Will Amazon ever solve its retail challenge?

What is harder? Adding e-commerce to a retailer or adding retail to an e-commerce business.

If you ask folks in Seattle, I think the answer is the latter. Amazon bought Whole Foods, took its soul, and opened bookstores, 4-star stores, and more recently, fashion stores called Amazon Style. Amazon has closed the bookstores, the 4-star stores, and now the Amazon Style stores.

Why has this all led to nothing?

  • Retail is about merchandising - can customers find what they are looking for it? If you have an infinite aisle - it does not matter where and when items are for consumers as they will search for it.
  • Retail requires experience from management. Has Amazon had the right talent to manage retail?
  • Retail requires locations in densely populated areas - Amazon has never run or had retail locations close to consumers as their warehouses, by design, were far from consumers due to the cost of land.

Interestingly, AmazonFresh continues to remain an important part of Amazon’s retail plans. This week it announced that all consumers could access grocery delivery and pick-up for all consumers, not just Prime members. Why was this not the case from the beginning?

As long as Walmart owns groceries and steadily grows its marketplace/e-commerce business, it will force Amazon to continue experimenting with retail. It does feel like grocery/retail is Amazon’s kryptonite.

This is the ten million dollar question.

Why did Amazon have three grocery carts instead of 1? (Whole Foods, regular Amazon, and Fresh)

What hope does Amazon have of moving into Walmart territory? It’s hard to imagine the path.

It’s worth breaking down merchandising into several parts:

  • location
  • ranging–is the right item being listed for the store? Who decides? The retailer, based on what they want to push, the retailer but based on good customer insight, or a manufacturer? There is one right answer for Amazon to be different to the rest and play to their presumed strengths (although are they as strong as, say, Shein?).
  • top level merchandising (store layout including “handedness” of the store, left or right, standards, labour hours)
  • visual merch which further breaks down into display especially where product is on show but not on sale i.e. windows, mannequins, and detailed level of the selectable product (planograms, floor mats, backroom layout for efficient processing of stock not on the sales floor)

Amazon seems to be failing on most of these points, failing to make the stores relevant to their geographical catchments and have a clear target demographic. And this has impacted uptake of their “Just walk out” grocery stores

In terms of people, on the fresh side (maybe all of grocery) Amazon has Tony Hoggett, who was well regarded at Tesco as “knowing his onions” but may not have the broad control and may be a bit too non-US in his experience to get this right for the US (bearing in mind the mess that Tesco made of Fresh & Easy, although Tony wasn’t involved in that, it was very much Tim Mason’s show, Tim now being CEO of Eagle Eye)

The one model that Amazon doesn’t seem to have tried is a “counter sales” model (think Argos in the UK) which would play well to Amazon’s logistic strengths, being a hyper local source of fulfilment for BOPIS, a place for BORIS where potentially with returns processing location to better reclaim saleable stock, and also shoppable for walk in customers and allowing customers to pay cash. Not so relevant for groceries although could offer q-commerce and grocery BOPIS (including bring to car/drive through).

1 Like

Interesting 15 min explainer video on YouTube

Did Amazon’s Waste $14 Billion Buying Whole Foods?

(From a small new UK based journalism crew branding themselves as TLDR, balanced centrist/left of centre explainers, also available via the Nebula mutually owned streaming service)

1 Like

In many situations in retail, technology is not the point. It just needs to be the enabler and accelerator. Trying to make it about the technology has generally not worked so well.

Even breakthrough interfaces like iPod and Uber tended to want to make the tech disappear.

JWO reduces margin by reducing basket size I would think.

1 Like