Think brick and mortar is dead? Guess again…
Amazon (NASDAQ: AMZN) has built its brand the one-stop shop behemoth digital marketplace. But it’s become increasingly clear that our favorite e-commerce company is also in need of a large physical presence. And this would serve to further knit customers into the Amazon ecosystem.
Last Wednesday, a deal was announced that Best Buy (NYSE: BBY) would be the exclusive in-store sellers of Amazon’s Fire TV Edition TVs. This deal indicates that Amazon has realized it can no longer achieve the scale that it wants without first having access to more brick-and-mortar establishments.
In a rare sit-down with a small group of reporters, Amazon CEO Jeff Bezos and Best Buy CEO Hubert Joly made the announcement at a Best Buy store in Bellevue, Washington.
This summer in the U.S., Best Buy will begin selling the high-definition and 4K Ultra HD Fire TV Edition TV models from Toshiba and Best Buy’s in-house brand, Insignia.
This deal will be extended to Canada later in the year.
Each television will be equipped with Amazon Fire TV. And users will be able to search for and watch broadcast TV. And they’ll be able to choose from a catalog of streaming TV shows and movies from Netflix, Prime Video, HBO, PlayStation Vue, Hulu, and other popular streaming sites.
The special release TVs will also include a voice-activated remote with Alexa, Amazon’s voice-enabled smart assistant. And they’ll be set up to pair with any Echo device, which will allow users to issue voice commands to their new television via Echo.
Bezos said he’s excited by the possibilities because a Fire TV-enabled TV gives consumers the convenience and simplicity that they want in the important smart TV segment.
He added: “The data is that it’s growing something like 70% year-over-year, so it’s also a natural place for us to partner together because it’s something customers are very interested in.”
Best Buy and Amazon have a long relationship that dates all the way back to the launch of the Kindle e-book reader.
Today, about 700 Best Buy stores feature an Alexa showcase table where shoppers can see how Alexa works, especially with smart home products, said Joly.
Joly added:
What’s new in this partnership is the depths of the physical integration between software and the hardware, between the two companies working together. The two companies are retailers but they’re also product companies.
Televisions have been moving away from external boxes and add-ons that provide access to content like cable TV and Amazon Prime Video. Instead, that functionality is being directly built into the television’s operating systems (OSs) and hardware.
To remain competitive in this ever-shifting market, Amazon needs to get its Fire TV OS into customers’ living rooms. Once the hardware is in the home, it’ll most likely stay there.
Amazon can use that to get consumers into using Alexa and whatever smart home gadget it comes up with next.
This latest deal with Best Buy shows how Amazon understands that it’s becoming a hardware company in addition to an online company.
Stephen Baker, vice president of consumer electronics at the NPD Group, says:
And to be a hardware company, you’ve got to play nice. Nobody can be successful at the scale Amazon wants to be at just selling their own stuff, you have to go to other partners. This shows they’re recognizing how important that is.
This move is only the latest example of how Amazon recognizes that many consumers still prefer to buy things like big, fancy TVs — not to mention organic kale — in physical stores.
“Amazon gets all this credit and buzz about how innovative and disruptive it is, but the fact is that until its acquisition of Whole Foods, it was a single channel operator. True scale is no longer achieved in a single channel,” said Carol Spieckerman, a retail analyst with Spieckerman Retail.
This is especially important for Fire TV because it hasn’t always been able to find its way.
But Amazon’s embrace of brick and mortar isn’t necessarily new.
The e-retailer has been working to increase its presence in the physical world. It’s opened 15 Amazon bookstores. And last year, it bought Whole Foods, which gave the company 479 physical grocery store locations.
Amazon has also partnered with department store Kohl’s to sell Amazon smart home products in its stores. Kohl’s now offers Amazon returns, too.
This deal with Best Buy “is an incremental move, a stitch in the tapestry that’s going to be necessary if Amazon is to realize its ambition of creating this massive, interconnected system for services, content and products,” said Spieckerman.
It’s also a nice gig for Best Buy, too. Six years ago, the consumer electronics company had been pretty much left for dead. It’s since bucked the retail shakeout by ramping up its e-commerce efforts, promising to match Amazon on price, and taking market share from competitors.
Best Buy shares rose almost 4% last Wednesday after the announcement, putting it up more than 10% so far this year.
This is a smart move for Amazon, too. In this current climate, the company has been getting a lot of heat for harming retailers.
The deal goes to show that Amazon’s not just a juggernaut that crushes everything in its path.
That’s all for now.
Until next time,
John Peterson
Pro Trader Today