It’s a well-known fact that Amazon is on a mission to reinvent the traditional brick-and-mortar store model. Until recently, they were mostly focused on dominating online sales. However, it is clear Amazon is now looking to expand its footprint to include offline sales. A great example is the $13.7 BILLION acquisition of grocery store chain Whole Foods in 2017.
Amazon cleared approximately $258.22 billion in US retail sales in 2018, according to eMarketer’s figures. That is 49.1% of all online retail spend in the country, and 5% of all retail sales.
Let that sink in. Almost half of all online retail purchases are made via Amazon. And they aren’t done. They are now attacking the fact that they have just 5% of ALL retail sales by increasing their offline presence with the addition of traditional stores where customers can touch and feel a product.
This is an interesting trend as, in the automotive industry, only around 3% of consumers complete the entire transaction from start to finish online. The majority of car shoppers will complete as much of the process online that they feel comfortable with -- then come into the store and finish the transaction. The most successful auto dealers are set up to allow customers to buy vehicles the way the shopper wishes to do it – both online and in the store.
Amazon is doing the same thing.
In my opinion, there are a couple of strategies Amazon is focused on to help propel the company towards higher market share in the online and offline retail market.
1. Adopting a Showroom Model – Many consumers still want to touch and feel a product before they buy it. Amazon is answering this need by adding a showroom model with its increasing footprint of brick and mortar retail stores.
They are also using technology in store to full advantage to help improve the customer experience and drive the purchase decision. With the Amazon app, you can scan the bar code of an item and immediately view its price – while you’re in the store.
And then there are the Amazon Go stores which are rolling out. We have one near our office here in San Francisco, and it’s an incredible experience. You simply walk in, pick out what you want to purchase and then walk right out! Your credit card is charged automatically. Nothing else required. In fact, we had several OEM reps visiting our office last week who specifically asked us to take them to an Amazon Go store so they could see firsthand what Amazon is bringing to retail. They were completely blown away by the experience!
I bet that Amazon will do well with this model and blow its competition out of the water. Just watch – people will be surprised and upset at how ruthlessly it drives out other brick and mortar stores.
2. Customer Experience – Amazon has really mastered the art of the customer experience and continues to come up with innovative ways to put the customer first, removing friction from the buying process. In fact, one-third of the population of the United States are now Amazon Prime members, as of January 2019.
With same day delivery and a simple return process, Amazon continually meets consumer needs. In most recent news Amazon partnered with the retail chain Kohl’s to enable consumers to return items purchased on Amazon without going through the hassle of packaging up and shipping the item back to them for a refund. This is mutually beneficial to Kohl’s and Amazon.
Kohl’s, however, may well be that fish that eats the algae in your fish tank -- they are banking on the fact that consumers with Amazon returns will also spend money at their store, while Amazon is further greasing the wheels of its customer experience. Only time will tell who benefits most -- but I bet that it will be Amazon.
Amazon’s rise to dominance is in no way a mistake. Everything they have done is intentional and based on the following facts: Consumers want transparent pricing, they are impatient and want the items as soon as possible. And, if they aren’t happy with the items purchased, they want an easy return process.
Amazon’s strategy has enticed 100 million people in the United States to PAY THEM for these services. To the point that people will pay more for the simple convenience of shopping on Amazon rather than taking a trip to Walmart or Target where they could get the item cheaper; I have done it myself!
Investing in customer experience and providing a seamless transaction has merely increased their gross margins – not lessened them – which is the fear of some dealerships I talk to.
Perhaps it is time to take a lesson from the most successful online retailer in existence and provide consumers the experience that they want when they purchase a vehicle. My money is on Amazon’s strategy. Dealers that provide a seamless customer experience will prosper. While those that don’t could well lose market share.