Tuesday, July 5, 2016

Lessons in Retail Merchandising and the Brand Experience From Amazon

The Amazon logo contains a somewhat hidden element: an arrow that points from A to Z. 

It now stands as a reminder that the online retail giant had humble beginnings as an online bookstore. Amazon has surely worked its way through the alphabet by now as it sells just about anything you could possibly need, offers same day delivery in select cities, and even has original programming via Amazon Prime.

But Amazon might consider adding another arrow leading back to A as it begins to move from online to retail and opens its first bookstore in Seattle.

Oh, and it’s also launched a locker program in Baltimore and a has installed pickup locations at Universities of Akron and Texas at Austin with Jeff Bezos saying that they plan to open more retail stores.

So what gives?

Amazon’s basic platform is what put bookstores out of business. It also puts many other local stores in danger by undercutting virtually everyone’s prices. So why invest in overhead that was shown to be incredibly vulnerable to online shopping?

According to Bezos, this isn’t about revenue and that’s what makes this noteworthy.

Amazon is willing to lose money if it creates a better brand experience.

We’ve previously touched on our retail knowledge and experience in the world of financial institutions and in spite of the clear market gap between Amazon and credit unions, it’s not hard to draw parallels between how the two can approach retail.

1)    Online and in-person experiences aren’t mutually exclusive
Even as the banking industry pushes to make online and mobile banking the most accomodating experience it can be, it’s still important for FIs to think about the in-branch experience. Amazon is taking a similar approach. Their model has always been based on online experiences, but now they’re undertaking an exercise in enhancing brand loyalty by giving people a chance to interact with the A to Z live and in person.

2)    Sometimes, you have to ignore ROI
Amazon is a company that has essentially never turned a profit. In lieu of that, it directs its considerable revenue stream into new brand experiences (Prime, original programming, same-day shipping, etc.). And Bezos himself said that these retail environments aren’t about making money and everyone could stand to approach brand experiences this way. Ultimately, this is about forming a lasting connection with a consumer. For Amazon, it’s what will make them first-in-mind for shoppers and for credit unions, it’s what can turn savings account holders into lifelong, profitable members.

3)    Retail is an education opportunity
It always will be in a way that online isn’t. For credit unions, it’s an opportunity to get member to enroll in a high yield checking account or see how your CU offers a really low APR on auto loans. For Amazon, they’re going to be pushing digital services and tech products in their “bookstores.” Amazon Echo, Fire tablet, Fire TV, etc. will all be pushed along with a nice new hardcover. What services are you educating people about when they come into your branch?

There are a lot of lessons to be learned here, but to go even broader, take a page from Amazon and just try something new. They’re aware that they have to keep innovating in order to keep customers coming back. And sometimes innovation happens by looking at what came before or utilizing what might seem simple.