As much as Amazon’s “Everything Store” approach might seem disruptive, particularly as the retailer branches out into supermarkets and physical stores, it’s not that different from what Sears did nearly a century ago as its wildly successful mail-order business transformed into a bricks-and-mortar mega-chain. The question is: Can Amazon keep from making the same mistakes that led to Sears’ fall from grace? The following looks into Amazon’s growth.
Here’s what we learned from an interesting recent piece in the Atlantic that compared Sears Roebuck as it began its store-building spree in the late 1920s with Amazon as it opens more bookstores and gets into the grocery business in 2017.
1. Sears was the original Everything Store.
You might think that Amazon sells everything, but it doesn’t sell firearms, cars, houses, or tombstones. Sears did, a century ago, alongside the merchandise you might expect, like clothing, tools, and toys.
2. Selling everything isn’t about making money from everything.
Offering a wide variety of products means that shoppers will turn to that store first when they need something. Sears expanded its range of merchandise (see above) and kept its prices low by selling huge volumes. Customers stayed loyal because of the wide variety and low prices, turning to Sears first for much of their shopping. Even today, it’s one of the few retailers where you can buy lingerie and lawn mowers.
Amazon has understood this for a long time, lowering its prices relentlessly to win business, not necessarily making a profit. In the last few years, it has turned to making its own private-label products to boost its profit margins after gaining shoppers’ trust.
3. Building physical stores doesn’t hurt catalog (or online) sales.
Sears learned that sales actually increased as it built its first physical stores. Yet its catalog business didn’t really die out until the country was thoroughly suburbanized in the 1980s. Amazon may find the same, as it nestles smart speakers in the produce sections of its Whole Foods stores, but also includes Amazon Lockers as a pickup point for orders. Amazon has also found that a physical retail presence boosts online sales.
4. Follow the customers.
Sears found success by reading census data and studying its own catalog mailing lists, then putting stores where its customers were, or following trends to put stores where its customers were going. In the 1920s, it noticed that customers were migrating to cities, and heading south and west. In the 1960s, the department store chain didn’t just follow its customers to the suburbs: It developed its own malls in areas that didn’t already have one.
Amazon has already taken this lesson seriously, building its bookstores in upscale malls, building pickup points on college campuses, and acquiring the Whole Foods chain, which already attracts an upper-income population of shoppers.
5. Adjacent businesses can be helpful, but don’t get distracted.
Sears grew a lot of related businesses along the way, like Allstate auto insurance (when it sold cars and auto parts) and the Discover card, both of which it later spun out as separate businesses.
Amazon doesn’t sell car insurance or run its own credit card, but it does experiment with side businesses like robotic fashion advice, handmade crafts, and food delivery. Even original TV programming is an odd side business unless you think of it as something to attract people to Prime subscriptions, which lead them to buy more from Amazon.
The above was first reported by The Consumerist.