A news report on NPR (http://www.npr.org/2017/08/15/540076527/be-more-than-a-bookstore-a-brick-and-mortar-shop-s-key-to-success)describes an Amazon store in New York City that sells books but uses data captured on the webstore to suggest related books, offer Amazon prime discounts etc. The physical store thus serves as an extension to the web store and uses web data to enhance the in store experience, while offering immediate delivery. Should brick and mortar stores leverage the data collected on their web sites to enhance the competitiveness of their stores ? How should other independent bookstores who do not have a large web presence compete – should it by hosting events, such as book readings etc, like the Greenlight Bookstore described in the report ? What information can Amazon collect from the physical store that might help the webstore ?
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Brick and mortar stores can use data collected on their websites to enhance competitiveness in the stores by knowing what to sell at what price (for example, “frequently bought books”). This would also allow them to lower procurement costs and inventory storage costs by focusing on the top performing goods. On the other hand, those that do not have large web presence can still compete with “experience” or be more than just a bookstore. They are able to achieve this by building a sense of community and personal space for their customers through community events.
Because physical stores serve as a personal shopping experience, they also can serve as a resource for the web store. One example is a “register system” or the creation of new accounts, the article mentioned that Amazon prime account holders get $15 less.
After working in the retail industry, I have learned that as Sarinah and the article mentioned experience can be a key driver in brick and mortar locations. Although data is important in customizing the online presence, companies such as Amazon have data from not only books, but alternate retail goods. This provides Amazon a competitive advantage to drive interest for other books related to other web store buys. For bookstores that have limited amount of data they cannot connect individual’s books with their hobbies to tailor what is available in the store. As a result, it will be more difficult for them to compete with Amazon. In looking at the 4Cs, competitiveness here is a key driver for decision making. Although, driving down cost by utilizing data to compete against Amazon may help boost sales temporarily, it is not a competitive advantage & has led companies such as Nordstrom to see a decrease in sales. In order to compete, brick and mortar stores have to drive foot traffic which can be done through hosting experience events.
As Amazon further progresses however, it can collect information about the books that individuals are reading and match them to alternative types of goods on the web store to help increase the sales. For example, an individual reading about mountaineering, may also be interested in purchasing snowshoes or mountaineering boots. From these purchases, Amazon would then be able to drive sales further by utilizing this data to match books to individuals interest in snowshoeing and top mountains to climb.
Brick and Mortar stores should leverage the data collected on their websites to enhance the competitiveness of their stores as this is an era of information, information is key.
When we talk about web presence, a lot of customers get different types of service which is very hard to receive in the case of a physical store such as reviews on a book, quick and accurate recommendations on the genre of books they like. For example, a customer be it in a store or online, goes through a lot of books before buying one. The ones he/she browses if not bought has 3 possibilities, first did not like the book, second liked the book and matches closely to what he/she wants to read but did not buy it and third the book he/she bought. This information can be easily stored and analyzed on customer to customer basis if it has a web presence but this is very difficult in case of a physical store.
Another example where data collected on web can be leveraged by brick and mortar stores is on the inventory holding and opportunity costs of books that do not sell in a given store.
There is a possibility that in a given neighbourhood one genre of books such as crime/mystery is not read much but more of non-fiction are picked up more. In such a case, books that might come under the bracket of crime/mystery fiction might be returned to the wholesalers which will incur costs to the supply chain but it could have been directed to a store in another location where people buy or read more of those type of books.
It is all about customer experience be it book availability, or faster delivery or the environment to experience the book in.
If we go back to the article, it resonates that reading books is more of an experience than just flipping papers or pushing the right side of a kindle device. This is where the independent bookstores could compete who do not have a large web presence. They try to capture the niche who like the experience of getting involved in conversations or groups. Hosting festivals and book reading events could improve the competitiveness of these type of stores. By not doing such activities or providing these experiences, they might lose the formula which has attracted so many people till date. It is part of the chain structure that is very important.
