Why Amazon Won't Succeed at Brick & Mortar

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Why Amazon Won't Succeed at Brick & Mortar

By Chen Katz, Sagarmatha - 11/30/2016

Amazon would like to move its digital experience to brick-and-mortar and open 2,000 grocery stores. Is it possible to copy-paste the Amazon experience into a real store? Can Amazon take its science and just plop it into this new venture?

Amazon is famous for its personalization engine: You book something online, and you immediately get personalized offers based on your purchase history. The company knows what is relevant to you, what related products you may want to buy, and the likelihood that you’d purchase the product on offer, based on what you’ve bought before.

But that’s not all there is to the story. When Amazon translates its virtual stores into physical ones, it will suddenly face the importance of location, location, location. It will face the realization that customers are not always engaged; that they see supermarket shopping as a chore, not a leisure activity; that they need high levels of service, right now.

The list of issues Amazon is going to face is long. I wouldn’t presume to have all the answers, but when it comes to optimized personalization, I just might have them. 

Let’s tackle the concerns one by one:

Special Offers

Unlike e-commerce, it is not so easy to promote personalized pricing in a physical store. You know what shoppers have bought previously, but you cannot limit your physical inventory the same way you can control an online catalog. Shoppers will be looking at other brands and prices on the shelves, at your store and elsewhere, deciding which deal is best for them, and making personalization all that much harder.  

New Elements in a Physical Store

Amazon will need to analyze product availability by store to determine “primary” store per shopper. It will need to add rules based on the offer store distribution: Will it allow or block offers according to availability, rules and shopper’s main store? Also, it may want to provide special offers or content per store for new stores, stores under threat, stores being renovated, etc.

Timing

You can’t underestimate the importance of timing when it comes to physical stores. Amazon must determine the optimal timing for its offers, calculate average product purchase cycle, and more to ensure they get the right customer with the right offer at the right place at the right time.

Source of Data

With brick-and-mortar stores, the source of data is transaction-based, not click-based, which means Amazon will need to start its data collection from “scratch” to match each customer to his/her in-store behavior.

Channels 

These will become more important: Expect shoppers who want to get direct mail, or prefer that their content be sent via a store kiosk. Now Amazon will need to test frequently to discover the customers’ channel of choice, which adds new costs.

Brand Loyalty

How do you determine this? Shoppers won’t be logging on to a site looking for a specific product. Instead, they expect the store retailer to stock everything. Amazon will have to find out how loyal the shopper is to the brand or to the category. Is the shopper loyal to multiple brands? Not loyal at all? What is the shopper’s normal purchase behavior of the brand? What affects the brand loyalty?

Shopper Engagement

How engaged are they? Sounds like an easy question. But again, the brick-and-mortar shopper is not choosing to log in or coming from home motivated to be engaged. Amazon will now need to build a dialogue with shoppers, with each offer being a "question." Responses (positive or negative) are the answers on a shopper level, offer level, or campaign level.

Basket Effect

Can Amazon afford to give its shoppers in-store discounts only on what they usually buy? This would cannibalize their basket and wouldn’t profit Amazon or the suppliers. How can Amazon increase both their share of wallet and the return-on-investment on their basket?

Last but Not Least, Readiness to Buy

When the Amazon shopper logs in, he may be browsing or buying, but in a physical store, he is there to buy. However, once at the store, the retailer doesn’t know what he is there to buy, until his personal shopping habit analysis has been built up over time. Even then, there may be some surprises. The retailer must focus on what it is trying to achieve in the store campaign.

Amazon is not only putting itself in a new place it isn’t familiar with, but it will actually need to change its very personalization DNA. This is not easy.

Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News. This article originally appeared on progressivegrocer.com. Progressive Grocer is a sister publication of CSNews.