Amazon may have a relatively small retail footprint of just 48 stores across the globe, however it has certainly made a splash with its bricks-and-mortar strategy.
Despite launching in 1994 by Jeff Bezos in Seattle, the online giant didn’t open a physical bricks-and-mortar until 2015 as the “physical extension of Amazon.com”.
Despite reports back in 2018 that it would open 3,000 stores in the three years that followed, it has approached the market cautiously, testing the waters in true Amazon fashion.
However, CEO Andy Jassy revealed last month that it now has a store format that it wants to “go big on”.
Charged breaks down the evolution of Amazon’s physical retail strategy, from the beginning until present day.
2015
Amazon Books – its first store
The book store, located in the University Village mall in Seattle, stocked about 5,000 titles and was opened to showcase the authors and their work, as opposed to launching as an efficient retail space.
Shelves displayed positive reviews and star-ratings from the Amazon.com website and prices were matched to online equivalents.
The store also sold Amazon electronics, including the Kindle e-reader, Echo devices, Fire TV and its Fire tablet range.
The store was closed in March 2022 as part of a raft of store closures
2017
Acquisition of Whole Foods Market
Amazon, which was looking to make more of a splash in physical retail, swooped in to save Whole Foods from free fall, buying the grocer for $13.7 billion. This added some 400 stores to its footprint.
Since then, Amazon has implemented a range of its own retail tech solutions into Whole Foods stores, including Amazon One, a palm recognition system that allows shoppers to enter the store by scanning their palm onto a display.
Amazon has since also integrated Whole Foods products into its online grocery offer.
2018
The launch of Amazon Go and a new era of retail technology
Expanding on its physical retail experiment, Amazon opened its first Amazon Go store in January 2018.
The flagship store, located in the company’s headquarters in Seattle, sold products included prepared food, meal kits, a limited selection of groceries and alcohol, with a hi-tech twist – checkout-free technology.
Amazon Go stores are equipped with either Just Walk Out technology or Amazon One that allows shoppers to grab what they want in stores and simply walk out.
The following month, the US ecommerce giant began to offer its Just Walk Out tech solution to other retailers.
Since then, retailers around the globe have adopted the solution, including UK grocery giant Sainsbury’s, US coffee chain Starbucks and stationery retailer WHSmith.
Amazon 4-star
In the same year, Amazon pushed on with the launch of a new retail concept; Amazon 4-star. The idea was simple. All items stocked have to be rated four stars or above on the company’s website, be a best seller or trending at the time.
“We created Amazon 4-star to be a place where customers can discover products they will love. Amazon 4-star’s selection is a direct reflection of our customers – what they’re buying and what they’re loving,” the company said in a blog post announcing the new store format.
Popular products from the most popular categories on Amazon.com were added to the lineup of products, including devices, consumer electronics, home items, toys, books and games.
In the UK, Amazon only opened two versions of the 4-star, one in Kent’s Bluewater shopping centre in October 2021, before opening its second in London’s Westfield shopping centre the following month.
The stores were criticised by analysts for offering “a lot of many things and not much of anything”.
The 4-star experiment was ditched after just five months, as Amazon swung the axe on 68 of its physical retail stores, including Go stores based in the US.
CACI vice president Dan Parr said on the closure: “The move is most likely based on the fact they couldn’t view their customers in the same way as they can do online, and if they did (through you having the app on your phone), not even their innovation could act quickly enough to get you to engage.
2020
A ‘Fresh’ approach
In August 2020, the ecommerce behemoth marked its most significant venture into physical retail to date with Amazon Fresh.
The store was viewed as a mainstream alternative that could sit alongside upmarket sister business Whole Foods, and convenience format Amazon Go.
In the US-based larger stores, automated trollies known as ‘Dash Carts‘ were rolled out, using computer vision and inbuilt scales to identify items and charge customers without them having to visit a cashier.
To this day, shoppers are able to scan a QR code to activate their cart and link it with their Amazon profile, allowing them to access Alexa shopping lists.
The carts detect when items are added or removed from the cart and charge their accounts directly when they walk out of the store.
A number of voice-activated Echo Show devices are positioned around the store, which shoppers can ask for information about item locations, or ask for recommendations about what to make for dinner.
Amazon Fresh stores in the UK are all urban-based, and with a small footprint. Customers enter the store using Just Walk Out technology, with a series of AI-powered cameras and shelf sensors detecting which products are lifted of the shelves.
Shoppers are able to bag the order before leaving by just walking out the store. Amazon then charges the customer via their Amazon account.
Despite the tech offering a seamless shopping experience, some analysts have branded the move an overpriced gimmick.
LS Retail director of business development Sigurður Ari Sigurjónsson said last year that the cost of JWO technology is “far too great” for the concept to be scaled.
“Putting in all this investment upfront in AI, security equipment and all the other hardware means that you need to either have a lot of foot traffic through your store or high enough margins. In this case the technology is just a burden on Amazon’s operations!”
2021
A (hair) cut above the rest?
Changing direction slightly, in April 2021 Amazon pivoted from grocery to open a standalone hair salon in London’s Spitalfields, set over two floors and measuring more than 1,500 sq. ft. on Brushfield Street.
The salon trials the latest in haircare technology and adds its own twist with augmented reality hair consultations and point-and-learn technology, with styling services provided by Elena Lavagni, owner of Neville Hair & Beauty, an independent salon based in London.
Amazon UK country manager John Boumphrey said: “We have designed this salon for customers to come and experience some of the best technology, hair care products and stylists in the industry.
“We want this unique venue to bring us one step closer to customers, and it will be a place where we can collaborate with the industry and test new technologies.”
Customers are able to experiment with different virtual hair colours using AR tech and enjoy entertainment on Fire tablets at each styling station.
They are also able to simply point at the product they are interested in on a display shelf and the relevant information, including brand videos and educational content, will appear on a display screen.
To order the products, customers can scan the relevant QR code on the shelf to visit the product detail page on Amazon.co.uk and purchase, with delivery direct to their home.
Amazon said at the time of the launch that Amazon Salon is an experiential venue aiming to “support the professional beauty industry”.
2022
Amazon takes on the fashion industry with Style
Seven years after the first store opened its doors, Amazon teased the next stage of its physical retail strategy, Amazon Style, a clothing store outfitted with the latest in retail technology.
The new 30,000-square-foot store opened in The Americana at Brand mall in Los Angeles next to traditional retailers including Nordstrom, J. Crew, Urban Outfitters and H&M, aiming to offer customers an alternative to shopping at department stores under its brand imagery.
The store allows customers to use an app to scan their chosen items. They can then choose to either have them sent to a fitting room or direct to the checkout counter.
Once inside the fitting room, a large touchscreen panel allows shoppers to browse additional clothing options. These can then also be ordered digitally and brought in for customers to try on.
It specialises in higher-end products from CK, Lacoste, Levi’s, Tommy Hilfiger and Steve Madden.
2023…
No further store openings weren’t expected after the company halted its bricks-and-mortar expansion last year off the back of the difficult economic landscape.
Its Fresh store in Dalston, which had been operational for 18 months, closed its doors in January, and many expected the retailer to batten down the hatches.
However, just weeks later two new stores were opened in Monument and Croydon.
The big change with these stores are that they feature manned checkouts alongside the Just Walk Out technology for the first time.
Now Jassy seems determined to push ahead with physical retail. He told the FT last month: “We’re hopeful that in 2023, we have a format that we want to go big on, on the physical side.”
Perhaps this hybrid model could be Amazon’s template for grocery stores going forward.
