As Amazon reportedly prepares to buy RadioShack stores, Retail Week examines whether this is the end of pure-play etailing.

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Rumours are circulating that Amazon is in talks to acquire a number of RadioShack’s stores in the US in order to showcase its hardware products. The etail giant is considering some of the troubled electrical chain’s 4,000 stores to display products, as well as for potential collection and drop-off locations.

Does this mean other pure-plays will have to leave their online safety net?

“The irony of the situation is that Amazon has reached a point where it needs physical locations to grow online sales - which sounds counter-intuitive,” says Natalie Berg, director of retail insights at Planet Retail.

She says that while Amazon is very good at selling products at good prices online, it has had difficulties selling hardware - a key area of growth, especially if it is to compete with retailers such as Apple.

“While the Kindle has been successful, [Amazon’s] smartphone has gone less smoothly,” she said. “Having physical locations helps it better connect with customers, but also gives customers more choice for fulfilment.”

Berg points to the Argos model in the UK and believes Amazon would be smart to adopt something similar, such as click-and-collect from physical stores.

And the etail giant has already dipped its toe into the water, following the success of its click-and-collect lockers which are becoming increasingly common. This week, Amazon announced partnerships with three US universities to provide on-campus staffed pick-up locations where students can collect and return goods.

Last October Amazon offered a similar service in New York where customers could pick up and return orders.

Retailers need bricks and clicks

Miya Knights, senior research analyst at IDC, says Amazon’s acquisition of physical stores is inevitable in a mature ecommerce environment because retailers realise they can’t survive with just a bricks-and-mortar or online-only presence anymore.

Knights says it is difficult, particularly in the US, for Amazon to offer speedy delivery to customers if its warehouses are 200 miles away from the end destination.

She suggests buying up some bricks-and-mortar locations could help with this geographical distribution problem. “And if you’re going down that road anyway, some of that floor space is transactional so you can sell in it,” she adds.

Rupal Karia, Fujitsu’s managing director of retail and hospitality in UK and Ireland, agrees that the move doesn’t come as a surprise. He says: “Amazon’s move into bricks-and-mortar stores highlights the importance of the high street – even for online businesses.

“Though the retail landscape has never been more digital or mobile, this move allows customers to have more options when it comes to their shopping experience, giving them the choice to either shop online, click-and-collect or pay through different channels.”

Showrooming

The shift from digital to physical proves that customers still want to touch and feel their products. In effect, Amazon will be showrooming its range to consumers.

Knights concludes: “No matter how big a brand Amazon is going to grow to, it was always going to feel the slight knock-on effect of not having a physical presence where people can touch the product.”

Martin Gill, vice-president and principal analyst at Forrester, says: “While other retailers have tried to blend the digital and physical experience with mixed success, Amazon is likely to get this right. By 2018, we expect web-impacted retail to account for 59% of all retail sales - so building coherent, end-to-end customer journeys that naturally lead consumers from digital research to physical purchase via tools like mobile is a natural step.”

But Gill warns that Amazon needs to realise that operating in a physical retail environment is a different beast from a purely digital offer, “so their choice of leadership candidate for their store build out will be a critical one”.