Offline retail is like a battle of trapped beasts It is Amazon that beats Amazon

In 2015, Amazon, which has a dream of revitalizing physical bookstores, must not have thought that in less than 8 years, it will close all physical bookstores in the United States and the United Kingdom, plus 4-star stores and pop-up stores to be closed in the same period, a total of 68 Amazon physical stores are facing closures.

Not long ago, IKEA China announced that it would close its IKEA Guiyang market store on April 1, becoming the first offline store to close in recent years. This move has to make people wonder: Are offline stores really at the end of the road?

Amazon's bookstore past

On July 5, 1994, Bezos built an online marketplace called Amazon in the garage, dedicated to selling books. Riding on the east wind of the Internet, Amazon is no longer satisfied with selling books, it began to expand its business territory, the old bank's books to sell, but also to establish its own book list; next to the "eye-throwing" chicken and dog pieces, large to electrical furniture, small to toothpick cotton swabs, as long as it thinks, it is sold.

In the blink of an eye, it became the largest shopping site in the United States.

The draught does not forget to dig wells, and Amazon, which has achieved fame, once confidently believed that taking money in one hand and data in the other is not only a new branch that can beat traditional bookstores to autism, but also a prodigy who can save traditional bookstores from water and fire.

In November 2015, Amazon rushed to Seattle to open a physical bookstore, preparing 6,000 popular physical books on the website, and various Amazon-promoted related products, such as Kindle, Echo and other electronic devices, to enrich the bookstore with high hopes.

In the information age, data is the key to opening consumers' wallets.

Amazon cleverly uses the advantages of its big data to sift through books, manage inventory, and synchronize prices. While traditional bookstores are still ordering books through the eyes of their managers, Amazon has put the choice in the hands of consumers.

At the time, it thought this step was a beautiful step.

Amazon says that if the brick-and-mortar bookstore is successful, it will plan more physical stores in the next few years, not just bookstores. They optimistically think, set a small goal: just 400.

Sixteen months later, the tenth bookstore cut the ribbon on the other side of Lake Washington, and Amazon calmed down a little from the enthusiasm for opening stores above, changing its tone: We probably won't open 400 stores, but we will only expand faster.

Amazon's retail footprint

In 2017, Amazon completed the acquisition of Whole Foods Supermarket, and the number of offline physical stores jumped to 629, with 480 Whole Foods alone, while Amazon's original physical stores had six Amazon Go, 2 Amazon 4-star, 18 bookstores, 7 coffee shops, 25 treasure trucks, 67 pop-up stores and 14 smart home experience stores.

In 2017, Amazon opened its own fresh supermarket, which only provides packing and taking away services, and until 2020, Amazon Fresh has a real physical store.

Physical stores, steadily contributing to Amazon's performance. In 2017, physical store net sales reached $5.798 billion, accounting for 3.26% of the total, and in 2018, net sales reached $17.224 billion, accounting for 7.40% of total net sales.

If the story ends here, everything is happy.

Sadly, Amazon's ambitions met the coronavirus.

Since the beginning of 2019, the sales of physical stores have encountered bottlenecks, and the contribution to the total amount has fallen all the way. In 2021, the physical store tail is not big, and it has become Amazon's most chicken department.

Earnings are underperforming, but costs remain high. In 2018, Amazon's fulfillment costs (including all operational and labor allocation costs incurred and expenses incurred by fulfillment centers) were $34 billion, and total administrative expenses, including salaries, were $4.336 billion. Together, they accounted for 16.5% of net sales. By 2021, that number would rise to 17.9 percent, while the contribution to net sales generated by entities would be as low as 3.63 percent.

Amazon also responded that under the epidemic, physical store employees have been demanding higher wages and benefits, more flexible attendance and longer vacations.

In contrast, online business is more flexible, employees do not need to move in designated places, and inventory and turnover of goods are more flexible. After the start of the epidemic, the net sales of Amazon's online business rose rapidly, with net sales in 2020 increasing by about 40% year-on-year, while offline growth showed a depressed negative number. Online and offline this time is like a zero-sum game, although the money is still in Amazon's pocket, but the gap in the middle, it is really difficult to say to people.

Weighing the two sides, Amazon's behavior of cutting physical stores is not difficult to explain.

This time the bookstore, 4-star and pop-up stores were sacrificed to the "guillotine", the future Amazon Go and fresh will continue to operate, the new entity Amazon Style targets fashion, Amazon will not be able to bring the traditional bookstore back to glory after all.

Also, the money of the readers, where there is the money of fashionable men and women to earn.

Can online and offline coexist?

Amazon's story has been played out in China as early as possible.

In 2016, Ali took a stake in Sanjiang Shopping and tentatively touched the water temperature offline. Then it was cold.

Hou Yi, president of Hema Business Group, has previously admitted that the set of e-commerce is not fully applicable to offline, "or hope to return to the physical retail industry itself." "

Unlike Ali, which upgrades its business group and forms a B2C network to continue to seize the stock market, Amazon's path is to segment the market and try to find the most profitable ones to take root.

It's also quite in line with Amazon's usual style, innovating, trying, even if it fails.

It's just that nowadays, no matter what industry is in full swing, the apparel industry that Amazon Style is involved in is no exception. The impact of e-commerce on the industry is not divided into you and me, clothing retail is not indispensable today, coupled with the continuous impact of the epidemic, maybe Amazon Style may also be yesterday's offline Amazon Book.

After all, the big guys before the epidemic may have liked to hang out offline, but two years is enough time to educate the stubborn American people about the necessity of surf shopping.

After Amazon's big data analyzes all the preferences of customers in place, will finally consumers choose to enjoy imperial services in physical stores, or enjoy the happiness of online clicks?