Tom Dougherty, CEO – Stealing Share
29 April 2019
Why Amazon stores are struggling
More than a year ago, I wrote that the success of Amazon Go and other various Amazon stores would depend on brand. That is, how those stores defined their customers, especially when other groceries basically ignore brand meaning.
Well, Amazon stores are struggling with a brand problem. One of brand definition.
In last week’s earnings call with investors, Brian Olsavsky, chief financial officer, said Amazon stores were growing at a slow rate. While its online grocery business was booming.
In fact, Amazon is so invested in growing its online growing business that it will spend $800 million in just the next three months to reduce delivery times.
Meanwhile, Amazon Pantry, Amazon Go, Whole Foods and other various Amazon stores only grew 1%.
Amazon stores have a brand definition problem
What gives? The in-store business model for Amazon stores includes making things as easy for shoppers as clicking on their online cart. At Amazon Go, you pick your items, they register on the app and off you go.
“The Amazon stores seem redundant when you can just buy the same groceries online and they’re delivered to your door. If you’ve bought into the Amazon brand (and most have), there’s no reason for the stores.”
But it seems the Amazon brand isn’t really defining who those shoppers are. Right now, they’re just grocery shoppers who either like tech or need things to be speedy.
While there’s probably also trepidation in choosing an Amazon store, I think there’s something deeper in root. When you think about it, if all you want is cool tech and things to be speedy, you can just log onto…Amazon.
The Amazon stores seem redundant when you can just buy the same groceries online and they’re delivered to your door. If you’ve bought into the Amazon brand (and most have), there’s no reason for the stores.
I still see the advantage of the stores, however. All those 500 Whole Foods locations serve as warehouses for online shopping. They remain assets, regardless.
I’m not willing to give up on any of the Amazon stores, and I don’t think Amazon is either. But the company needs to intensely dig into how they can define them in a way that is singular in purpose but also part of the Amazon brand. That becomes vitally important as more competitors (imitators) emerge.
Right now, the stores’ brand definition is weak. But there remains enormous potential for it to be strong.
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