A growing number of traditional brick and mortar retailers are setting up dedicated Amazon storefronts. Nike, Victoria's Secret, J. Crew, and The Children's Place are some of the well-known brands that have also created Amazon storefronts. Unsurprisingly, Amazon gained 1.5 percent of the U.S. apparel market in 2017, making it second only to Walmart. Here's a look at why so many retailers have made the leap and how consumers benefit.
Big retailers can no longer ignore the market growth opportunity that Amazon offers. With more than half of all online product searches starting on Amazon, customers expect to find what they want on the e-commerce giant, says Max Borges, head of business development for Amazon brand-strategy partner Amify. "If a brand isn't present, that fruitless search is the first step towards a poor customer experience," explains Borges.
Amazon has grown to be the world's mall. As a result, a retailer's products typically show up on Amazon whether or not the retailer puts them there thanks to rogue resellers selling products at a discount, explains Josh Owens, CEO of Amazon strategy company SupplyKick, "So smart retailers are taking control. By creating a storefront, these retailers are controlling price, delivery, and promotion," says Owens.
Joining a platform like Amazon is similar to choosing to open a store in a mall where store owners don't need to worry about getting traffic to their location, says Nitin Mamillapally of Amazon sales-boosting company Sellozo. "With shoppers increasingly moving online, platforms like Amazon provide access to multiple potential customers as opposed setting up their own online site and buying traffic," he says.
More than half of shoppers start their searches for an item or product on Amazon, and projections are that sales this holiday season will grow by 15 percent, says Josh Owens of SupplyKick. The biggest risk to brick and mortar retailers may be in failing to set up a storefront on Amazon.
So, what are some of the benefits for consumers as brand after brand expands onto Amazon? The obvious is making shopping easier. Want that cool new J.Crew item? It will no longer involve traipsing down to the mall and dealing with parking or lines.
Not only does this development eliminate the need to go to the mall, it also does away with the chore of having to inspect nine or 10 stores in search of what you're looking for, says Allen Adamson of NYU Stern School of Business. "You only have to have one relationship. It's one stop shopping. It's like going to a mall and not going to 20 stores but instead just going to one store."
One of Amazon's best features is the customer ratings and feedback about the items for sale on its site. This "social proof," says Nitin Mamillapally of Sellozo, is an added bonus for brands setting up storefronts. "It provides brands the opportunity to engage with their customers much more effectively," he says.
When a brand migrates to Amazon, it allows customers to more easily compare and contrast such things as an item's features, pricing, and ratings, ultimately making more informed decisions, says Nitin Mamillapally of Sellozo.
J.Crew, Nike, Victoria's Secret — it's all just the beginning when it comes to the proliferation of Amazon storefronts. Brick-and-mortar retail sales have been flattening for quite some time now, says Nitin Mamillapally of Sellozo. And that flattening is not because consumers have stopped spending. "If anything, consumers are spending more," he says. "The convenience of buying something and returning it by pressing a few buttons, as opposed to driving somewhere, is just going to encourage more and more people to do that, which would compel more brands to follow the customers' behavior."
Having an Amazon storefront gives brands more opportunities to engage with customers from a distance, while still offering a customized, branded experience similar to the one a customer would receive in-store. "Customers definitely have the ability to engage with the brand directly," says Nitin Mamillapally of Sellozo. "With targeted, rich content playing a significant role in buyers' decision-making, customers feel more connected and well-informed, thus reinforcing their trust and confidence in the brand."
Customers are able to interact with more branded content, like product demo videos, when shopping their favorite fashion brands on Amazon. As a result, they receive a more in-depth shopping experience then one would have in a traditional store, says Nitin Mamillapally of Sellozo.
While brick and mortar stores are limited by their square footage when it comes to the amount of product that can be displayed, selling on Amazon has no such limit, says Nitin Mamillapally. "Online storefronts don't have this restriction," he explains. "With the launch of Amazon storefronts, brand owners are able to offer customers a customizable shopping experience similar to visiting a physical store, without the limitations a physical storefront has."
It's no secret that Amazon has incredibly high customer service standards. Customers get packages in a mere one or two days and can make effortless returns. Retailers that do business on Amazon better be well prepared. "You need a professional presence. So, if you can't deliver product in two days, if you don't understand SEO, and if you don't have staff to keep up with changes, Amazon isn't for you," says Josh Owens of SupplyKick. "You may do more damage to your brand than having rogue sellers selling your products and under-cutting your price."
The decision to open an Amazon storefront has many upsides. But there are also some potential drawbacks, such as fewer customers visiting physical stores. "It will definitely bring less people to the brick-and-mortar stores, which may result in less revenue per store," says Nitin Mamillapally of Sellozo. "But on the flipside, these stores can still act as a customer support location to allow for products to be shipped-to-store and allow customers to return or exchange products."
Yet another risk or challenge associated with opening an Amazon storefront is tied to the potential negative impact on brand perception and integrity among consumers, says Max Borges of Amify. "When price fluctuates or is reduced to low levels relative to the manufacturer's suggested retail price/minimum advertised price, the brand perception from customers may change based on these price points," he explains In addition, a lack of focus and execution on product content and storefront pages will create a clunky transition for customers as they go from a retailer's website to its Amazon listings.
Amazon is all about data. Data about its shoppers allows the e-commerce giant to provide customized shopping experiences with each and every one of us. When brands like J.Crew or Nike set up shop on Amazon, they will find themselves sharing data about customers with the online behemoth, says Allen Adamson, an adjunct associate professor at NYU Stern School of Business. "All of sudden, your customers and what you know about them is available to Amazon," he says.
Online shopping can often be like going down a rabbit hole. This can easily become a downside for brand's establishing storefronts on Amazon. "You could start by looking at a J.Crew item and two clicks from now you could be looking at a competitive opportunity and buying something else," explains Allen Adamson of NYU Stern School of Business. "Whereas, if the customer is in an actual J.Crew store and doesn't like one shirt they still might like another shirt in the store."
Yes, Amazon and the opening of brand storefronts on the site has dramatically changed the consumer shopping experience. But that doesn't mean brick and mortar stores will someday cease to exist, predicts Allen Adamson of NYU Stern School of Business. In fact, Amazon itself has opened physical stores. "There will always be the customer who wants to talk to someone in person, who wants to touch and feel a product and who wants to smell the fabric. You can create an environment in a store that is much more intimate."
Yes, physical stores are likely here to stay, but that doesn't mean they won't evolve to maintain their edge. "As we have seen with Nike's New York City experience store, it is evident creating an unrivaled customer experience is how these companies will be investing moving forward," says Carlos Castelán, managing director of The Navio Group.