Alyssa Pfluger
Alyssa Pfluger
Marketing Management
Article Summary #2
November 21, 2014
I have neither given or received, nor have I tolerated others’ use of unauthorized aid.
Alyssa Pfluger
Article Summary
Amazon is opening its first physical store in New York. The store is meant to act as a sort of warehouse which allows nearby customers to have same-day delivery, pick up the products they have ordered, and more easily return products. Although this move will offer the firm increased immediacy, it also increases costs. These costs can be found in “retailing, including leases, paying employees and managing inventory.” Due to these costs this store is seen as an experiment. If unsuccessful the store will disappear, but if successful it may lead to a larger amount of physical stores.
This move is not made without caution. The location of the store will allow for a great deal of foot traffic to reach the area, and the high-end store has high ceilings and open floor plans that will allow work to go smoothly. Furthermore, Amazon has previously engaged in practices found in physical stores. They sold Kindles in Walmart and Target, before the items were taken off the shelf in competition. Amazon has also opened pop-up shops and stores run by subsidiaries and lockers located convenience stores and parking garages which accommodate deliveries and returns. However, none of these options really offered all of the benefits that a physical store offers, and when Amazon noticed the success of competitions which opened up physical stores they decided that it was time to move in on a new type of distribution.
Relevance to the Course
The reason for Amazon’s decision to develop a brick and mortar store is, clearly, because of a focus on distribution. Although Amazon can save a lot of money by avoiding costs associated with physical stores, the truth is that they are unable to provide much of the customer service and convenience that makes many stores successes. These “warehouse” acts as a sort of in-between for Amazon, allowing it to get many of the benefits of a physical store while also allowing the company to gain experience before opening a full customer center. By altering their logistics in this way, Amazon can vastly improve on the customer service level offered to consumers.
Through utilizing the total cost approach, Amazon predicted that creating a physical store would offset the costs of retailing. Amazon saves money by simplifying the transportation process and letting customers come to them. They can also increase sales by giving customers an easier route for making returns, thus retaining more customers by improving their customer service. Furthermore, by adding a local store location, Amazon can even foster better relations with other channel contributions, such as advertising companies who give better deals to local companies.
Amazon carefully considered the specific location of their first store, turning down options before deciding on New York. The company wanted a location with a large amount of foot traffic in order to encourage people to utilize the company’s services. The store will also benefit from the increased promotion that arises from developing in such a well-known area. While advertising may account for some of this, general publicity resulting public interest and word-of-mouth will increase too.
What I Learned
While the internet has increased the opportunity for sales overall, there are some benefits from physical stores that cannot be realized by a solely online company. The fact that Amazon has decided to build a store/warehouse in New York proves just how key these benefits are. Through studying Amazon’s decision I was able to analyze and realize the importance of place in store location, as well as the importance of allowing customers ways to solve any potential sales problems with the greatest possible ease.