( ) BEZOS is on a quest toAND perfect the ‘last mile.’ THE Will its brick- and-mortarBRICK ambitions turn retailing on its head? Amazon In an interview with TV What’s the idea? What would we do that would be different? How would it be better? ¶ “We don’t talk-show host Charlie Rose, want to do things because we can do them. … Jeff Bezos looked prepared for We don’t want to be redundant.” the inevitable question: That was Nov. 16, 2012. Today, the reigning king of online retailing is ready to turn his clicks into bricks. “Are you headed to brick and mortar?” Pausing long enough to take only a single breath, BY ABBEY LEWIS, MITCH MORRISON AND JACKSON LEWIS Bezos spoke confidently to one of the few reporters with ILLUSTRATION BY MARTIN O'NEILL whom he has gone on the record in recent years. ore than a year after opening And though a company spokesperson em- tomers’ smartphone tracks everything they the first physical Amazon phatically debunked that figure—“Not pull from the shelves, eliminating the need bookstore in his company’s even close,” she said—the digital dynamo for a checkout. It brings new meaning to the “We would love to, but only if we can have a truly hometown of Seattle, Bezos stunned analysts with the late-fall debut of term “grab-and-go.” is returning to the very play- its incipient c-store Amazon Go. On what all this means for Amazon’s fu- differentiated idea,” he said. “One of the things book he created two decades A video launched on YouTube shows ture retail strategy, the company is charac- ago when he launched the country’s first customers walking in and out of an teristically mum. “I can’t comment on any that we don’t do very well at Amazon is do a ‘me-too’ online bookstore. First books. Then … who 1,800-square-foot store outfitted with sub- rumors or speculations there might be,” Mknows what? way tiles, wood trim and sleek black shelves. said Brian Olsavsky, senior vice president Well, now we’re beginning to get an idea. It’s stocked with packaged goods and pre- and CFO of Amazon.com Inc., following product offering. ¶ “The question we would always Just days before Halloween, Amazon pared foods made fresh daily by chefs and a question about grocery gossip during the spooked countless retailers with a rumored favorite local purveyors. Using technology company’s most recent earnings call. ask before we would embark on such a thing is: pilot of 2,000 click-and-collect stores. similar to that of self-driving cars, the cus- Rumors? Speculations? 28 csp february 2017 february 2017 csp 29 Spearheaded by wunderkind Bezos, to logistics to their retail platforms—is all the Seattle-based company opened its about finding the best way to get products The dot-com digital doors in 1994. The online bookstore into your home,” Lewis says. “So when eventually outdid venerable behemoths you look at the brick and mortar they are bubble of the Borders and Barnes & Noble. In a decade’s planning, you have to view this as another time, Borders shuttered; Barnes & Noble laboratory for them to find out how they late 1990s greatly reduced its presence. can … create a more unique, convenient Amazon expanded into DVDs, CDs, Blu- experience for the consumer.” rays, apparel, housewares, video streaming, boomed with audiobooks, electronics and more. And Virtual Ceilings while its virtual shelves proliferated, SP’s interviews with more than audacity, the company’s foray into the physical— a dozen retail experts, analysts AmazonFresh, Amazon Locker, drones, and authors who have spent jumbo jets, postal carriers out on Sundays— years seeking to understand brashness and, began to take form. Amazon’s culture of audacious It seemed scattered and incongruent, yet Caspirations and Iron Curtain secrecy perhaps, even all moves were directed with the same goal: uncover a common thread: Amazon’s how to perfect the last mile, the final leg in incursion into the arena of brick and mortar a product’s journey to the consumer, with underscores a heightened realization. some justified speed, efficiency and customer satisfaction. “Amazon has … hit a virtual wall,” says “You can’t just look at any one thing retail expert Bill Bishop. “A wall of virtual overreaching. Amazon does; you have to look at Amazon growth. They’re only going to be able to from 30,000 feet above,” says veteran push through and push beyond by having Absurd startups pocketed millions from retail and design consultant Gerald Lewis. some physical presence.” a Wall Street awash with money. But soon “They’re not confined to online. Rather, Remember when dot-com haters after the balloon took off, it popped. Loudly. online was the way for them to create a predicted the demise of brick and mortar? Still, some businesses anchored in the convenience channel for customers to Well, they weren’t