‘Make no mistake – Amazon still has big ambitions in bricks and mortar’

The surprise news that Amazon is to shut a raft of shops may tempt some to believe it cannot replicate its online success in bricks and mortar. 

A few hard-pressed retailers, long used to struggling with the economics of challenged stores – their problems often exacerbated if not entirely caused by Amazon – may be enjoying a frisson of schadenfreude that the Seattle giant has decided to close its 68 bookshops and 4-star shops.

They may take the closures as a sign that Amazon has over-reached itself by stepping beyond its field of expertise. They are almost certainly wrong.

“When failure occurs, the important thing is to learn fast and move on. That attitude has helped Amazon reach its stratospheric heights”

The shops were interesting experiments for Amazon and had a wider effect on the industry. The company is famous for its spirit of innovation and willingness to try ideas, some of which ultimately fail. 

When failure occurs, the important thing is to learn the lessons fast and move on. That attitude has helped Amazon reach its stratospheric heights and will continue to give birth to new ways of doing things – and, as tends to be the case with Amazon, generate more successes than failures. 

The same approach has increasingly been taken up by other retailers and they, too, have sought to change in ways inspired by Amazon, such as using data gathered online to range their stores.

Amazon’s bookshops and 4-star stores (which only stocked products rated four stars or higher on its online marketplace) have proven to be unsuccessful as physical retail formats.

That said, the 68 shops destined to be shuttered were ultimately insignificant to Amazon. They probably wouldn’t even amount to a rounding error in its finances.

That’s quite different from the store closure programmes undertaken by other retailers.

John Lewis, for instance, has shut a third of its branches over the space of a year, including newer flagships such as Birmingham’s Grand Central and decades-old ones like Sheffield. Those closures, unlike Amazon’s, represented emergency surgery.

Anyone who thinks the Amazon closures are an acknowledgment that stores just aren’t its thing need only look at the retailer’s comments. 

It said: “We’ve decided to close our Amazon 4-star, Books and pop-up stores, and focus more on our Amazon Fresh, Whole Foods Market, Amazon Go and Amazon Style stores, and our Just Walk Out technology.

“We remain committed to building great, long-term physical retail experiences and technology.”

That is pretty unequivocal and shows that Amazon’s bricks-and-mortar ambitions are undiminished. 

New formats, such as fashion store Style, are under development. And, while the attention this week may be on 4-star stores and bookshops, let’s not forget that Amazon has owned and operated around 500 Whole Foods Market stores since acquiring the upmarket US grocer four years ago. 

“Its food store portfolio will continue to expand, both in the UK and elsewhere, because grocery growth is a key goal for Amazon”

And just this week Amazon opened its 16th Fresh convenience store in the UK, almost exactly a year on from its maiden opening in Ealing, west London. 

Its food store portfolio will continue to expand, both in the UK and elsewhere, because grocery growth is a key goal for Amazon.

It recently came under the oversight of the Groceries Code Adjudicator (GCA), a milestone that was perhaps more significant than many realised at the time.

The GCA only scrutinises companies with a grocery turnover of at least £1bn (probably a little bit more than 4-star stores and bookshops generated) – a sign of the progress Amazon is making in a fiercely competitive UK food market. 

And let’s not forget that at the start of this year former Tesco chief strategy and innovation officer Tony Hoggett joined Amazon as senior vice-president of physical stores. That, too, was a clear sign of Amazon’s commitment to bricks and mortar and its intention to shift up a gear.

The 68 shops closing is not a sign that Amazon has failed in bricks and mortar, but that its focus is tightening on what shops it wants to go big on.

Make no mistake about it: this is a warning shot, rather than a reprieve, for its rivals.

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