Amazon announced yesterday that it plans to close all 68 of its brick & mortar bookstores, pop-ups, and 4-Star shops in the US and UK to focus on developing its grocery formats and a new chain of clothing stores.
Amazon opened its first physical bookstore in 2015 and 4-Star concept in 2018 as part of its efforts to move beyond the online channel. The company brought the 4-Star format to the UK last year and now operates two stores that stock its bestselling lines of electronics, homeware, toys, games, and other non-food merchandise.
The US firm stated that the closures were part of its plans to focus more on its Amazon Fresh, Whole Foods Market, and Amazon Go grocery and convenience stores, in addition to the ‘just walk out’ technology that enables a checkout-free experience at its own stores and other retailers.
The group is also planning to launch its new Amazon Style concept, which will sell fashion and accessories, in southern California later this year.
A spokesperson for the company said: “We remain committed to building great, long-term physical retail experiences and technologies, and we’re working closely with our affected employees to help them find new roles within Amazon.”
Amazon’s physical store sales were up 17% year-on-year in the most recent quarter, to $4.6bn, making up 3.3% of the company’s overall sales as in-store shopping recovered from the effects of the pandemic. However, growth in the unit had plateaued in recent years and not shown the type of growth that Amazon is accustomed to seeing in other parts of its business.
Michael Pachter, an analyst at Wedbush Securities, said internet-savvy Amazon was right to forgo the niche market of bricks & mortar book shoppers, suggesting that Andy Jassy, Amazon’s new Chief Executive, likely made the call as he reviewed the retailer’s myriad businesses since taking the top job in July. “Retail is hard, and they’re discovering that,” he said.
Meanwhile, Neil Saunders, MD of GlobalData Retail, noted that the main problem with Amazon’s non-food stores is that they lacked a real purpose even though the merchandise was well-presented.
“They were designed for people to pop in and browse rather than as destinations where people would head on a mission to buy something,” he said.
“Ultimately, this wasn’t great for driving footfall – especially in an era where people are visiting shops less.”
Last year, Amazon announced that it had recruited long-serving Tesco executive Tony Hoggett to run its physical stores as it expanded further into the grocery sector. He took up the post in January this year as Senior VP of Physical Stores, reporting to Dave Clark, Chief Executive of its worldwide consumer business.
As well as its online grocery activities, Amazon has been opening its Fresh grocery stores in the UK with reports suggesting it wants to have more than 250 of the hi-tech outlets operating before the end of 2024.
From this month, Amazon and its UK subsidiaries must comply with the Groceries Supply Code of Practice (GSCOP) after its annual turnover in the sector reached more than £1bn.
NAM Implications:
- A little bit of housekeeping for Amazon, a fundamental issue for others.
- We all concentrate our minds on…
- Amazon plans to focus more on its Amazon Fresh, Whole Foods Market, and Amazon Go grocery and convenience stores…
- …in addition to the ‘just walk out’ technology that enables a checkout-free experience at its own stores and other retailers.
- Enough for most stakeholders?
