Amazon’s Pop-Up Shops: What Impacts Are They Likely To Have?

Adding fuel to the contention that the high street isn’t wholly in decline, Amazon has launched a new idea – the so-called “clicks and mortar” shop. This is a pop-up premises, where up to 100 online retailers can operate their brand’s physical premises within.

 

This article will look at Amazon’s pop-up shop initiative and consider the impact it is likely to have, looking particularly on the impact the new initiative is expected to have on the UK high street.

 

 

 

Launched in 2019, Amazon’s clicks and mortar initiative will see 10 pop-up retail outlets open up in sites across the UK. 

 

Amazon’s pop-up shop initiative follows several successful US ventures, launched by Amazon including their range of US-based bookstores and their cashless store brand “Amazon Go”.

 

It is a year-long pilot scheme which will be evaluated after 12 months to see if it should be continued. The first pop-up shop has already opened in central Manchester and similar shops are planned to open in Wales, Scotland, the Midlands, the South-East and Yorkshire.

 

The pop-up shop isn’t just a space, to be filled as the retailer sees fit, rather it is a supported space, where technology and support is also available. This makes it very different from the generic office space rental, however it remains to be seen whether the initiative will be successful. Indeed the short time-limited nature of the initiative suggests there is an inherent risk that the venture may not be successful.

 

 

 

Expected impacts of popup shops cannot be understood without first considering the landscape of the current high street, from which they will be operating. The decline of the UK high street has been measured in a number of ways – from measuring the declining gross retail spend in high street outlets to the decline in the number of physical premises opening, to the decline in the number of bricks and mortar premises remaining open. For example, the Local Data Company suggests that one in every eight physical retail units in the UK is empty, which amounts to a total of 600,000 vacant retail units. This is down, however from a “vacancy high” in 2014 where 13.9 million vacancies of physical retail premises were reported.  

 

However, whereas many experts considered the decline of the high street as a general problem, a more nuanced view has most recently emerged which suggests that only certain elements of the high street are actually in decline. These experts argue that customer expectations about their shopping experience has changed, and this has created an impetus for some bricks and mortar retailers to adapt to meet their new expectations. The “new” argument goes on to suggest that those bricks and mortar outlets who have adapted are actually doing quite well, compared to their static counterparts who foundered, owing to their failure to make any changes to their business model or approach to customer service.

 

Examples of retailers how are actually doing well on the high street include Apple. Its approach to customer service is acknowledged by many as exemplary and in-store “gurus”, hired to provide free advice and demonstrations of how Apple products work, seem to work very well to attract healthy levels of footfall through Apple’s physical premises. The store layout also makes their products highly visible and people can browse and try out the products while they are in the store – something that cannot be done online. Apple also operates a “genius bar” from their bricks and mortar stores, and this enables owners of Apple products to visit the stores with their products for free advice and technical support. In doing this Apple has added value to the generic experience of simply buying a laptop, and so people are willing to visit their stores to receive a better, more personalised experience compared to just clicking on their chosen Apple product online and having it delivered. Such is its success, Apple is opening a large number of franchisee stores across India, in partnership with local brand Aptronix. In the June 2019 quarter, iPhone shipments alone, saw growth of 19 per cent and this surge in popularity of Apple products in India is fuelling the launch of even more stores in India such as in Delhi and Bengaluru. Store layout, the architecture of the building and product visibility within the stores are said to be among the features of new Apple stores that are working to attract customers to their stores.

 

Other brands who seem to have worked out how to continue to appeal to both online and bricks and mortar customers include makeup brand Charlotte Tilbury. Charlotte Tilbury customers can visit their stores and take advantage of their “magic chair” which is a sophisticated tool developed to analyse customers’ faces and apply makeup to their faces, virtually, on a giant screen. The incredibly lifelike process dispenses with the need for customers to physically apply makeup. The tool then goes on to make a set of personalised recommendations as to what products are suitable for the customer’s face and individual profile.

 

Adidas, too has identified the greater need for better customer service to support their brand’s performance on the high street. As a result it has invested heavily in AI systems to ensure customers have a more positive experience of fitting on its products. The integration is AI and customer service has been a widespread phenomenon, with other brands such as Rebecca Minkoff creating smart mirrors and using AI to allow customers to check their purchases out without having to interact with a human sales assistant. Research carried out by Rebecca Minkoff suggested that some shoppers didn’t want to feel “judged” on the basis of their purchases. Furthermore, its flagship New York store has installed a large digital wall where customers can order a drink, or request help from a store assistant.

 

Boots has survived the decline of high street bricks and mortar stores, owing to the unique experiences that customers can have in its stores. Their makeup counters display merchandise in an aesthetically pleasing way and customers are invited to stop to chat to makeup counter assistants and enjoy free samples and free makeup applications by beauty experts.

 

 

 

In creating its pop-up shop initiatives, it is clear that Amazon is acknowledging the new analysis of the decline of the high street as conditional on individual performance, as opposed to a general phenomenon affecting all retailers in the same way. As such, Amazon is hoping to emulate successful high street operators by catering to changing customer needs, at the same time as creating fresh income streams.

 

One of the biggest expected impacts of the pop-up shops will be the incidental benefits to surrounding businesses. When people go out shopping, they rarely visit just one shop. Usually a shopping trip will be a family event, and a family will often make many purchases on their shopping trip, across several different economic sectors for example, food and drink, clothes and IT. This is illustrated by the example of London Fashion Week. Although hotels and restaurants don’t actively participate in London Fashion Week, they can expect to reap the rewards of increased numbers of people attending the event, who need accommodation and food while they are away from home. For example, this year’s London Fashion Week attracted 80 designers and the event itself had over 100,000 visitors. Some experts put the total income made from the event as 269 million GBP, with an additional 52.6 million GBP generated incidental to the event itself for example in food and drink sales and hotel stays. This is based on estimates that take account of the number of visitors, the length of their stays and the incomes of the visitors. These estimates suggest that the average spend per visitor is 1,800 GBP with each visitor spending approximately 750 GBP alone, on eating out.