altogether wrong. web remained afloat. And one would change buy things at lower prices and in more Companies such as Kodak, Kmart, the world of retail. convenient ways.” Blockbuster, Sears and Blackberry failed Quarter after quarter, Amazon lost Keeping true to its reputation, Amazon to adapt and have shuttered or are a shell of millions of dollars. It didn’t turn a profit for officials did not respond to requests for an their former selves. nearly a decade. Yet investors, thinking long interview for this feature. But some brick-and-mortar companies— term, rewarded it with greater interest. “Everything they do—from technology most recently Best Buy and Kohl’s— allowing customers approves a two-for- to make a purchase one stock split, giving 1995 with one mouse click. investors one additional Amazon is launched as share for every share an online book seller Amazon goes public held. (The move is AMAZON, BEAT BY BEAT based out of Jeff Bezos’ in May and raises $54 repeated July 1999.) Amazon’s chronology reflects the garage. Within the first million, at a valuation Also in April, Amazon month, it sells books to of $438 million. Shares acquires IMDb (Internet visionary audacity of its founder. It has people in all 50 states are sold at $18 each. Movie Database) for and in 45 countries. an undisclosed amount. shuttered competitors, expanded and Amazon launches its contracted, and stubbed its own toes— Amazon builds an second warehouse In June, Amazon auction website to in November in New adds music as its first all while turning retailing on its head. compete with eBay, Castle, Del. category expansion which flops. beyond books. Note: In the timeline at right, black entries In October, indicate products and services, while 1998 Amazon expands orange entries indicatefinancialmilestones. 1997 In April, Amazon’s to Germany and the Launch of 1-Click, board of directors United Kingdom. 30 csp february 2017 Construction is close to completion at Amazon’s new mysterious physical location, currently known asProjectX,inSeattle’sBallardneighborhood. space has unnerved Amazon and shaken the world’s largest e-commerce company from its perch. “I am surprised that Jeff Bezos is doing this,” Brandt says. “Certainly he wants to deal with the threat from Wal-Mart, and they’re going in this direction.” Former Amazon executive John Rossman is much more optimistic than Brandt, convinced that Amazon will do what it does best: pioneer, test, analyze, incubate and scale. “Grocery retailing is something I think Amazon will excel in, by creating a scalable experience based on store by store, region photograph by Zach Lewis Zach by photograph by region that reflects what the customer in have adapted to the digital world and, a nearby Wal-Mart Supercenter. each market and demographic wants,” says collectively, are 26% more profitable than Both Wal-Mart and Amazon closed 2016 Rossman, author of “The Amazon Way” their industry peers as a result, according to with flashy small-format store openings, and managing director of Alvarez & Marsal, MIT Sloan research. creating a battleground for the world’s New York. Wal-Mart Corp., Bentonville, Ark., has two biggest retailers, fought on c-stores’ During a late-fall interview with CSP, mirrored Amazon in its mission to wed turf, with the convenience industry stuck Rossman played soothsayer when he digital and physical for last-mile perfection, between the crosshairs of these two giant predicted Amazon would launch an urban launching a grocery pickup service that competitors as they set their sights on the retail footprint aimed at a more affluent covers more than 100 markets. other. population and engineered by cutting-edge And that’s not all. This mainstay of Bishop, chief architect of Brick Meets payment and fulfillment technologies. old-world retail has opened a new store Click, Barrington, Ill., believes Wal-Mart He envisioned a store in which customers prototype: Wal-Mart Pickup With Fuel. has laser focus on its digital foe, “but it’s not not only buy what’s in front of them, but In 4,000 square feet, Wal-Mart Pickup true the other way.” also can order items from AmazonFresh With Fuel allows customers to fill up Richard L. Brandt, author of “One Click: and Amazon.com via phone and in-store their cars, grab a coffee, snack or other Jeff Bezos and the Rise of Amazon.com,” touchscreens and have items delivered to convenience item, and retrieve their online doesn’t fully agree. He believes the trespass their homes, an Amazon Locker or another grocery order—filled online and fulfilled at of Wal-Mart and others into the digital nearby Amazon store. Amazon acquires online company Alexa, which profit of $35.3 million, cancels Block View booksellers Bookpages later becomes the name compared with a loss of in 2006.