Some information that Amazon can collect from the physical store that might help the web store is when a customer buys a product in the physical store or activates a prime account that provides contact information of the customer and the types of book he/she reads, Amazon can then use this information to create deals or bundles or promotional strategies for that customer and target directly to them via email or social media means.
Yes, Brick and Mortar should leverage the data collected on Amazon website. It is just an extension of online shopping for Amazon. The purpose and the business model (immediate delivery, reduced price if they have prime account) on which brick and mortar was opened is different than the independent book stores.
Amazon can collect information of book purchase in store and add it to the information that has been collected in online shopping. This information will help to improve the predictive models and algorithms created with online shopping. Also, Amazon can see whether the book returns were even reduced below 3%.
The independent store can improve their competitive advantage by hosting events as pointed in Greenlight book store. In addition, they can also gather information from the book sales records and identify the customer preferences around each books through data mining or machine learning concepts to reach right customer for the each book – categories (genre) or title.
In my opinion, the brick and mortar stores of Amazon are more like a way for Amazon to join the local communities and build a more unbreakable connection with locals. As an online store, one drawback of Amazon comparing with other independent bookstores is the connection/bonding with local communities. It’s true that Amazon has loyal customers, but how loyal they could be? This concept can also answer the question that how independent bookstores survive-build emotional connection/bond with local communities. The experience and events that independent bookstores provide are the ways to build this bonding relationship. Giving back to communities is also a good way.
For Amazon, this connection/ bond that its brick and mortar stores build is something that useful for its website-building unbreakable connection with its loyal customers.r Of course, Amazon can collect users’ preference and other behaviors to better analyze and promote its webstore.
Brick and mortar stores should utilize the data collected on their websites to enhance competitiveness of their stores. Granted, this this should only be utilized if the store has the proper information system in place to collect this type of customer data. Using online data would allow the stores to reduce inventory of unpopular books and utilize that storage space towards books that are “most viewed” by their customers. This would allow brick and mortar stores to focus on the A Class of books, as in the books that provide 80% of sales.
Independent bookstores who do not have a large web presence should find ways to draw in customers, similar to the Greenlight Bookstore. The reading mentions a Barnes and Noble outside of New York testing whether a restaurant connected to the store will draw customers. Coffee shops utilize a comfortable atmosphere with couches and nice seating areas, drawing customers to stay in the shop and buy more products the longer they stay. A similar approach can be used by independent bookstores by having an area where their customers can read books in a lounge area, and then browse for more products when they are ready.
Amazon can collect information on which types of books sell best in different locations. For example, maybe science fiction books are the top genre in one neighborhood in New York city, however psychology is the top genre in a different neighborhood. The geographical sales information would help with inventory at Amazon’s warehouses.
The Data collected on the Amazon websites can help the physical bookstore focus on the best-sold books, which can reduce the bookstores’ inventory. Moreover, the physical bookstore can organize and classify the books according to the data collected. This can enhance the customer in-store experience.
As for other independent bookstores who do not have a large web presence compete, they should have their features. They can work with the community, hosting regular events that can appeal to fixed customers. Moreover, increasing bookstores’ function is also a good method to appeal to customers. For example, Barnes & Noble allow customers order food when they read books. This meant physical bookstores are not only the place to buy a book, they are also the places to relax, read, and make friends.
The physical bookstores can market new customers. Thereby, Amazon has one more method to access new customers. Just as the article said, when people come in the physical bookstores, they are more likely to be an Amazon Prime member when they check the list price and the Amazon Prime member price. The connection between physical bookstores and the web store can reduce the return cost. For example, given that a customer bought book from the web store, if he wants to return the book, he doesn’t need to deliver it to Amazon, he can return it to the Amazon physical bookstores. So, the cost in this link can be reduced, which means the book price also can be lower. Similarly, the data collected from the physical bookstores can help web stores. For example, the data also can tell the most popular books, the recommended books when you look for a certain book.
