Amazon is plotting physical stores in Germany, in response to Germans' preference for shopping in-store, Amazon’s chief there, Ralf Kleber, told German newspaper Berliner Morgenpost on Monday. Nothing official, though—the company hasn't announced store openings there, according to a spokesperson for Amazon in Germany. " At Amazon, we have always had a habit of not commenting on new products or services until they are useful to our customers, and we do not participate in speculation," according to an email to Retail Dive.
Between 90% and 95% of German retail sales are rung up in stores. Kleber pointed to the slow rollout of Amazon’s bookstores, rather than the dramatic acquisition of the Whole Foods grocery chain, as a likely way the e-commerce giant might roll out brick-and-mortar operations in Germany.
Kleber provided no official launch date for stores. However, he emphasized that German consumers are also increasingly turning to last-mile delivery, made possible, he said, by Amazon’s innovation around delivery modes (like drones, truck, car or bike) and processes (like ensuring the accuracy of addresses).
Quartz, in its report of the Berliner Morgenpost interview with Kleber, focused on his characterization of Germans’ preference for brick-and-mortar retail — but that’s not all that different from the picture in the U.S.
Despite its robust growth, e-commerce in the U.S. still only accounts for "well below 10% of the huge overall retail market," which has been growing at the "same healthy 4% [or so] annual rate we have seen over the last 30 years," according to retail analyst Nick Egelanian, president of retail development consultants SiteWorks International. Plus, "when shipping costs are fully allocated to the consumer some time in the future, we will see the rate of internet sales growth sharply decline," he said in an email to Retail Dive.
It's no wonder then that Amazon is focusing on expanding its brick-and-mortar footprint and conquering the last mile of delivery — here, in Germany and elsewhere.
"If you look at the statistics on consumer preferences, consumers actually like going to physical stores. There’s emotion that goes into a purchase, and they want to see an item, feel it, touch it," Sam Cinquegrani, CEO of digital commerce solutions firm ObjectWave, told Retail Dive last year. "If I were a retailer, especially a predominantly online retailer like Amazon, I would be concerned about that advantage. Given their success, you might think they wouldn’t be. But Amazon has always proven to be much smarter than everyone else, so it’s not surprising that they’d push into physical retail."
There is undeniable synergy between physical stores and online sales, with brick-and-mortar helping to boost e-commerce thanks to services like in-store pickup of online orders, as well as the marketing value of a physical location in a given area. That makes e-commerce and physical stores each just a sales channel — and consumers expect to find any retailer on both.
Plus, the expense of e-commerce also has yet to be well rationalized by most retailers. That includes Amazon, which burns billions of dollars a year in shipping costs but, unlike rivals, has a lucrative cloud services business that delivers huge profits. Meanwhile, its retail operation, even after 20 years, isn’t very profitable relative to its sales.