Amazon’s first quarter results, out overnight, make for interesting reading not only because they report net sales up by 43% to $51bn (£37bn) in the first quarter, or net income – profits – of $1.6bn (£1.16bn) in the first quarter alone. They’re also interesting for the extent to which this retailer, until relatively recently a confirmed pureplay, now includes stores as part of its selling equation.
In its home US market, the retailer, an Elite trader in IRUK Top500 research, is now offering two-hour grocery deliveries from Whole Foods Market in 10 US cities, less than a year after it first announced its acquisition of the natural foods retailer. That’s a move we might soon expect to see arrive in the UK market, where Whole Foods Market now has seven stores, all in the London area where the retailer first launched its Amazon Fresh grocery deliveries.
Amazon is also working with electricals retailer Best Buy in what’s described in the first quarter figures as a “multi-year” collaboration to sell the next generation of Amazon’s own Fire TV Edition smart TVs. These will be sold in the US and Canada via Best Buy stores, as well as online via both retailers’ websites.
Add to these examples the Amazon Go store that’s now up and running in Seattle, and, closer to home, the use of Amazon lockers in third-party stores such as Tesco in the UK, and it’s clear that stores are now becoming a real part of the Amazon retail experience. What the store offers, that online cannot, is the chance to see, touch and feel an item, to buy it and take it home immediately – from a convenient location.
Adrian West, director, commercial sector at Fujitsu UK, says the move shows that the retailer is not complacent, despite its online strength. “This shift of pureplay retailers moving into physical stores and merging the online and offline experience is becoming an increasing trend,” he said. “What’s clear is that it is no longer one or the other. To be successful in retailing you need to have both, and this is what customers themselves are telling us.”
Meanwhile, Hugh Fletcher, global head of consultancy and innovation at consultancy Salmon, point to a new “retail culture of immediacy,” which offers 100m Amazon Prime subscribers “the products they want with little waiting time”. Stores take that on still further, offering another alternative for shoppers who want it now.
While stores are proving a vital component of future retailing, it’s equally important not to have too many in a retail environment where more and more shoppers are now buying online. This week alone, floorings-to-beds business Carpetright, a Top350 retailer in IRUK Top500 research, gained approval for a company voluntary arrangement (CVA) that will see it ‘right size’ its store estate, closing up to 92 stores and renegotiating rents on a further 113, while Poundworld is reported to be considering a CVA that would enable it to close 100 of its 355 stores. Leading IRUK Top500 retailer New Look is already well along this route, with an ambition of closing 60 of its 593 stores.
Carpetright chief executive Wilf Walsh yesterday said gaining creditor backing for its proposed CVA “will enable us to take tough but necessary action to established a right-sized estate of stores on economic rents, which is essential to restoring our profitability.”
At the time that its CVA was approved, New Look executive chairman Alistair McGeorge said it was a step towards restoring long-term profitability. Other actions included improving value, flexibility and speed to market. “Additionally, we have further strengthened our alignment between ecommerce and stores,” he said.
Image courtesy of Amazon