Compared with the strong bargaining power of Amazon, the independent stores have no competitive advantage on the purchasing cost and selling price. Therefore, those physical stores have to find fresh and different roles in the market.
Customers care not only about the product or price, but also the service or the experience. That’s the reason why Amazon opens physical stores, and why brick and mortar stores would not disappear.
For the brick and mortar stores, the best way to gain a competitive advantage is leveraging data from both online and offline to provide a better experience for their target customers. Online data can come from their websites if they have. However, most of the data may come from offline, which can be the experiences or the feedback from regular customers. The target customers of those stores can either live in the same community or have the same preference, such as cartoon fans. Based on the demand data of the customers, various activities could be held, such as hosting events, provide cafes, and etc.
For Amazon, information collected from offline can work as a supplement for online. Face to face interaction provides more accurate and specific information about how the offline customers read, what’s their preference. Those customers may not shop online or buy e-books. Know more about this group of customers can help Amazon to figure out the way to provide better service for them or eventually transfer them to online.
Growth of technology coupled with availability of large amounts of customer’s search history data resulted in employment of personalized advertisement strategies by tech savvy giants such as Amazon, Google etc. Such data mining algorithms require constant improvements and are cost intensive, resulting in higher operating expenses for the company. Traditional bookstores comprise several intermediaries starting from the author till the retailer (the bookstore itself) who add their respective margins to the books resulting in higher price to the end customer. On the other hand, Amazon do direct deliveries to the customers skipping intermediaries and thus provides a better price compared to that of brick and mortar stores.
Amazon book stores do show price discount tags (example: actual price $100, amazon price $70) in their shelves and also provide a range of 5-star ratings for specific books. Hence, independent book stores need to constantly implement innovative ideas such as attractive themes, restaurants, kids zone etc to stay in the business. These stores can showcase books based on current trends (generic), rather to focus on specific recommendations to customers as operating expenses of these algorithms would eventually hit their bottom line.
It is a helpful way for the brick and mortar stores to use the data collected on their website. They can use these data to determine the demands of different kinds of books in different communities. For example, in this area, many people search “magazines”, and the brick and mortar could increase the number of the magazines, which can enhance the competitiveness.
In the meantime, Amazon can collect data from the brick and mortar stores to improve the online store. Amazon can know the demands of different kinds of books in different communities. Then, Amazon could provide different preferences on the website according to the areas.
For other independent bookstores without data collected on the website, they should hold some events such as the Greenlight Bookstore did. They can invite the author to the bookstore which can attract many fans of the author. They can also hold an event like “Reading Festival”. Customers can get together to share their ideas after reading and enjoy some coffee and cookies in the store.
It is really hard to compete against Amazon when it comes to price and convenience. As we were discussing in class, almost any book can be found on Amazon, and it can be yours in just a click – usually by the cheapest price.
Although brick and mortar stores could use their website data to better sort books at their store, according to what customers are more likely to buy/bundle, and even having different inventory according to the location of the store, I think their competitive advantage would have to show up trough the experience itself.
As others mentioned, most of brick and mortar stores are offering more than just books. Coffee shops, food, relaxing environment… something customers cannot find on Amazon.
It is a niche, for those who like the way books smell, feel and more than that, value a different and cultural experience.
The article points interestingly to the amalgamation of the brick and mortar with the online book stores. On one hand Amazon with its large customer base (customers buying on amazon.com) is creating the right mix for the success of its physical store. We can term this as ‘thin and wide’. On the other hand stores like Greenlight Bookstore who understand the local community better will be able to better reach out to them by understanding the needs and capabilities of the community. The store develops a more personal connection with the community while the community as well feels the direct link rather than a corporate communication. We can call this as ‘thick and deep’.
