Amazon is expanding its physical retail footprint.
After putting other retailers out of business, it is pursuing a brick-and-mortar strategy in the grocery business, a sector known for razor-thin profit margins. It has also opened several physical bookstores at a time when Barnes & Noble, unable to compete with the digital retail giant, has been closing its own. The common element to an increasingly diversified portfolio of businesses is the Prime membership. In making its products and services ubiquitous, Amazon is becoming more of a lifestyle than just a retailer.
Video Spotlight: Amazon’s New, Full-Size Grocery Store
This post is based on the CNBC article, Amazon Just Opened a Cashierless Supermarket – Here Are All the Ways It’s Trying to Upend the Grocery Industry, by A. Palmer, February 25, 2020, and the YouTube video, Here’s A Look Inside Amazon’s First Full-Size Grocery Store, by CNBC Television, February 25, 2020. Image source: SEASTOCK/Shutterstock.
1. Why is Amazon increasing the number of its physical stores in areas where others have failed?
Guidance: Amazon has put a large number of retailers out of business. With enormous financial resources and weak competition, it can try different growth strategies with less risk. According to the article, the new ventures do not generate much revenue for the company. However, they expand the privileges and therefore appeal of the Prime membership in areas other than digital retail and video streaming services.
2. Why is Amazon able to scale its grocery businesses so easily?
Guidance: Amazon already has the infrastructure in place. Besides its almost unlimited financial resources, it enjoys an extensive and sophisticated distribution network with warehouses and delivery services around the country. Its massive inventories are used for its online grocery business, Whole Foods and Go stores, and soon a new chain of grocery stores. With these economies of scale, Amazon is setting new barriers to entry for potential competitors.
3. Does it make sense to open bookstores when so many of them are closing?
Guidance: Amazon already carries large inventories of books ordered online. The investment is therefore limited to the physical space and personnel. Echos, Kindles, and Fire tablets are also sold in the stores, and clients can get discounts with their Prime memberships. As it expands both its digital and physical businesses to all retail sectors, Amazon is becoming a way of life.