Amazon clothing “harvest” offline retail

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Text / Ma Ji

Source: Xiaguang Society (ID: Globalinsights)

As the epidemic subsided, online traffic returned to offline. The e-commerce giant Amazon, after closing 68 offline brick-and-mortar stores in one go at the beginning of the year, began to make efforts to new offline positions.

On May 25, Amazon Style, Amazon’s first brick-and-mortar clothing store, officially opened. In March of this year, Amazon closed 68 offline stores, including bookstores, four-star stores and pop-up stores.

Consumers are eager to return to their pre-pandemic lifestyles, and that includes going back to shopping in brick-and-mortar stores. Amazon Style has become the latest move by Amazon to deploy brick-and-mortar retail.

In-store spending rose 7% in April, according to Earnest Research data, while online shopping saw a slight drop of 3%.

Amazon’s performance also reflects a shift in consumption to offline. In the first quarter of this year, Amazon’s online store net sales fell 3% from a year earlier, while brick-and-mortar store net sales rose 17%.

In 2021, Amazon will overtake Walmart as the largest seller of apparel in the United States. Now, Amazon plans to further expand this advantage from the e-commerce platform to offline, while cutting off the physical business such as bookstores with a knife, it will focus on the fashion business.

From e-commerce to brick-and-mortar retail, smart logistics, financial technology, cloud services, and even aerospace, Amazon has gone further and further in “breaking the boundaries” and has formed a strong influence in many industries. How will the increasingly large and complex “Amazon ecology” affect the clothing retail industry?

Amazon’s offline map

Amazon started out selling books online in 1995, and four years later became the world’s largest online sales platform.

Then, the Amazon online store was established, and with the arrival of a large number of merchants, the boundaries of Amazon’s “e-commerce empire” expanded rapidly. The types of goods sold have expanded from books to music video discs, electronic equipment, home appliances, toys, etc., almost “all-inclusive”.

The data shows that in 2021, sales from Amazon and its third-party sellers will already account for 41.8% of total online sales in the United States, and account for almost half of all online shopping spending, reaching 49.7%.

Although it has been the leader of the global e-commerce platform for many years, as competition in the industry intensifies, Amazon is not without pressure.

A Coresight research report shows that of the major retailers it studied, Amazon saw the biggest drop in online grocery shopping between 2020 and 2022, at 11%. For comparison, Walmart’s figure fell just 1.8% over the same period, while other retailers such as Albertsons, Target and Costco rose 2.7%, 2.6% and 0.5%, respectively.

But even without pressure from peers, Amazon’s ambitions are obviously not just to be an “e-commerce overlord.”

Consumers may have their preferences between shopping online or offline, but few shop exclusively online or only in brick-and-mortar stores. On the one hand, online consumption cannot completely replace the influence of offline consumption; on the other hand, online consumption has also faced the reality of slowing growth in recent years.

In order to open up a “new battlefield”, Amazon has begun to aggressively enter the offline market many years ago, further cannibalizing the scale market and ensuring a share of another revenue stream.

The bookstore has become Amazon’s first step into the offline game. In 2015, Amazon’s first brick-and-mortar bookstore opened in Seattle, and has since expanded across the United States.

In the following years, Amazon first bought Whole Foods, a health food supermarket, for $13.4 billion, giving it about 500 stores in Europe and the United States at once.

Since then, Amazon has opened a number of offline stores, including Amazon Go unmanned convenience stores, Amazon four-star stores, Amazon Fresh supermarkets, pop-up stores, and even hair salons.

In Amazon’s four-star store, offline consumers can directly access various “net red goods” on Amazon’s website. The products sold in the store have been rated by the website with more than 4 stars, including a variety of smart devices, games, books, kitchen and household necessities. On the price tag of each item, online customers rate the item and how much Amazon Prime members can save.

In the Amazon pop-up store, the products displayed are mainly hardware products such as Amazon’s Kindle e-reader, which aims to attract traffic to the website’s online sales.

Some offline brick-and-mortar stores also provide Amazon Prime members with online orders and offline appointments for self-pickup services. This mode is called “BOPIS tactics” (ie Buy-Online-Pickup-in-Store).

“It’s actually helping them grow Prime memberships, which is the ultimate goal,” said Natalie Berg, co-author of “Amazon: How the World’s Most Ruthless Retailer Will Continue to Transform Business.”

About 166 million people in the U.S. are Amazon Prime members, more than a third of the total population, according to PYMNTS.

In essence, Amazon’s offline store is like a showcase for its online products, and the e-commerce giant goes off to do physical retail in person, also to attract more consumers into its ecosystem, build consumer loyalty, and encourage them to be more Shop multiple places on Amazon.

The second half of e-commerce giants: transforming physical retail

When Amazon aggressively expands offline, the related financial technology layout also unfolds simultaneously.

The goal of Amazon to expand its financial business is to empower it to empower its own business. On the one hand, it includes more offline scenarios into Amazon’s ecosystem, and on the other hand, it also explores new consumer groups through offline channels, which in turn drives online sales. on sale.

Developing products has always been an area of ​​Amazon’s strengths. As early as 2007, Amazon launched Amazon Pay, a mobile payment service. Since then, Amazon has continued to actively invest in payment infrastructure and service offerings to enhance its payment experience. Amazon Pay has gradually developed into a payment network that includes consumer digital wallets, online payments, and offline brick-and-mortar merchant payments.

In addition, the more “technological” unmanned store technology Just Walk Out, palmprint payment technology Amazon One, etc., have also been applied to offline retail stores one after another.