As of today we could say that Amazon has a upper hand in the field as it incorporates its online book sales learnings into the store and can utilize this opportunity to implement the store sales learnings back into the online category and keep the cycle repeating. The brick and mortar stores could attract people into the stores with various additions to the store but at the end of the day the feeling of holding a book in hand while reading it is the advantage that the brick and mortar stores have in comparison to an online store and they should utilize this to the fullest possible extent and carry forward this to establish a deeper connection with the individual and with the community as a whole.
At the end of the day, we cannot really say which of the ‘thin and wide’ vs ‘thick and deep’ strategy would work but can fairly estimate that the company which learns from its current position and takes the least time to implement these learnings would have an edge over the other in times to come.
What’s also interesting is the reversed approach Amazon is using in their bookstore, bringing data collected from their web sales to their physical store. The way they categorized books under “Most wished for” and “Top Sellers” has a different way of credibility combined with the physical experience.
The online EVERYTHING (retail, entertainment, media) presented challenges to all of those traditional industries, taking away from the experience good itself and making it merely a transaction. However, the response in the books industry is strong and effective, small bookstores are focusing on selling an experience rather than just a book, and they are also leveraging the information good to their benefit as well.
I’m curious to see how the industry transform in the next 5 years, and whether physical bookstores will lose their edge as we change generations, or will they gain a stronger foothold.
This move by Amazon seems to embrace the trend that consumers tend to use physical stores as showrooms to interact with a product before they fully commit to buying it. It is also useful to use this showroom method to partially mitigate the “last mile problem” seen in the delivery of its products. Making goods available for sale to people who might only need to go a short distance to pick them up is an effective method to not have to rely on slow shippers (i.e., USPS) to deliver the product with their economy shipping method.
I think the best business opportunity for small, independent booksellers is to follow a formula of specializing in selling limited production run, rare, and hard-to-find books. If the stock is constantly rotating in the store, or there is an element of scarcity in the shopping experience, the customer would be more likely to buy.
There is a lot of data that can be obtained from the physical store to enhance the online shopping experience. One data point is to compare return rates for products available found both online and in the physical store. They could study how customers interact with the product in the store and enhance the virtual experience to include the same amount of interaction with a product so that they are satisfied that they will make the right choice.
Brick and mortar stores should leverage their online data because it is much easier to collect than data from in-store sales. When a customer visits a brick and mortar store, they may pick up several books that peak their interest before deciding what to purchase. However, the stores POS system does not know all the books that the customers browsed during their visit; it only knows what they customer purchased and brought home from the store. In contrast, the data collected by online websites covers all the impressions that a customer receives on their virtual visit. Each book that a web customer views is recorded and, along with final customer purchases, becomes the basis of the website’s title recommendation algorithm.
Independent bookstores should compete by providing services that online book retailers cannot give customers – community. Similar to the coffee house model implemented by Barnes and Noble, bookstores that give the community an opportunity to come together and interact in an open forum linked by common interest is something that is not currently available with Amazon or other online book retailers. Although it certainly would be possible for companies like Amazon to create a virtual gathering space to link book enthusiasts, they would be unable to recreate the exact experience of meeting others in person. One advantage that the virtual space would provide is the ability to connect people from around the global, which would be nearly impossible to do in the physical confines of an independent bookstore.
One thing that Amazon can gain from its physical store is which books are truly in highest demand. Many purchases of hard copy books in brick and mortar stores are impulse purchases, and with so many titles it can be difficult to see which books are the ones customers want both. When the purchases are made purely on impulse and without the convenience of online shopping, customers are more likely to select only the books they truly want and no others. This is one way that the brick and mortar stores can help to build Amazon’s collection of customer data.
