Once again, Amazon is startling the retail landscape.
Now, it is the arrival of a big brick-and-mortar store: 230,000 square feet. The reporters say this square footage is about the size of two Target stores and larger than an average Walmart. This new Amazon megastore is headed for an exurb of Chicago, IL.
For almost 10 years, Amazon has been educating itself and experimenting with brick-and-mortar, non-online retail establishments, grocery, and non-grocery. Not all of these Amazon retail ventures – adventures – have been successes.
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The Chicago megastore, then, will not be the first time Amazon has added (or experimented with?) brick-and-mortar stores to its retail portfolio. Amazon had bookstores and self-service grocery stores in New York and Seattle, respectively, Amazon 4-Star in New York (featuring products with 4-star ratings, now defunct), and Amazon Fresh grocery stores. Amazon Fresh stores are apparently moving along after a slow start with the Woodland Hills, CA, store. Amazon Fresh is more mass-market, with some lower prices than its sibling, Whole Foods.
Amazon Go stores, where customers walk in, shop, and leave without a cashier, are fewer now than 3 years ago. Even the Amazon Go store next to Amazon’s extraordinary biodome headquarters in Seattle, WA, does not appear to be the busiest place on earth.
There was a lot of talk about how Amazon’s 2017 purchase of Whole Foods would dramatically alter the grocery landscape. Since the Whole Foods purchase, observers indicate that Amazon has been using Whole Foods as a laboratory for grocery retailing. Amazon’s changes to Whole Foods – some great and some abandoned – did help to transform Whole Foods’ perceptions as Whole Paycheck. For example, Amazon was incredibly prescient about its own-label products. Amazon deserves enormous credit for an early re-do of the Whole Foods 365 brand.
Amazon significantly and smartly rebranded its 365 brand. If you look at the 365 logo, you see that it no longer says “Everyday Value.” The 365 logo features the words “Whole Foods Market.” Now, through a wide variety of offerings, a shopper can purchase high-quality, affordable organic and non-organic products that compete in taste and ingredients with the more high-end brands on its shelves. A 365 can of black beans is 99 cents compared to Hannaford’s 95 cents. The 16 oz 365 Creamy Peanut Butter – just peanuts and sea salt – is $2.68. A jar of Skippy’s peanut butter with no sugar costs between $3.69 and $5.25, but it contains palm oil. The Skippy’s Natural version at 15 oz. contains peanuts, sugar, palm oil, and salt at $2.99 to $3.99.
In 2021, the business press reported that Amazon was planning to open a department store.
A department store offers a wide range of products and services across multiple categories. This is what Amazon already does online. Having a physical option would have allowed Amazon to showcase particular offerings that may be overlooked on its website. At the time, The Wall Street Journal reported that Amazon would be stocking its department stores with its private-label fashion brands and its other private-label offerings across categories such as household items, electronics, and other merchandise.
Building department stores was intriguing to Amazon observers. Amazon would have the opportunity to learn about non-food retailing. The customer knowledge base would be extraordinary. Amazon would learn about shoppers who actually prefer to purchase clothing when it can be tried on. Amazon would learn why these customers behave in this manner. Amazon would learn about the power of touch and feel in retailing. As with Whole Foods, department stores would provide pricing information, allowing for experiments with alternative pricing strategies.
The current Amazon megastore description sounds a lot like the ideas that swirled around the Amazon department store concept. But with an Amazon twist. According to the news, this new Amazon megastore will devote half of its footprint to groceries and general merchandise. The other half of the footprint will be committed to Amazon online and in-store fulfillment.
How will this online and in-store fulfillment work?
The Wall Street Journal writes that a customer may see an item in the megastore but would prefer a different color. An in-store kiosk will allow the customer to place an order for the desired item in the desired color and pick it up at checkout.
There will also be separate areas for online orders and third -party delivery drivers. Shoppers at the megastore will not jostle with those using an online grocery delivery service. There will be a back-of-house area for shoppers of the online grocery delivery service.
Amazon’s understanding of shoppers in the Chicago area will enable it to “curate” items to meet these local customers’ needs. It was once said that money makes money. Today, it is data that makes data. This is Amazon’s area of expertise.
However, and this is a big however, Amazon will need to differentiate itself meaningfully from Costco (with a rabid, avid fan base) and Walmart, with its focus on driving its online business and its “folksy” small-town heritage.
Amazon has been working on solving the brick-and-mortar conundrum. Will this new establishment be the way forward?
Could be.
As a marketer, your job is to compete. Compete differently with The Blake Project.
Funny thing about customers: customers do not care about your strategy, your corporate mission, your brand vision. Customers care about having their needs and problems solved in a relevant, differentiated manner. Customers care about the promised experience. Customers care about the brand’s trustworthiness in delivering this promised experience day in and day out, regardless of geography.
If you think this sort of relevant differentiation is nonsense, just ask Novo Nordisk, the maker of Ozempic. In the world of GLP-1 weight loss drugs, Ozempic is a leader. But there are now so many brands and options that the GLP-1 weight-loss category has become genericized.
The Ozempic brand is launching an advertising campaign to differentiate itself from other offerings. Ad experts point out the obvious: pharmaceutical advertising is rather generic, featuring happy people engaged in all sorts of active, healthy activities in beautiful locations. Of course, there are statements about side effects, but they cascade over incredibly desirable scenes. Think automotive advertising where cares are seen in areas with no electrical or telephone poles – just endless, Pacific Coast Highway-type scenery.
Ozempic is in that Xerox, Teflon, and Kleenex area, where the brand defines the category. It takes resources and focus to ensure the brand remains meaningfully differentiated. As the CEO of Novo Nordisk told an analyst conference, with patents expiring, “Because in a number of markets we have lost exclusivity this year, we will get competition. And when you have a very high market share, competition will take some of that share away. We need to focus on the market expansion.”
With the proposed megastore, Amazon has the opportunity to transform the big-box store concept.
In a 2021 review on five new books about retailing in Harvard Business Review, “Getting Back to Business: The future of shopping in the post-COVID World,” Juan Martinez wrote, “The thriving stores of the future will be driven by data, technology, and even a little theater.”
As Mr. Martinez points out, the five books on the future of retailing all concur that thriving stores will rely on an optimization of data, technology, and the experiential. Success in future retailing will undoubtedly require expertise in e-commerce, customer service, customer understanding, and digital prowess. These are all things that Amazon does so well. Although Amazon does not face an empty field, never underestimate Walmart and Costco; Amazon can redefine an industry as it did with online books, groceries, delivery, and merchandise.
Defining the brand promise will be critical. What will be the relevant, differentiated, trustworthy branded experience that customers will receive at this Amazon megastore?
Contributed to Branding Strategy Insider by: Joan Kiddon, Partner, The Blake Project, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I
At The Blake Project, we help clients worldwide, in all stages of development, define and articulate what makes them competitive and valuable at pivotal moments of change. Please email us to learn how we can help you compete differently.
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