After ecommerce, Amazon has found its place in the non-ecommerce sector too. Learn how the ecommerce giant is leveraging the potential in non-ecommerce retail.
Every year, we hear news from Amazon that makes everyone wonder if there’s any market this giant has not yet influenced. Recently, Amazon has found its way into non-ecommerce retail after ruling the ecommerce market for over a decade now.
Although the pandemic shifted the mode of shopping to online, the post-pandemic world will definitely have people returning to stores, as we can already see. Amazon wants to cater to these customers too. Amazon realizes that, despite the convenience of shopping online, a segment of the population still favors an in-person shopping experience.
At the moment, Amazon has nearly 600 physical brick-and-mortar stores in the US. The majority of these stores are from Amazon’s acquisition of Whole Foods Market. Other stores include the company’s own branded stores, like Amazon Go and Amazon Fresh.
Moreover, Amazon 4-star stores stock products that have a rating of 4 or higher on the company’s ecommerce website. Amazon Books is home to books and electronics while Amazon Pop Ups temporarily offer customers shopping opportunities in shopping center locations.
Let’s take a look at how Amazon is slowly making an impact in the non-ecommerce space.
Amazon is Improving Gradually
Since Amazon is still a new fish in the ancient sea of non-ecommerce retailers, the company still has a long way to go. However, it has definitely managed to make a ripple that competitors are sensing.
Over the years, Amazon has experimented with a number of concepts. But Amazon acquiring Whole Foods is the company’s most serious investment. Since Amazon has a well-curated multi-faceted approach, it faces competition from everyone in the non-ecommerce space, from large retailers like Target to smaller department stores.
However, at the moment, Amazon’s brick-and-mortar presence is not too large to be a serious threat to existing non-ecommerce retailers.
Amazon’s Non-Ecommerce Earnings
Even in terms of revenue generation, Amazon’s brick-and-mortar stores don’t make a significant percentage. Amazon reported generating revenue of $52.90 billion in the first quarter of 2021 from its ecommerce presence.
Meanwhile, the company only earned $3.92 billion from its physical stores. While this isn’t exactly a small figure, it’s definitely not as substantial when compared to Amazon’s ecommerce earnings.
Although Amazon does not break down the non-ecommerce earnings as per their sources, it’s fairly easy to say that most sales come from Whole Foods as Amazon only has a few branded stores.
Amazon’s Brick-and-Mortar Stores
In 2020, Amazon had multiple cashier-less convenience stores, with more upcoming. Other stores included Amazon Pop Up kiosks in five sports, 21 Amazon Books bookstores, 11 Amazon 4-star general stores, and 500 Amazon Whole Foods.
Andrew Lipsman, a retail analyst, told CNet in an interview that Amazon has a typical strategy here. Basically, the company is trying to experiment with different stores and see which one works best. It did so earlier with Echo smart speakers and even with the delivery methods.
For a company to experiment with seven types of physical stores, it must have something that others don’t. In Amazon’s case, it’s money. Since the company made $11.6 billion in profits in 2019, it’s safe to say that it has enough to experiment liberally.
Amazon has developed four different grocery shopping ideas, which shows that the company is interested in this area immensely. Covering all bases will allow the company to expand its reach in the online and physical grocery shopping avenues.
Another thing that many experts have noticed about Amazon’s physical stores is that they’re not only limited to making sales. They also help build customer loyalty. We touch on that in detail below.
There’s More To It Than Sales
While we can compare Amazon’s ecommerce and non-ecommerce sales to judge where the latter stands, it’s a widely known fact that Amazon’s non-ecommerce ventures are not merely to generate revenue.
Amazon uses its branded stores to do a lot more than that.
For example, Amazon’s Pop Up stores and Amazon Books was a vehicle for marketing Amazon’s branded electronics. Amazon also uses its physical stores to test omnichannel shopping strategies and new technology.
The Amazon 4-star stores are a way for the company to make inventory decisions based on online reviews. Meanwhile, Amazon Fresh and Amazon Go stores allow the company to test new innovations, like store sensors, Alexa-integrated shopping lists, Dash Cart, biometric payments, and cashierless checkout.
To be the future of non-ecommerce retail, Amazon must offer something that its competitors don’t. It seems as if Amazon is planning for its technology to be that unique feature. The company’s current brick-and-mortar stores serve as testing grounds to determine the effectiveness and usability of new technology before Amazon can roll out the same features to all its physical stores across the country.
What Does Amazon Plan for the Future?
Looking at the company’s current strategy, it seems that Amazon is striving to bolster ecommerce sales and get more value from Amazon Prime customers. For instance, Amazon Prime members get discounts and deals on Amazon Fresh and Whole Foods Market.
Incentives like this will attract more people to get memberships in the long run.
Moreover, Amazon’s physical stores also serve as warehouses for returns and pickups. People can return the items they bought online or pick up the orders they placed through the website from the company’s brick-and-mortar stores.
This is bound to make customers adopt omnichannel shopping habits. Experts at Emarketer forecast that Amazon will expand its hybrid offerings in the future, such as click and collect. It will also leverage Amazon Prime members to boost consumer loyalty in physical stores by offering perks that are not available to non-members.
Final Words
At the end of the day, one thing is clear; Amazon’s strategies revolve around bringing customers into the loop, whether online or in-store. In doing so, the company builds customer loyalty and ensures that the customer ends up spending, even if not in the physical store.
Amazon’s non-ecommerce retail initiatives may not bring substantial financial gains, but they will definitely be discovery platforms for consumers to find services and products that are available through the company at any of its fronts, online or in-store.
