Clicks and Mortar?

The digital business environment has for some time now been seen as the future of retail. It saves retailers the costs of renting or purchasing shops on what were becoming more and more expensive on the high streets. More and more companies began racing to build their digital offering and high street stores have been closing.

Online marketplaces like Amazon and eBay have provided the public with a digital tool to sell their wares without having to fight for an expensive physical space in a prime location. The increase in digital literacy has also seen more people/retailers creating strong digital propositions with their own websites.

This, however, seems to bring its own challenges. Speaking to the guardian in 2016 Sucharita Mulpuru noted that there are some 800,000 online stores trying to compete for customers via the google gateway. It’s critical for websites to appear on Page 1 of Google, especially in one of the top three organic positions, as these spots receive 58.4% of all clicks from users, according to a new study from Optify.

https://searchenginewatch.com/sew/news/2049695/top-google-result-gets-364-clicks-study

This creates the type of intensive battle online for visibility that was previously occurring on the high street.

Online real estate has become crowded and costs are becoming ever more expensive. To get on to the first page of Google stores are having to bid against the likes of Amazon, eBay and other digital powerhouses. This can prove too expensive for alot of businesses.

Macy’s and Nordstrom, for example, spent an estimated $6.4m and $4m, respectively, in paid search listings for the top 1,000 apparel-related keywords in the first quarter of 2015, according to a study this month from L2 Inc, a research firm that tracks digital brands. (Guardian.com, 2016)

So how can organizations maximize their exposure?

Amazon, the most successful online business and market place has changed its strategy. Not only is it now looking at having a strong digital presence, it is actively growing its physical presence too.

The advantages of a combined physical and virtual channel strategy can be derived from early predictions about the death of distance caused by electronic commerce (Cairncross, 1997).

This “Clicks and Mortar” strategy began in 2016 Amazon opened its first physical book store. Ironic as the company was originally blamed for effectively decimating the market for independent bookstores globally.

Image from Amazon.com

So why would Amazon who created such a colossal digital empire look to create a physical footprint?

After a slow start in Web-based retailing, many traditional brick and mortar retailers now have an electronic commerce channel in place. E-commerce researchers, using terms like clicks and mortar, and cyber-enhanced retailing have considered the combination of physical and web
channels to be a distinct business model (Stienfield et al. 2001)

By opening physical stores Amazon are creating flagships which can:

  • Increase awareness of the companies value proposition and brand
  • For the first time bring in a human element to the shopping experience.
  • Move away from gatekeepers like google who have such control over location in digital searches.

Research suggests that there are indeed tangible benefits to click and mortar approaches to e-commerce, particularly when firms more tightly integrate the two channels and exploit the sources of synergy between them. The four categories of synergy:

  • Costs,
  • Differentiation,
  • Trust,
  • Market extension

Represent one workable framework to help organize these opportunities.

But Amazon is going further, Amazon is using digital technologies in its flagship stores to further enhance its shopping experience. How are they doing this? By introducing their new technology with the name Amazon go. Which changes the way people do the physical store shopping and calling their new technology as Just walk out technology.

This Just walk out technology developed using the similar kind of technologies used in the self-driving car. These are computer vision, Sensor fusion algorithms, and deep learning.

https://www.youtube.com/watch?v=NrmMk1Myrxc

The concept of walking into the shop and waking out with exactly what you need and not having to queue for a check out is revolutionary. However, how big an impact will the removal of the human element have?

With turnstiles instead of registers, we have removed one of the few points of contact between customers and the store, irrespective of the size of the shop. Removing the person working behind the till will provide huge savings for employers, as but also potentially hundreds of thousands of job losses world wide. Although in this instance we are describing a single amazon go store which has just opened in seattle, but what will be the impact globally by 2030?

The Amazon Go project in Seattle is the first major example of the extent to which technology is a threat to some professions which are destined to disappear. Other roles in the store still require human staff, storerooms, shelf stackers etc, but what is to say their jobs will be safe in the future sooner rather than later it is concievable that robots could do these jobs too or even start mingling with humans.

The use of technology like this will also revolutionise Amazons ability to collect customer data. Not only will they see what you are buying as they currently do, they will also be able to use the instore camera’s to study your behavior and gain insights into these data intelligence touch points. Information collected across digital platformes can now be cross-referenced with information on individual behaviors in stores. So where will advertising go now? Potentially everywhere: this does depend on the individual customer, in line with the habits of individual accounts
ad hoc deals could appear on specific items. And freedom? Privacy? Gone.

References:

Walsh, M. (2016, January 30). The future of e-commerce: Bricks and mortar. The Guardian. Retrieved from http://www.theguardian.com/business/2016/jan/30/future-of-e-commerce-bricks-and-mortar

Caffo, A. (2018, May 7). Amazon Go: the pros and cons of the high-tech store of the future. Retrieved from https://blog.avira.com/amazon-go-opens-seattle/

Chaffey, D. (2018, August 14). Amazon.com case study – 2018 update. Retrieved from https://www.smartinsights.com/digital-marketing-strategy/online-business-revenue-models/amazon-case-study/

Goodwin, D. (2011, April 21). Top Google Result Gets 36.4% of Clicks [Study]. Retrieved from https://searchenginewatch.com/sew/news/2049695/top-google-result-gets-364-clicks-study

Frink, L. (2017, April 12). Here come the new office cyborgs: One of them could be you. Retrieved from https://searchenginewatch.com/sew/news/2049695/top-google-result-gets-364-clicks-study

Stienfield, C. et al (2001). Combining physical and virtual channels: Opportunities, imperatives and challenges. Retrieved from https://www.researchgate.net/publication/228592877

Combining physical and virtual channels: Opportunities, imperatives and
challenges

. Retrieved from https://www.researchgate.net/publication/228592877

10 thoughts on “Clicks and Mortar?

