Today, consumers have many options for shopping. They can shop at brick-and-mortar retail stores, they can shop online and receive home deliveries, or they can shop online and then pick up their purchases at a store, thus avoiding checkout lines. These options helped to generate just over $5 trillion in retail sales in the United States in 2017 and $605 billion in Canada in 2018.

Despite this volume of commerce, traditional brick-and-mortar retailers are closing stores. Over 9,000 retail stores in the United States and Canada closed during 2017 and over 11,000 closed in 2018. Retail stores such as Sears, Tevana, and Gymboree closed their doors in 2018.

These stores are failing because increasing numbers of consumers are shopping online. From 2000 until 2019, online retail sales increased from 1 percent of total retail sales to 13 percent in the United States and about 10 percent in Canada.

One of the main drivers of the rapid growth of e-commerce is Amazon (www.amazon.com). Founded in 1994, Amazon is the largest e-commerce retailer (e-tailer) in the world as measured by both total sales and market capitalization. The company's impact on the retail sector has been so significant that industry analysts have coined the term the Amazon Effect, which is the ongoing disruption of the retail marketplace, including both online and traditional brick-and-mortar retailers.

Of course, Amazon is not standing still. An estimated 50 percent of all U.S. households subscribe to Amazon Prime (100 million members), according to a report from Consumer Intelligence Research Partners (www.cirpllc.com). Furthermore, approximately 45 percent of all online retail sales come through Amazon. Let's examine several of Amazon's initiatives. Significantly, most of Amazon's recent moves involve the development of brick-and-mortar retail locations.

Despite Amazon's online retailing success, it has become clear over time that there is much shopping that people prefer to do in person. The most notable example is groceries. Therefore, August 2017, Amazon bought Whole Foods Market (www.wholefoodsmarket.com) for $13.4 billion. Whole Foods is a U.S. supermarket chain that features foods produced without artificial preservatives, colours, flavours, sweeteners, and hydrogenated fats. In August 2018, the chain had 470 physical locations in the United States, Canada, and the United Kingdom.

There is an important strategic reason behind Amazon's purchase of Whole Foods. Each Whole Foods store represents a prime urban and suburban retail presence and distribution hub for Amazon. Because Americans value consumer convenience extremely highly, Amazon is now in position to seriously enter the food-delivery business, thereby disrupting, for example, Blue Apron (www.blueapron.com), GrubHub (www.grubhub.com), and other companies in this space.

Following the acquisition, Amazon quickly began to implement changes at Whole Foods. Here are some examples:

The day that the acquisition was completed, prices of many Whole Foods products dropped, some by as much as 40 percent. Whole Foods announced that Amazon Prime will replace Whole Foods' current loyalty program. Amazon added more than 1,000 Whole Foods items to Amazon.com. Furthermore, Whole Foods goods also became available on AmazonFresh, Prime Pantry, and Prime Now. In August 2018, Amazon debuted its click-and-collect service at two Whole Foods locations. Customers had to have AmazonFresh memberships to participate in this service. AmazonFresh is Amazon's grocery delivery service, which costs Prime members an additional $14.99 per month. Amazon has been developing technology for automatically detecting when a customer pulls into the parking lot so their orders can be brought to them more quickly. Customers can also have their Amazon.com orders delivered to an Amazon locker inside certain Whole Foods stores until they want to pick them up. Customers can also use these lockers to return Amazon items. Amazon lockers provide customers with a self-service delivery location to pick up and return Amazon items. Amazon is developing physical stores, as you saw with the firm's purchase of Whole Foods. Although most of the attention has focused on Amazon's grocery store strategies, the company has several other experiments underway.

Amazon is exploring the idea of creating stores to sell furniture and home applications, which are the kinds of products that shoppers are reluctant to buy over the Internet sight unseen. The stores would serve as showcases where people could view the items in person and have them delivered to their homes. Amazon is considering the use of augmented reality (AR) and virtual reality (VR) in these stores. AR and VR would enable customers to see, for example, how couches and stoves would look in their homes.

Amazon is also considering an electronics store, similar to Apple's retail stores. These shops would emphasize Amazon devices and services such as the Echo smart home speaker and Prime Video stream service.

In January, 2017 Amazon opened a convenience store that does not need cashiers, called Amazon Go. The store uses a combination of sensors, cameras, and artificial intelligence to automatically detect the food items that shoppers remove from shelves, so they can leave the store without visiting a cashier. Amazon is expanding Amazon Go nationally.

Amazon does have competition in this space from San Francisco startup Zippin (www.getzippin.com). Furthermore, several companies such as AiFi (http://aifi.io), Aipoly (www.aipoly.com), and Trigo Vision (www.trigovision.com), are developing the technology needed to power cashierless stores.

Interestingly, in May 2018, Walmart ended its Scan & Go program, which was Walmart's attempt at cashierless checkout. The program allowed customers to scan their items with a smartphone app and skip the checkout line by paying their bill on the app and showing their digital receipt to a store greeter on the way out.

In addition to expanding its U.S. operations, Amazon is targeting India for new brick-and-mortar grocery stores. India is a vast market that remains dominated by traditional street bazaars, where shoppers go from stall to stall haggling over prices.

Amazon is also building brick-and-mortar bookstores. The company's flagship bookstore, Amazon Books in Seattle, Washington, opened in November 2015. By August 2018, Amazon had opened 14 bookstores.

Amazon has been moving into the food and beverage space. In June 2016, the company launched its own brand of coffee, called Happy Belly. This launch puts Amazon in direct competition with Starbucks. As of 2017, there were some 8,200 company-owned Starbucks stores and another 5,400 licensed stores (kiosks, and others).

In June 2017, Amazon announced a new program called Prime Wardrobe that allows customers to order clothing, from 3 to 15 items at a time, without actually buying it. Amazon will charge customers only for the items they keep. Customers can return the items that they do not want within seven days in a resealable box with the preprinted shipping label that the order came in. Prime Wardrobe will allow customers to try on more than 1 million items of clothing, accessories, and shoes from brands including Calvin Klein, Levi's, Adidas, Hugo Boss, and Lacoste.

Prime Wardrobe will be an option only for members of Amazon Prime. The service will enable Amazon to subtly discourage clothing returns. The company will take 10 percent off the purchase price of an order for customers who keep 3 to 4 items and 20 percent off for customers who keep 5 or more items. Amazon's service puts it in direct competition with Stitch Fix (see the opening case in Chapter 12).

In October 2017, apparel industry analysts announced that Amazon is entering the field of private-label sportswear. The online giant is buying small amounts of products from two Taiwanese activewear manufacturers as part of a trial. Makalot Industrial Company (www.makalot.com.tw) produces clothing for Gap, Uniqlo, and Kohl's, and Eclat Textile Company (www.eclat.com.tw) manufactures clothing for Nike, lululemon athletica, and Under Armour.

In June 2018, Amazon purchased PillPack, an online pharmacy that lets users buy medications in pre-made doses, for just under $1 billion. PillPack has a licence to operate in all 50 U.S. states. The firm's PharmacyOS is a platform that helps manage patient data and figure out how to balance medications together in safe doses for its customers.

Amazon's purchase emphasizes how the e-tailing giant hopes to have a larger role in health care, a $4 trillion sector in the U.S. economy. Amazon views health care as a key frontier in its bid to be the go-to place for anything a consumer might want or need in health care.

Discuss and analyze the reasons why Amazon is moving so decisively into traditional brick-and-mortar commerce. Do you think Amazon will "win" over Walmart? Support your answer. What are some additional courses of action that Amazon could adopt to further compete with Walmart?