 

Taking account of the fact that the Amazon pop-up shops are going to be permanent fixtures (at least for one year), the impact of their opening can be expected to translate into millions of pounds of business for surrounding businesses.

 

But, what of the impact of the pop-up shop itself? Will the pop-up shops have an impact on customer experience?

 

 

 

The pop-up shop is likely to have a notable impact on customer experiences as customers will be able to have a more seamless and convenient shopping experience when a brand has both an online and a bricks and mortar presence. Customers of niche brands who would otherwise have remained on the internet will find that they have a multi-faceted experience of the business they are buying from and this is likely to be good for the consumer and for the business.

 

A “seamless” and “convenient” shopping experience is one of the factors highlighted in research by Which? as to what customers want and expect when they make purchases in 2019. The Which? research highlighted that consumer expectations have changed considerably in 2019, compared to ten, twenty or thirty years ago. In 2019, consumers place a high value on convenience, which is why Homebase with its infrequently updated itinerary and poor pricing strategies made it to the top of the worst online retailers list for 2018.    

 

Recent research has suggested that brand revenues can actually be improved where they have a seamless digital and bricks and mortar presence, as opposed to just having an online presence. There are many reasons why customers seem to prefer two “presences” as opposed to just one, online presence - as we can see in the case of successful bricks and mortar operator, Apple, customers who come into the physical store and see, touch and feel the products they are interested in. They can physically examine them and compare different models. The in-store visit has the added benefit of skilled and knowledgeable staff on hand to answer queries, or show how a product can be used. In-store visits can be particularly beneficial for disabled or more vulnerable customers, who can benefit from human contact, as opposed to just making a purchase online. Additionally, customers are often reassured by the existence of a physical store in an era where online scams are so prevalent. This is a particular concern for new brands, trying hard to build trust and a loyal base of customers. Another reason why a physical store, complemented by an online presence is a good idea is that customers often like to be able to “follow-up” purchases in a physical store. Someone returning an item, bought online may prefer to speak to a human sales assistant to explain product concerns in person.

 

There are many reasons why having an online and a bricks and mortar presence can be of benefit to brands as well as customers. Some customers want a personal service, and to interact with a human before they make their purchases. As highlighted in the Which? research on customer experience, modern day customers want the shop assistant they deal with to be helpful and knowledgeable about the products they are selling. By providing this type of experience, brands can expect to form more personal relationships with their customer base. It is often said that “people do business with people”, and this highlights the importance of the personal touch in business transactions. Having a physical location allows people to make enquiries by telephone that they may not be able to make in the case of a purely online presence. For some customers, for example disabled or vulnerable customers, this can make all the difference and can really help them access the products they require. An added bonus is that by adding another way of buying products i.e. attending the bricks and mortar store, more sales opportunities are created.

 

On the other hand, opening a physical premises can have many drawbacks. In fact, one of the biggest factors fuelling the decline of high street shopping is the cost of rent for retailers, operating from bricks and mortar premises on the high street. As well as rent, physical premises need to be kept warm and well-lit, and these utilities add extra strain to a budget.

 

In addition to this, bricks and mortar premises need to be stocked, and to remain open at the promised times. This can place a lot of pressure on brands to hire staff. Having employees opens a whole new set of potential risks, as employees can sue for employment rights, and interpersonal conflicts can create problems for staff morale. This is particularly difficult, given that today’s consumers expect shop assistants to be both knowledgeable about the products and services they are selling, as well as helpful and reliable. Brands with physical premises also need to have cash available for payroll purposes. Theft from physical stores is a very big risk and high profile brands can lose tens of thousands of pounds per year as a result of shoplifting and theft. Other problems that can come with having an online and a bricks and mortar presence include a pressure on time and existing resources. A business owner will have to split their time between managing the demands of the physical premises and the demands of an online store, both of which have their own set of very pressing demands.

 

All of these factors create the potential for negative customer experiences of brands operating a bricks and mortar premises. Customer feedback about their in-store experiences need to be monitored closely to ensure that the bricks and mortar premises itself is not repelling customers. Even one incident can lead to catastrophic consequences for a brand as highlighted by an incident where a member of the public photographed a rat in a Starbucks outlet, which led to the shop closing for a considerable period of time and receiving a fine and a criminal conviction.

 

 

 

Pop-up shops represent an enormous opportunity for both Amazon and the individual brands that will be housed in the shops themselves. Surrounding businesses are likely to benefit from increased footfall as tired shoppers seek out services from surrounding facilities including restaurants and hotels. Customers themselves are likely to benefit from a more “seamless” approach to customer experience that many associate with a combined online and bricks and mortar presence, but that is of course, assuming that the bricks and mortar premises is successfully managed.

 

Operating a bricks and mortar premises is a double-edged sword, in many respects, for the individual brands that will be operating from the popup shop. This is because of the risks and the added expenses that emanate from operating a bricks and mortar premises. As such, Amazon’s ambitious and unique proposition to add popup shops to the high street is very risky, with the potential to deliver huge pay-offs, or dire consequences for both Amazon itself and the individual operators who choose to operate bricks and mortar premises from the pop-ups shops.