Add yours

  1. HI Reza
    Wow! I had no idea that Amazon Go even existed. I actually can’t believe that they have invented algorithms and computer programs that can do this, it seems like something from the future.
    It interesting that Amazon have decided to open bricks and mortar stores whereas most other companies are going the other way. The whole concept of having the ‘human element’ keeps popping up, which I find curious as they are till less stores! So on the one hand they want to have more human interaction, but on the other hand they have removed this opportunity by creating Just walk out technology.
    You mention the impact in 2030, do you believe this type of technology will become the norm by then?
    Also what will be the implications if half our stores are walk out and half are not, do you think that people will simply forget to pay? It could be the small independent retailers worse nightmare!

    Gayle

    Like

    1. Hi Gayle,

      Thanks for reading and making a comment. I think that it may well be a trend that is followed and by 2030 you will see more mainstream stores adopt this type of tech. Even supermarkets like Tesco already have apps like Tesco pay which allow you to pay for your shopping via your mobile. However, I think what will be the biggest industry trendsetter will be Wallmart in the USA who are also developing their own version of Amazon Go. If they develop it and implement it successfully I can see this becoming a trend that will be picked up around the world. In terms of convenience, it will be fantastic, however, what will be the human cost? The number of people employed in supermarkets like Tesco will take a massive hit. I don’t think people would forget to pay. When you go into the store you have to scan yourself in with a QR code (though these were dead) which acts as a mental cue as to the type of shopping experience it will be.

      I think this is only likely to affect groceries, other industries like makeup and require a level of expertise to understand skin tones and what makeup to recommend with skin types etc. but in the long term with advances in facial recognition who is to say this won’t become automated too?

      Kind regards,

      Reza

      Liked by 1 person

      1. HI Reza
        I seem to be coming across a lot of QR codes recently, maybe they are making a come back?
        Interesting you say that about makeup. I did my blog on MAC cosmetics and there is a short video on there about ModiFace, an AR mirror, that shows you what the makeup will look like on without the customer having to actually apply it. Its worth a watch! But as a Beauty Therapist, I definitely agree that human interaction is important when choosing cosmetics and skincare! And you certainly wouldn’t want an AI robot giving you a massage! 🙂

        Like

  2. Hi Reza! This is a really interesting blog on how Amazon have integrated physical and digital together to create a new ‘Just Walk Out’ technology (which I didn’t know about). Amazon have really set the standard for commerce reinvention with fast delivery, near-invisible payments and other perks tied to their Amazon Prime membership platform.

    You mentioned that by opening physical Amazon stores, their aim is to bring in a human element to the shopping experience, however, by removing checkout service and offering the customer the ‘Just Walk Out’ service in fact eliminates the human interaction. I read an article that states that Amazon do not want to replicate the current shopping experience but create an entirely new model, one that removes the checkout experience, with no questions asked but demands that you adapt to its rules. You can read the article here: https://medium.com/analytics-for-humans/the-amazon-go-store-made-us-sad-b9e271c7fdbb

    I believe that Amazon are trying to enter a new market for the customers that prefer the human interactions in their shopping experience. However, humans prefer talking to people and fixing any issues you may have had with the experience. The Go Store has none of this. Do you believe that this experience is a deliberate and intentional devaluing of the benefits of human interaction?

    Liked by 1 person

    1. Hi Nimat,

      Thanks for taking the time to read the blog and comment. That was a really interesting article on the user experience you attached. I am not surprised that they (and others in the store) found it strange. Its really smart tech.

      We do most of our food shopping online, so it seems like a bit of a cross between the two. Not sure how much I would like it. Also if it makes an error and you don’t find out until you have been out of the store for a while?

      So currently Amazon has 2 types of store. Staffed and not staffed (the Amazon go in Seattle). The bit when I mentioned bringing in human experience was the staffed stores.

      Kind regards,

      Reza

      Like

  3. Hi Reza,

    You presented the concepts really thoroughly in this piece! I agree with the tangible benefits of brick and mortar that have been outlined above and I’m curious to see how our stores will continue to develop as the years pass.

    The one thing that does have me a little concerned is the topic you touched on at the very end – data collection. In order for our retail experience to keep evolving (and continue on its road of hyper-personalization), the amount of data collected will also need to grow. Do you think we’ll reach a point where the negatives of data collection and personalization will outweigh the benefits?

    Liked by 1 person

    1. Hi Serah,

      Thanks for taking the time to read my post and comment. I really appreciate it.

      I think that this is a really interesting point you picked up. What is the balance between data collection to improve service and data collection becoming intrusive? I think personally that as we become more and more digital our data will become an even bigger commodity. It is already being bought and sold (see Cambridge Analytica and facebook). I think that it will be really challenging to lay down guidelines legally regarding data collection. How will we be able to track its use?
      Sometimes I think it comes down to the individual, how much of your data are you willing to give out or have shared? What you are comfortable with someone else may not be or visa versa.

      Because all of this technology is new, its is really difficult to imagine/predict how it is going to further develop. What implications will this have on us (consumers) in the future.

      Kind regards,

      Reza

      Like

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