Buying a book on Web Store Vs a Brick and mortar store:
Webstore: The following are the advantages and disadvantages a customer has, by choosing a web store
I. Large Variety
II.Price comparison among different sellers
III.Book Reviews & Opinions by readers
I. Delivery time
II.People buying a physical copy would like to touch and feel the book, which can’t be facilitated by a web store
Brick and Mortar store: The following are the advantages and disadvantages a customer has, by choosing a Brick and mortar store
I. No delivery lead time. You get the book then and there.
II. People buying a physical copy would like to touch and feel the book, which is facilitated by a brick and mortar store
I. Small Variety
II.No price comparison
III.No reviews/opinions on books while buying
We can clearly see that Amazon is trying to complement the experience of a buyer, visiting the physical store, by providing him the benefits he could get on visiting a web store. This strategy clearly gives Amazon a competitive advantage over other sellers.
Using data generated by web foot print to depict foot falls at a retail store:
Though this strategy works in developed nations where the e-commerce is highly penetrated, it might not work in developing nations where e-commerce is still not that popular.
For example, India has internet users of 450 Million (July 2017), which constitutes only 40% of its population. Here the web footprint could not depict the retail sales. So, in these markets, it works the other way around. Getting the data from retailers on the customer preferences could improve the web user experience.
Strategies for Small brick and mortar stores:
The strategies that should be followed by small brick and mortar stores should depend on the socioeconomic factors.
For example, providing students with some free copies would impact the sales in a country like India, where books related to academics are a major chunk of books published and sold.
We might be impressed to see the steady growth rate of ecommerce sales at 8-10% per year, but it still surprises me that ecommerce accounts for only 8% of the total retail sales as per 2016 US census notwithstanding the fact that online retail started more than two decades ago. Two major reasons which I think explains the small % of ecommerce in overall retail sales are:
1. Inability/Lack of trust to use technology: Between 2000 and 2010, the population aged 18 to 44 grew at 0.6% and those aged 45 to 64 grew at a rate of 31.5 percent and the population aged 65 and over 15%. If it’s not too much of an assumption that older people are less prone to use technology, then the demographics are not in favor of ecommerce sales in the near future too.
2. Multisensory experience: Something that can’t be done online is the experience of touching, feeling and carefully examining the product before a customer purchases it and most customers would like to have that.
To address these issues more companies are trying to pursue omnichannel sales strategies where brick and mortar stores and online platforms can complement each other by integrating their supply chain information. According to TechCrunch, omnichannel customers shop more often and spend 3.5 times more than other shopper types when they do make a purchase. Companies can look out for types of products or the varieties within a product which are sold relatively more in brick and mortar stores than on its online counterpart. This information can be used to implement effective promotional strategies for different channels and manage inventories better.
One idea which has a potential to boost online sales especially in apparel and technology products category is to let customers review the product in the brick and mortar stores and integrate that information with its online reviews. Because customers don’t have to buy the product to give a review, number of reviews will increase and online customers have more information on more products to make a purchase decision. In this way in-store experience of someone can help online customers and online platforms can help customers locate physical stores where the products they are interested in are available.
I think Amazon opens physical stores to collect information from the customers who prefer brick and mortar stores to buy books instead of website. As you know, Zara’s employees gather information from its customers and forward these informations to store managers. Afterwards, store managers organize these informations and send them to designers to respond customer needs. Also, Amazon can use information gathered from its physical stores to respond these customer needs. With this way, Amazon can extend its customer base, improve its website to attract brick and mortar customers, and increase its profits.
Additionally, it is very clear that Amazon has the competitive advantage when it comes to offer lower prices and high variety of books against its competitors. Therefore, independent bookstores who do not have large web presence, will face serious decrease in their customer numbers unless they do something different than Amazon.
I agree with Jutong that customers not only care about prices, but also the service they get from the bookstores. Independent bookstores can be successful by offering different kind of services to their customers to gain competitive advantage. For example, in my country Turkey, some of the bookstores have children playground inside the bookstore to attract customers who have children and they are mainly selling books for 5-12 age range. Also, these bookstores arranged the interior design for small kids where they can have fun. My point is these small independent bookstores can be successful by offering services to a specific customer type.