In the Amazon Go convenience store owned by Amazon, the patented biometric payment technology Just Walk Out is used. There are no cashiers in the store, and the entire shopping process of consumers is identified by machine learning, computer vision, and sensors.

When consumers enter the store and scan the shopping cart through the Amazon APP, Dash Carts, a smart shopping cart equipped with hardware components such as touch screens and sensors, can track and identify the goods in the cart. After completing the shopping, consumers do not need to stop to check out. When they walk out of the convenience store, the Amazon account will be automatically debited.

Another innovative payment method, Amazon One, released by Amazon in 2020, realizes “swipe hand” checkout by recognizing the lines and vein patterns in the palm, the principle is similar to “face brush payment”.

In the same year, Amazon also tested the “voice payment”. Users can refuel at Exxon and Mobil gas stations in the United States by using voice commands from Amazon’s smart speaker Alexa. Amazon partnered with financial services technology company Fiserv to activate the gas pump with a voice command and ensure that payments go through securely, all through Amazon Pay.

In addition, Amazon also uses functions such as Amazon Cash and PayCode to attract offline consumers to directly use cash to pay for online shopping by showing barcodes, scanning QR Codes, etc., to reach those areas that do not support digital payment or do not hold credit card consumers.

The combination of financial technology and physical retail, on the one hand, integrates consumers into Amazon’s ecosystem to the greatest extent possible, and on the other hand allows Amazon to accumulate a large number of consumers’ online and offline shopping behavior data, and release targeted information for them. Advertisements and promotions provide valid references.

Can Amazon reinvent brick-and-mortar clothing stores?

Revenue growth from online stores, which account for the largest share of Amazon’s e-commerce business, has slowed sharply since 2021. Corresponding to this is the growth of the brick-and-mortar store business. As of the first quarter of this year, Amazon’s physical store business has grown for four consecutive quarters.

However, Amazon’s physical store business, which has been deployed for many years, has not been able to “bigger”. Amazon’s 2022 Q1 financial report shows that brick-and-mortar stores account for less than 4% of its overall sales.

As the epidemic subsided and consumption returned to offline, Amazon also took the opportunity to reorganize its offline layout.

Earlier this year, Amazon announced the closure of 68 brick-and-mortar stores in the US and UK, including more than 20 bookstores, more than 30 four-star stores, and some pop-up stores. At the same time, Amazon announced plans to expand into offline clothing stores, with the fashion business and Amazon Go grocery stores as future business priorities.

This is a typical Amazon strategy, eMarketer retail analyst Andrew Lipsman told CNET in an interview. Amazon is always experimenting with a lot of different ideas and sifting through the ones it thinks are the most successful, and those brands that expand more slowly won’t survive, or will remain small.

As a category with high daily needs of consumers, clothing is different from books. Consumers have very subjective judgments on the quality and style of clothing, and it is difficult to decide through electronic screens. Even though online shopping is very mature, the subtle differences in the fabrics, styles and colors of clothing products make many consumers still believe in the offline shopping method of “seeing is believing”.

Amazon overtook Walmart as the largest clothing retailer in the U.S. last year, according to research from Wells Fargo and estimates that Amazon’s U.S. apparel and footwear sales rose about 15 percent in 2020 to more than $41 billion.

Amazon clearly wants to extend this advantage further offline to solidify its omnichannel presence.

Amazon Style, a clothing store opened by Amazon, is not only a traditional offline clothing store, but also applies Amazon’s e-commerce logic and financial technology technology, placing the physical store closely in the Amazon ecosystem, showing that it has further transformed the offline shopping experience. ambition.

“For the first time, we will bring Amazon’s advanced technology and world-class operations to a physical environment to buy clothes, making the experience for every customer more inspiring, convenient and personal,” Simoina Vasen, vice president of fashion at Amazon, said in an interview. change.”

According to foreign media reports, only “sample clothes” are displayed in the Amazon Style store. Consumers can scan the code on the Amazon APP to select the size and color of the clothes to add to the shopping cart, and queue up virtually through the APP.

When consumers walk into the fitting room, the purchased clothes have been placed in the room by a special person, and a welcome message for each customer will be displayed on the screen. The screen will also recommend other clothing styles to consumers based on algorithms. When the size or color of the clothes is not suitable, consumers can also change it through the screen operation by a special person, instead of needing to go in and out of the fitting room to get new clothes.

In the checkout process in the store, the Amazon One palmprint recognition technology in the Amazon ecosystem is added, and consumers can complete the payment by “waving” at the machine.

And those consumers who have placed an order for clothing on Amazon’s website can also request that the goods be delivered to offline clothing stores, try them on in “high-tech fitting rooms”, and return returns can also be processed directly in the store. All online and offline purchase information can be viewed in the Amazon APP.

Today, fewer and fewer retailers can afford the rents on major U.S. high streets and malls, and Amazon does. “Even if those stores end up going bankrupt, it won’t hurt the company. Amazon can try to open some unsuccessful stores,” eMarketer retail analyst Andrew Lipsman said in an interview.

Combined with Amazon’s consistent play in the past, although Amazon Style has only opened a physical store at present, it is likely to expand further in the future. Compared with other offline clothing stores, the utilization efficiency of Amazon Style is obviously higher. After all, the support behind it is the entire Amazon’s online clothing business.

References:

[1] “E-commerce market share is declining! Amazon’s return to brick-and-mortar retail,” Ecommerce Daily

[2] Five Reasons Why Amazon Is Moving Into Bricks-And-Mortar Retail, Forbes

[3] “Amazon now operates seven different kinds of physical stores. Here’s why,” CNET

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