Home World Business Online giant Amazon sees ‘exciting’ future for its bricks and mortar stores

Online giant Amazon sees ‘exciting’ future for its bricks and mortar stores

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Amazon has been blamed for the demise of countless bricks and mortar stores, but the world’s biggest online retailer says its own physical stores – including its high-tech grocery store – have an exciting future.

“For us, [bricks and mortar] is another way to reach the customer and test what resonates with them and we are pleased with the results,” Brian Olsavsky, Amazon’s finance chief, told analysts at the company’s quarterly result on Friday morning Australian time.

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Amazon is coming to Australia

The US online retail behemoth confirmed Thursday it will establish the first of many fulfillment centres in Australia, in a move that’s sure to disrupt the local market.

Amazon shares jumped 1 per cent on the result, taking its year-to-date gain to 22.5 per cent and valuing the company at $US438.9 billion.

Amazon recently confirmed it was aggressively expanding in Australia, paving the way for it to offer a huge range of products including groceries and takeaway meals. Fairfax Media broke the news of the US company’s plans in 2016.

Amazon also caused waves in February by revealing Amazon Go – a convenience store without checkouts, that electronically tags each product and bills a shopper for their purchases through their smartphone when they exit. 

Amazon is understood to have yet to commit to opening bricks and mortar grocery stores in Australia.

Speaking on the analyst conference call, Mr Olsavsky said Amazon was pleased by the performance of its existing physical stores: six bookstores (soon to be 12), pop-up stores, college pickup points, and an Amazon Go testing site in Seattle. 

“Amazon Go is in beta in Seattle, and while that’s not large and only one site, we’re excited by the potential there and the use of the technologies of computer vision, sensor fusion and deep learning,” he said. “We think that has a lot of potential.”

In Seattle Amazon is testing a new store concept – Amazon Go – that lets customers walk in, take what they need, and ... In Seattle Amazon is testing a new store concept – Amazon Go – that lets customers walk in, take what they need, and walk out without seeing a register, queue or staff member.  Photo: David Ryder

Amazon has been pouring big money into its international expansion, particularly in India, and did not mention Australia on the call.

Amazon’s capital expenditure surged 51 per cent year on year, primarily due to investment in fulfilment centres, or large warehouses. 

International sales accounted for 32 per cent of Amazon’s first-quarter sales. International sales were up 16 per cent year-on-year, but continued to be unprofitable. 

Amazon operates its online grocery delivery service Amazon Fresh in 21 cities in the US as well as London and Tokyo, where it launched the service this month.

Mr Olsavsky said Amazon’s approach to international investment depended on the country’s retail, online and foreign investment environment as well as its “management bandwidth.”

In India, Amazon started from scratch. It bought businesses in the Middle East and China.

“We pick our spots carefully,” he said. “There’s a lot going on with international.”

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