Brick and mortar stores would be well served to use data analytics to enhance store competitiveness. In addition to stocking bestselling titles, major e-tailers (like Amazon) could also carry rare books, which already provide them with some of their highest profit margins.
Other independent bookstores may not necessarily be able to compete on the basis of price or selection. Instead, they would need to offer customers a full experience on multiple sensory levels: the visual display of books, the right auditory stimuli, the taste of food and beverages at a cafe/restaurant, etc. The NPR report, for example, mentions a cafe where fish, chicken, and wine are served.
Brick and Morter stores of Amazon works on the model used for Digital Amazon Books. It is differentiating from the usual bookstores’ experience on the basis of crowd reviewing. This is giving Amazon Bookstores advantage over any old-school bookstores where the bookstore keeper needs to be the making recommendations to the book buyer. Although the web -based collected data gives advantage in terms of recommendations, its makes the buyer view myopic as It makes recommendations only on the interests mentioned by the reader.
While the experience of a old-school bookstore is more much more than just buying a book. With the help of Author events, book festivals and book groups, they expose you to different genres outside your own interests. Having cafes where customers can relax and connect with other book readers, exchange their ideas adds to the charms of such bookstores.
Amazon supply chain is known for low cost supply chain due to lower return rates thus saving on reverse logistics cost and savings on fixed cost of the retail shop. In Brick and Mortar version, amazon will have higher fixed costs for ordering and therefore the economic order quantity will be higher. Now, for high EOQ there are correspondingly high reverse logistics cost. Therefore, the cost of the product goes up and amazon loses its edge of low cost alternative. Although, for C category books – more SKUs, low volume and high price , Brick and Mortar could be good place to attract big ticket customers, develop brand equity , take customer feedback and update book versions – therefore making it more like a responsive supply chain
For me, the power of data is very clear. Through data analysis, physical stores can use all the data and turn this information into a tool to make better decisions related to the reader’s preferences, such as seasonal books, writers, editors, themes, etc. and focus on the interest of the client.
On the other hand, it is very interesting how the brick and mortar stores reinvent the business. Surely this is a good idea for other independent bookstores, because sometimes the perception about the bookstore is that it is a boring place. The transformation into a place to share a space with a good wine or a cup of coffee, changes the concept and invites the client to take the time to carry out other activities related to reading or buying books, as a homelike experience. The article describes that Greenlight Bookstore is a place for adult readers and I believe that this type of bookstores can work in the development of new clients designing spaces for children, for example, with painting activities, puppets and book readings. Here is the future of the brick and mortar bookstores.
I think that for many reading lovers, the experience of touching the book, smelling the paper and feeling their company, as a friend, is irreplaceable!
It seems obvious that a brick and mortar store should leverage the data collected on their website to enhance the in-store experience. However, in contrast, it would be interesting to understand the differences in online customers, versus customers who tend to shop in store.
It seems that each day’s news includes another retail store its closing its doors, signaling it is imperative that physical stores will have to get creative in how it uses its space.
In September 2017, Nordstrom launched its first new concept store called Nordstrom Local. http://time.com/money/4935968/nordstrom-is-opening-a-store-that-doesnt-sell-clothes/
This experiment, if you will, does not include clothes or accessories, but does offer same day in store shipping, with the added experience of manicures, coffee, beer, wine and additional services.
When I think about my biggest reservations regarding shopping on line, especially for clothes, it’s- how will it fit, what’s the fabric like, will the color be right for me, etc.
The idea of being able to order a few garments online in the morning, and then head over to the local store to try it on, get stylist advice, and then get my daily coffee and nails done, is a seemingly interesting idea. It provides customer convenience, while still playing to the traditional shopper that enjoys the department store shopping experience.
The integration of virtual companies with strategic brick and mortar will further bring the brand to life. Is it possible to integrate new business models into existing brick and mortar stores to re-invent the real life experieince for people??? If the brick and mortar companies are able to leverage their longterm data, then they will have a fighting chance against the ecommerce players like Amazon.