Throughout the years, Amazon has shown an ongoing interest in occupying brick-and-mortar spaces, despite their e-commerce success – whether their pursuit was in physical spaces, or a more recently-reported interest in JCPenney.
It’s believed that Amazon has been undergoing challenges with logistics, such as cost of shipping, restocking and their impact on profit margins. Physical stores have proven to be a favorable model, that is essentially not impacted by friction points faced by e-commerce. Some of those factors include shipping issues, refund policies, prices, shopping cart abandonment and packaging waste.
Another problem sellers face with e-commerce is keeping their products in stock, especially when online shopping is at an all-time high. By the time products come back in stock, consumers often find a similar item from a different seller. There’s a lot of competition, and Amazon’s algorithms can possibly demote listings from search results if their product is out of stock.
“If you run out of product inventory, the algorithm will beat you up severely. To get yourself back up to where you were is very difficult because other products have now replaced you. You’ll have to spend a lot on advertising,” said Jerry Kavesh, an Amazon merchant.
E-commerce sellers, like those on Amazon, have faced these issues head-on among the increase of online shopping during the current health crisis. Additionally, Gen Z’s may be less likely to shop online than you may think. In a recent study, there have been numerous findings that point to Gen Z’s preference to shop from brick-and-mortar stores. And, operating physical stores may cost less when it comes to digital media. We concluded that, “Operating physical stores lowers the brand’s expense of paid online traffic. In some cases, significantly. We also noticed that not only were overall monthly PPC costs lower, but the distribution of carrying expenses per physical store were significantly reduced.”
Amazon currently has 12 4-star physical stores across the US with nearly 17 more coming soon, they also house dozens of Book, GO and Pop-up locations. Amazon has invested a lot of time and money into opening a number of brick-and-mortar locations, even with soaring e-commerce sales. The powerhouse brand must be aware of the potential opportunities that physical locations bring, and the many challenges that are often faced with e-commerce.
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