Interviews, insight & analysis on Ecommerce

Stephane Dugelay

Amazon to launch its own department stores: a major shift for retailers?

By Stéphane Dugelay, CEO at Mediarithmics

We have recently learned that Amazon is planning to open its first department store very soon. That so many retailers have been badly hit by the COVID-19 pandemic gives rise to many questions about the success of such a move. If Amazon has good reason to open stores, could this indicate a bigger shift in the retail industry?

Why now?

The pandemic brought us back home. As we spend more and more time living and working in the same space, it is clear that when we leave our homes, we need an experience. As physical stores have been deeply affected by the crisis, the in-person experience regains its value and is definitely a way to attract customers again: a return to the 19th century and principles of France’s first department stores, when shopping was almost a leisure pursuit. In Le Bonheur des Dames, Emile Zola wrote: “Forty thousand red balloons had taken flight in the warm air of the shops, a whole cloud of red balloons floating at that hour from one end of Paris to the other, bearing the name of Le Bonheur des dames!”, Le Bonheur des Dames being the name of a large Parisian store.

Amazon has always innovated to diversify its portfolio, to balance its assets and to find new sources of revenue. Entering the physical retail world seems like just one new step on this path.

For Amazon, opening stores has become a necessity, for several reasons. Firstly, it positions the Amazon brand as a true physical retailer. That is to say, it provides a physical presence of a brand everyone knows as a website, on the high street. This presence can be seen as a means to test the market and to establish innovations, whether that’s payment methods or more generally the way Amazon collects data from its customers during their shopping experience. It is also easy to imagine that in the future, Amazon’s stores will resemble Xiaomi or Muji’s one, stocking a mix of technological products, homeware and clothing.

A second point of interest is that physical stores finally provide Amazon the option of displaying its own-brand products to customers. The facility to see and touch before buying is a crucial point in building the customer journey.

This move by Amazon seems to reveal a new trend for retailers, who may need to strengthen relationships between offline and online activity to build a more consistent customer journey.

Why retailers should focus on structuring their customer journey

There’s something we know for sure: retailers need to enrich their interactions with their customers. Today, online retailers have much more granular information about customers, at least as far as the pure players are concerned. But the same goes for the offline experience. The key for retailers will lie in their ability to match their various sources of data. Once this step has been taken, they’ll need to offer the most personalised and best adapted experience to their customers, another key issue for their business. In this respect, the importance of online/offline synchronisation is massive. Online stores will need to know when and how they can activate their offline data to promote specific online offers – by email or push notifications, for example.

On the other hand, offline retail will have to offer a richer experience to attract new customers to its venues. This could be achieved by in-store events or private sales, or by organising special product releases. There is a need, therefore, to bridge the gap between on and offline activities, establishing one marketplace that efficiently synchronises on and offline stock levels, thereby easing click-and-collect sales, for example.

Which future for global retail?

There’s a good chance that in the future, offline and online retailers’ data will be highly synchronised. They have billions of data points to collect at various levels of understanding: the ideal would be one unique interface to reconcile all their customer profiles and to optimise the client’s journey. That’s a big next step for physical retailers, and the way they organise their data collection will be crucial to their future activities. It opens up the question of customer insights, both online and offline. How can retailers identify their customers and understand their interests at the same time?

To manage the identification issue, it is likely that we’ll see many more technological features in the stores, such as mobile app geolocalisation, and even more advanced features (such as facial recognition) being used in the local convenience store.

The key issue will be integrating all of the useful tools in the shopping experience without complicating the customer journey. Regarding customers’ interests, there’s a need to leverage and unify client interaction at the highest granularity possible, especially for the in-store journey.

For the retailer, there will most probably be a single interface to seamlessly and simultaneously manage the customer’s online and the offline experience. In this respect, Amazon’s new venture could be a real accelerator of change for the vast majority of retail actors.

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