Since 2005, Amazon has changed the way virtually all American stores. In February, the company launched Prime, the first lightning-fast subscription delivery service of its kind, which now has around 147 million members in the United States. Along the way, Amazon invented its own shopping vacation, assembled an army of couriers carrying your packages in the trunks of their cars, and turned toilet paper into the kind of thing people sent home by checkout. . Amazon founder Jeff Bezos has made enough money to get into space. Now we seem to know what Amazon’s next big innovation might be: building department stores.
Thusday, The Wall Street Journal reported that Amazon plans to test multiple US-based locations of a new brick-and-mortar retail concept that will focus on items like clothing, housewares and electronics, the genre of things you could have bought at a department store in the mall before the online shopping device that Amazon helped create hammered a nail into that company’s coffin. The stores are said to be the latest in a series of personal retail experiences for the company, which operates Amazon Go bookstores and convenience stores, among others, in addition to being owned by Whole Foods. The stores are said to be approximately 30,000 square feet in size, making them more like the average Best Buy than the multi-story shopping hotspots that have dominated the lives of American consumers for a century; they will stock well-known brands, as well as Amazon’s own lines of electronics and other products. (When asked to confirm the WSJ report, an Amazon spokesperson only said, “We do not comment on rumors and speculation.”)
For anyone who has even casually followed the faltering fortunes of US department stores over the past 15 years, this decision might seem counterintuitive to you. Especially during a pandemic, when online shopping has grown explosively and millions of people have grown accustomed to ordering even their groceries over the internet, why would the world’s most powerful retailer take over the vast storefronts of bricks and mortar that have long been an albatross for many of its competitors? But the more parts of our lives move online, the clearer it becomes that some things are simply best done in person, both logistically and spiritually. Amazon’s continued introduction to in-person shopping is just the most recent proof that America is heading for a digital upheaval.
On some level, shopping for everything you need in life on the internet is undeniably convenient, at least initially. You have more options, you can research on the fly, and thanks to the dominance of Amazon Prime, most major retailers have been forced to provide free shipping and free returns on virtually everything. You can “run errands” while watching Netflix or standing in line for the bathroom at a bar, and whatever you’ve ordered will show up in two or three days. E-commerce giants have worked for years to break people’s reluctance to buy items such as clothing and furniture – products very sensitive to tastes and preferences in a way not always captured in photos – without them. see in person. Businesses have done this very well; in 2020, Amazon overtook Walmart and its extensive network of big box stores as the largest clothing retailer in the United States.
Unfortunately, no matter how much you streamline product finding or payment processing, physical objects still exist in the world. Clothing and furniture still need to be moved from distribution centers to customers, and the labor and freight to get them to you is expensive. In this way, one of the main advantages of Prime is also one of Amazon’s biggest challenges. Because each shipment is free and arrives in a day or two for almost everyone, you don’t have to wait until you need multiple items to justify an order; paying for membership encourages people to use it as often and capriciously as they like. During the pandemic, the volume of online shopping has taxed the country’s shipping and logistics infrastructure beyond its breaking point. There is no clear way for the industry to keep pace if demand continues to grow.
The biggest problem in the industry is what’s known as ‘last mile’ delivery – the process of getting your new iPhone charger or new earrings to your doorstep. your door from a centralized installation. Traditionally, the United States Postal Service handles the bulk of last mile deliveries to the United States. The country is too big and too many people live too far from highways and urban centers for it to be profitable for a private company to include them in its services. Amazon has tried to solve the last mile problem in a number of ways, including outsourcing deliveries to simple shipping operations like LaserShip and creating its own worker delivery fleet called Amazon Flex. So far, none of these efforts appear to be a long-term solution. An infinitely scalable and profitable fix may not exist. Online retailers are already doing all they can to reduce delivery costs – many pay-per-view delivery services offer low wages and minimal benefits and require their couriers to use their personal cars and pay their own. gasoline. Delivery people who have done contract work for Amazon say they drive dangerously and urinate in bottles to keep pace with deliveries. (Amazon insists its employees are treated well.)
And then there are the returns. Companies may have been successful in making customers feel comfortable buying just about anything online, but those purchases always end up being returned at a much higher rate than items purchased in person. When the sale doesn’t hold up, the costs of all the incentives that retailers have piled on top of each other to make the sale in the first place start to add up unfavorably. Between 25% and 30% of online purchases are returned in an average year, and according to one estimate, each return costs an average retailer $ 10 to $ 20. In 2020, when the pandemic caused many people to buy more types of things online than they had ever had before, returns increased by 70%. Accepting returns is so unprofitable that in some cases the larger retailers will simply refund your money and tell you to keep the offending product. Your new clutter is worth less than what the freight would cost to get it out of your sight.
The people doing the math on Amazon aren’t stupid. It’s a business that strives for efficiency at virtually any cost, and encouraging people to buy three sizes of the same pair of jeans and return two of them just isn’t effective. It is, in fact, hugely wasteful at almost every level, and not even a particularly interesting experience for buyers, who now have to run a small-scale logistics business to make sure the things they don’t want. are repackaged, reshipped in a given company’s return window, and effectively refunded. Now imagine doing it with a sectional sofa that ultimately doesn’t match your rug after all, and is a bit uncomfortable to sit on, but is already in your living room nonetheless.
What solves all of these problems – the high return rates, prohibitive last mile freight, logistical nightmares, buyer frustration, and the monumental volume of consumer waste it all sends to landfills – at a certain level? Stores. Go to a store. In America especially, this notion was imposed for more than a century. Department stores were actually such a great idea, something people love so much and work so well, that the golden barons who invented them used their stores to create a middle class identity in from almost all the fabric and maintain it for generations.
Amazon has helped kill most of these stores, but it has only created a vacuum in which more Amazon products and services are ready to go. If Silicon Valley has taught us anything over the past two decades, it’s that if you have a bottomless money pit, you can remake an industry in your image. You can acquire customers so quickly that they might not realize that they are not. love whatever you do, and you can fit into their lives in a way that would be tangled and inconvenient to eliminate, largely by stifling the competition. Which leaves the retail industry in a precarious position: Amazon, and perhaps a handful of its biggest competitors, will decide how to buy the things you need, with very little significant hindsight. They’ll set the prices, they’ll set the working conditions, and they’ll decide what things are too inefficient for you to buy online. Apparently these things will go in a store.
Amazon and the likes of it invent the solutions to the problems they create, and you pay for them to be implemented. At least in some cases, physical stores can ultimately win. You can try on your new pants, sit on your new sofa, and walk away with whatever you want straight away, which, it should be noted, is considerably faster than a two-day delivery. Yes, you have to go to the store, but it will probably save you from having to go to the post office—the dreaded post office-next week. Work smarter, not harder. This is what Amazon would do.