Amazon, why do you go offline?
Have you tracked #Amazon's recent moves? Just like has happened in the past, they may not make sense immediately. I hope you know that I am talking about Amazon's acquisition of #WholeFoods.
It surely led to confusion initially, as Amazon has always been a supporter of #online #retail and an opponent of the brick and mortar concept. In the 'Everything Store' book, Jeff is quoted as calling Amazon an #Unstore, meaning that Amazon has #advantages that brick and mortar stores do not have, while lacking the #disadvantages that these stores do have. Even so, Amazon recently also expanded their offline #channels with their #AmazonGo & #AmazonFresh pickup concepts. So, why all of a sudden expand into #offline?
Amazon is exploiting #opportunities that can #fuel its #growth, while still #benefitting from its #online #skills. It has already mastered online retail, but has left offline retail largely to others. Its narrow focus on online retail, and later on #platform #strategies (see my previous post), was a smart thing in its early days, but in its current state it can certainly afford to widen its #scope and make others' lives difficult in the offline #business.
Actually, Amazon should! Let's look at four reasons for why Amazon's move into offline retail is a smart thing.
1) As much as Jeff Bezos was right about the disadvantages of brick-and-mortar #business, he has apparently also been aware about the fact that decent profits can be made in this business nevertheless. Such profits go to others in case they are #unrivaled by Amazon. What if these companies are also active online? Well, then these profits can then be used against Amazon! #Walmart would be a good example.
2) Also, in those moments in which Amazon is in need of their 'next big thing', a well-calculated #offense might be just it. The nice thing about this move is that Jeff has also countered the disadvantages of brick-and-mortar business by moving into the offline retail business through #leveraging #synergies with Amazon's online branch & other businesses.
3) Its partly about #experimentation & #data. #Learning about #customer #behavior is vital 'cause the Amazon #concept depends on it. With the #acquisition of #WholeFoods, Amazon acquired the data that was already present, as well as a 'playground' for trying out some of the projects that they may have on their minds. Such #data, both already present and yet to be acquired, can feed in to other offline concepts, but also #online #concepts. This will lead to a better understanding of who buys what, and why, strengthening all of Amazon's businesses.
4) But there's more! #Amazon integrates these #offline concepts, such as #WholeFoods, with its #Prime service. Prime #membership guarantees Amazon a #fixed #income, while it psychologically #incentivizes #consumers to order more due to the #absence of #shipping #costs. Consumers willing to benefit from discounts in Whole Foods and thus subscribing to Amazon Prime will most likely also increase their online purchases, fueling Amazon's other online businesses also. Finally all of this brings additional demand to some of Amazon's services as well, such as its #AmazonPay service.
So, many wins for Amazon! Why not move into offline, right? :)