in very carefully selected areas will take a while for the impacts to be felt.

The X and Why of Retail

 

One of the things I’ve always loved about retail design is the X factors that combined give the Why.

I failed maths miserably thru out school. All those numbers just registered as a blur in my brain, and needless to say I could never get my mind around algebra. What was the point of X and Y?

But I now deal in a slightly different version and they have a story and reality to them that becomes a visual reality and can be manipulated in ways to influence shoppers.

I was quite surprised recently. I met a “retail expert” who is frequently interviewed on tv about retail matters. She is brilliant at numbers and statistics, but when she made a comment about a current trend in the retail world I asked her why she thought it was happening and she had no idea. She could not even come up with 1 suggestion. It wasn’t a trick question and I have numerous ideas about why this retail event was occurring.

There’s so many things that happen on a daily basis in the retail world. Some are obvious and others we aren’t aware of.

Why are the supermarkets are so quiet at 3pm? Because the mums are at school pickup.

Why are the hardware stores are so busy on Saturday mornings? Because the weekends are the time for projects at home and everyone needs their supplies.

Why is there a huge demand for cardamom? Because one of the reality cooking shows is featuring Middle Eastern cooking that week.

Smart retailers know their X’s and Why’s and they make sure they all match up. These are the retailers who order up the big stocks of fertilizer in anticipation for Spring and then move it to a prime visibility location when they hear rain is forecast.

I designed a chain of bakeries for many years. They were about to open a brand new store in a brand new shopping centre. They were known for their award winning meat pies. The night before the opening it started to rain. The baker decided to double the set quantity of pies knowing that the next day was due to be cold and wet all day. An hour later there was another call to double that amount again. This was all happening in the wee hours of the morning and the rain was quite set in by then. Sure enough on opening day every pie sold out with customers looking for even more. Knowing their X factors is WHY they had such a successful day.

A recent headline caught my interest. It was about a Vietnamese food chain opening their first American store in Salt Lake City. The first thing that popped to my mind was that Salt Lake City is the home of the Mormon church. I wondered why Vietnamese food would be popular there. So I googled does Salt Lake City have a large Vietnamese population? Turns out it does and it is rapidly growing. And whilst it’s true that Vietnamese food is not limited to particular nationalities, it always helps to have people familiar with their own style of food who  integrate it into the broader community.

Understanding the unique X factors for each business means that you can design stores and tailor retail to influence WHY we buy.