Organizing for Omnichannel: Amazon Ushers in the Age of Convenience
In the wake of Amazon.com’s June acquisition of Whole Foods, retailers were left pondering the deal’s broader impact on the industry’s future. Paramount to that discussion is the future role of the physical store in a successful omnichannel retail organization. The pessimism around department store closures and traditional retailers declaring bankruptcy has seeped into our shared consciousness and redefined our expectations for the limits of stores. However, for as much optimism as e-commerce generates, the key to becoming — and remaining — a dominant retail force is the efficient use of the store as a central, local hub for customer engagement and product management.
Amazon Needs Stores
The Whole Foods acquisition tells us that Amazon, even with its stranglehold on e-commerce, believes that physical stores will be integral to its sustained growth. Amazon’s battle with Wal-Mart heated up after the retail chain got serious about e-commerce by acquiring Jet.com. Now Amazon is taking similar (albeit reverse) steps to ensure a true omnichannel proposition.
Of course, most observers believe Amazon will identify processes ripe for innovation and reinvent them (think Amazon Go and queue-less checkout), but it will also stand to benefit tremendously from an established network of large-footprint stores in top markets across the country.
Customers Demand Increased Flexibility From Brands
Customers want convenience. This is why e-commerce boomed in the first place, and why m-commerce has become more prevalent in recent years. It’s why Amazon Prime’s two-day shipping offer can offset a $99 annual fee, and why fulfillment options like click and collect are so popular.
Stores Are Now Distribution Centers
Amazon now operates more than 70 distribution centers across the country. By adding 431 Whole Foods stores, Amazon now has hyperlocal access to consumers. Also, by shifting resources closer to customers, Amazon is improving on its already legendary supply chain efficiencies.
Amazon’s acquisition of Whole Foods won’t eliminate the need for DCs, especially given the online retailer’s endless shelf, but it will be able to promise two-hour or same-day delivery for far more products in additional markets.
The good news is that Amazon is playing catch up in this area. Any retailer with an online presence and local or regional stores can manage its inventory similarly. Furthermore, the longer retailers work on honing their product management via stores, the smarter their assortment will get, the faster their distribution will be, and the more precise their pricing strategies can become.
Returns Get Easier
Naturally, transactions and relationships don’t really end at the point of sale. The returns process, especially for online orders, which are returned at higher rates, has a significant impact on customer loyalty. Being optimized for omnichannel returns by taking advantage of stores can be a great benefit to traditional retailers.
Today, Amazon deals with returns exclusively by accepting mailed-in items that get recycled through its DCs. However, with Whole Foods now under its control, returns may be accepted in-store, for no charge, regardless of the product.
Even more advantageous, once shoppers find reason to come into the store, retailers can potentially secure a sale on another product they otherwise would have missed had the customer simply mailed the product back.
As long as retailers have real-time product visibility, they can manage deliveries more cheaply for future orders. They may not need to take the time or money to send a product back to a regional DC, as someone else locally may be expected to buy the same product soon.
The Age of Convenience
Yes, physical stores have had their share of struggles. However, those monolithic entities that have succumbed to the pressures of modern retail weren’t ready to capitalize on the shared benefits of being physically present and digitally capable.
As Wal-Mart has proven, physical stores can be tremendous assets for omnichannel retailers far beyond using them as a merchandising tool. Stores are hubs of activity where customer service, instant gratification and easy returns drive customer loyalty. They hold potential as a retailer’s central inventory management asset. The hyperlocal nature of stores brings a new level of consumer connection to Amazon, as well as other retailers ready to enter the modern age of retail — the age of convenience.
Nick McLean is CEO of OrderDynamics, an omnichannel order management system.