What Amazon’s Investment in Brick-and-Mortar Means for Retailers

Amazon.com's recent investment in brick-and-mortar stores comes at an unusual time. Over the past 18 months, most retailers have focused on shifting their business from in-person to online. The recent e-commerce boom, which has accelerated online shopping trends by three years to five years, makes Amazon’s recent brick-and-mortar investment seem a bit unusual.

However, there has actually been a surprising amount of innovation in the brick-and-mortar space during the pandemic. Google opened its first retail store; Saks Fifth Avenue and WeWork teamed up to offer co-working spaces in department stores; digital-native brands such as Glossier opened or revamped their physical locations; and Best Buy announced plans for an experiential store dedicated to gaming, headphones, and fitness — with a bigger-than-average Geek Squad presence. These brands recognize that consumers love the in-person shopping experience and want to touch or see products before making a purchase.

So is Brick-and-Mortar Here to Say? Yes and No.

Despite the pandemic, this is a good time for some retailers to strategically invest in brick-and-mortar stores. Low interest rates and optimistic investors have made commercial real estate cheaper than pre-pandemic levels. Many department stores and malls are closing, though that doesn’t mean they aren’t looking for new business models. Retailers need to figure out how to give their customers more “bang for their buck” upon visiting a store. The Saks-WeWork partnership, for example, means that people will be able to work and shop in a single outing.

This doesn’t mean that brick-and-mortar stores will be the primary channel. For Amazon and other retailers, physical stores will form part of a larger omnichannel strategy that includes a hybrid mix of in-person and online shopping. Taking advantage of in-person shopping experiences to sell soft goods, for example, will enable Amazon customers to spend even more money with the e-commerce giant. This sets the stage for cool integrations with current fashion innovations such as wardrobe rentals, personal shoppers, and other retail innovations.

What Do Amazon’s Stores Mean for Other Retailers?

Today’s shoppers are juggling devices and moving between channels, both in-person and online. Consumers are using their phones in stores to accomplish tasks like comparing prices or checking for inventory in another location.

For other retailers, this means considering brick-and-mortar stores as a part of the digital experience and investing in omnichannel digital experiences. Here’s how retailers can follow in Amazon’s footsteps:

1. Build visibility between digital and in-store experiences. Developing a seamless experience across physical stores and digital channels will be more important than ever. E-commerce websites are the new storefronts, but that doesn’t mean retailers should abandon the in-person shopping experience.
2. Explore ways to innovate the omnichannel experience. Offering unique in-store experiences that bring the tech world and digital projects to life in a physical setting can help retailers stay relevant. Nike’s new immersive “Rise” store is a prime example. The footwear company is launching a new store in Seoul, Korea that enables customers to use their phones as part of a “high-tech” shopping experience.
3. Focus on the foundational elements. Improving everyday shopping experiences like returning items, trying on clothes, and testing out furniture will help retailers build trust with their customers. Amazon is using brick-and-mortar stores to showcase apparel and home, otherwise known as “soft goods.” With clothing and furniture, consumers tend to care about the product’s touch and feel, which means trying items on or testing them out. Ikea has responded to this need by inviting customers to "hang out" in rooms so they can experience the furniture in a "real life" scenario.

Elissa Quinby is senior director of retail insights at Quantum Metric, a continuous product design platform that helps organizations build better products faster.