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Amazon plans more stores and added Prime perks

May 19, 2016 03:22 PM
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Not content with simply dominating the online retail world, Amazon.com Inc. will step up its offline retail efforts as well.

CEO Jeff Bezos told investors at Amazon’s annual shareholders meeting Wednesday that the e-retailer plans to open more bookstores, though he did not specify when, how many or where those bookstores would be located. Amazon offered no additional comment.

Amazon, No. 1 in the Internet Retailer 2016 Top 500 Guide, opened its first bricks-and-mortar bookstore in Seattle late last year, a 7,400-square-foot location in Seattle carrying between about 6,000 SKUs and has said it will open a store this year at UTC Mall (formerly University Towne Center) in San Diego. In February, Sandeep Mathrani, CEO of retail property management firm General Growth Properties Inc., said during an earnings call that Amazon planned to open hundreds of bookstores, but a day later backed off his comments. A retail executive source soon after told Internet Retailer that Amazon planned to open stores in at least 10 major markets to sell books and electronic readers. Amazon declined to comment.

Industry experts say Amazon’s push into offline is hardly a surprise.

“So much of the business still comes from stores and synergy between the two fuels business in all channels,” says Lauren Freedman, senior vice president of digital strategy at e-commerce implementation vendor Astound Commerce and founder of online retail research and consulting firm The E-Tailing Group. “An innovative in-store experience goes a long way as well to engaging shoppers.”

To Freedman’s point, while online sales are growing faster than overall retail sales—15.1% compared to 3.3% year over year according to the latest figures released by the U.S. Department of Commerce—online accounts for a small chunk of retail sales. E-commerce accounted for 11.1% of total retail sales in the U.S. when factoring out automobile and fuel sales, according to an Internet Retailer analysis of The Commerce Department data.

Some say Amazon’s offline expansion will put pressure on retail chains to match any Amazon cross-channel innovations.

“We can expect [Amazon’s] move to be very successful and completely dominate customer experience, so it’s time for other retailers to step up and transform their physical stores to offer consumers the ultimate shopping experience,” says Juha Mattson, chief marketing officer at in-store retail analytics vendor Walkbase. “We can also expect Amazon to link the physical and online shopping paths together like no one has seen ever before.”

“Touch and feel is still an important experience for consumers, a fact which Amazon is aware of and making moves to capitalize on with its investment in bricks and mortar,” says Rupal Karia, managing director of retail and hospitality for the United Kingdom and Ireland at information and communications technology firm Fujitsu. “Retailers need to take note and ensure that they too are providing their customers with the relevant channels for their shopping needs and not run the risk of freezing out customers for failing to do so.”

Bezos also referenced new perks being added to the Amazon Prime membership program, though he did not specify them. Amazon does not disclose how many shoppers have signed up for Prime, which offers shoppers perks such as free two-day shipping or same-day delivery in certain markets for either a $99 annual fee or a $10.99 monthly fee. According to the most recent data from securities research firm Consumer Intelligence Research Partners LLC, Amazon has 54 million Prime subscribers in the U.S. 

 

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