LegalVision Update: Online Retailer Amazon Opens Brick & Mortar Stores

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• The Rise of Amazon
• Data Collection
• Low Prices
• Select Stock
• Trend Setters

Tech disruptors thrive on creating a new market for a product with a view to disrupting an existing market. The media describes tech-driven businesses as innovative, bold and revolutionary. So why then has online retailer Amazon decided to open its first bricks and mortar store, with further plans to open between 300 to 400 more retail stores. A move that seems counter-intuitive at first blush may, in fact, forge a new path for the next generation of tech disruptors. Below, we look at why and ask whether Australian retailers may adopt a similar move.

The Rise of Amazon

First established as an e-commerce and cloud computing company in 1994, Amazon has continued to diversify its product offerings to now be considered the largest internet based retailer in the United States. Although, virtually no corner of the world is left untouched with their international shipping offer and competitive rates. 

Amazon’s rise forced small independent bookshops to close up shop. Despite the recent failure of other large bricks & mortar retailers, in November 2015, Amazon opened its first physical store in Seattle, Washington State. There are plans afoot to open between 300 to 400 more stores across America shortly.

But what makes Amazon so sure this move will succeed where others have failed before them, largely at the hands of Amazon and its tech disruption?

Data Collection

Since it inception, Amazon has used its online platform to collect data from every customer including: 

• The customer’s age; 
• The type of product the customer purchased; and 
• The geographical region where it was purchased.  

In short, Amazon has 22 years of data mining and solid market research that they can exploit to open physical stores. In practical terms, this aids Amazon with selecting their preferred location in a popular suburb for each new store, and to stock the store with items that they know potential customers in that location will like. Amazon is confident that they can use this data to attract customers and avoid the old stock that doesn’t sell by tailoring the products they stock. 

Low Prices

Having already disposed of many of their competitors over the past 22 years of online trading and tech disruption, Amazon are now large enough to negotiate deals with publishers and keep their overheads low.

Select Stock

In addition to the data collection, Amazon’s online review system will assist the Company in identifying popular books and there is a plan to only stock the bricks and mortar stores with books holding an average customer review of at least 4 stars.

Trend Setters

In the United States, stores such as Bonobos menswear and Birchbox cosmetics have also recently moved their e-commerce operations to bricks and mortar stores, after first creating a market online.

This raises the question as to whether Australian online retailers will also attempt the move. Could we see online stores such as www.booktopia.com.au and www.kogan.com.au open a physical space and add to their already impressive online sales? LegalVision will closely watch this space and keep you updated!

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