Amazon AMZN is firing on all cylinders improve footprint in the retail sector on the back of its expanding physical presence.
The online retail giant has reaffirmed its stake in brick-and-mortar store space with the news that it is all set to open a new kind of physical store called “Amazon 4-star”.
The new store will be located at Manhattan's SoHo neighborhood on Spring Street. The store will sell various products like kitchen appliances and other items, home stuffs, toys, books, devices, consumer electronics and games.
The company is leveraging its huge customer shopping data from its e-commerce platform. Thanks to this, Amazon will only stock four-star or beyond rated products of the above mentioned categories in its new store.
Currently, the products in the store have collectively achieved around 1.8 million five-star customer ratings on the company’s online shopping platform. Further, Amazon 4-star will showcase products into four categories — Most-Wished-For, Trending Around NYC, Frequently Bought Together and Amazon Exclusives.
With these endeavors, the company is likely to gain further momentum in the core retail sector.
Coming to the price performance, shares of Amazon have returned 68.9% on a year-to-date basis, outperforming the industry’s rally of 31.3%.
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New Store to Benefit
The latest move will help the company in delivering better shopping experience by selling quality and best-rated products. Further, the shoppers will be able to check the products in person before buying them.
This will allow Amazon to reach customers who are hesitant to shop online and still prefer to do shopping in old traditional way.
With aid of these factors, the company will be able to attract shoppers to its new store consequently expanding its offline customer base.
Further, there will be digital price tags for each product reflecting its Prime price and the marked price. This will allow the Prime shoppers to pay the online discounted price but the non-Prime members will have to pay the marked price.
We note that this strategy is likely to drive the Prime subscriber base which will not only boost Amazon’s offline sales but also its online sales, thanks to its customer friendly offers and fast delivery services.
Consequently, this will aid the company’s top-line growth.
Expanding Physical Presence Aids Competitive Position
Amazon’s efforts to bolster physical presence in the retail space are providing it with a competitive edge against the local stores as well as big retailers like Walmart WMT, Target TGT and The Kroger KR.
Reportedly, Target, in an attempt to bolster presence in the retail sector, came up with a new concept called small-format stores. It opened 30 such stores last year and is planning to open more every year.
Nevertheless, Amazon’s expanding physical presence will continue to give tough competition to the above mentioned major retailers.
Recently, the e-commerce giant revealed its intentions to take the number of its cashierless store, Amazon Go to a record of 3,000 stores by 2021 after opening two more Amazon Go stores in Seattle. Notably, its first such store was in Chicago. This is in sync with its strategy of aggressive expansion into the retail space.
Further, the company is planning to set up more Amazon Go stores in cities like Los Angeles and San Francisco in the near term.
The company started fortifying its presence in the grocery market with the Whole Foods acquisition.
Additionally, it has around 15 offline bookstores in total, while three have a work-in-progress status.
Consequently, Amazon’s aggressive retail strategies will help it in reaping benefits from the rapidly growing retail market.
Currently, Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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