For years, Walmart and Amazon operated mainly in separate spheres - one a massive brick-and-mortar retailer, the other an online giant. But in the late 2010s, each began aggressively moving into the other's domain. To many in the technology industry, Amazon's chances of success in physical retail seemed high.
But as Walmart's DNA long blinded it from the right tactics to succeed in online retailing, so too has Amazon's DNA encumbered its efforts to penetrate brick-and-mortar retail. The following excerpt reveals how Amazon attempted to utilize its physical bookstores to bolster Amazon Prime and its other digital subscription services - in sometimes unethical ways.
Amazon seemed intent on building the Everything Retailer, and the flip-flop of where consumers were shopping made it seem crucial to its long-term ambition. Store sales were rebounding. E-commerce growth plateaued.
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That's why, at least on the surface, it was curious when Amazon announced in March 2022 a major retrenchment in physical retail: the closure of 68 of their physical stores that sold books, electronics, and other general merchandise in the US and UK and had been built as part of a seven-year experiment.
Among them were bookstores, under the name Amazon Books, which first opened to the public in 2015. The stores were designed to bring some of the benefits of shopping for books on Amazon.com into the real world, such as a book's customer rating.
They were also about - even more so, according to some former store employees - selling customers on Amazon gadgets such as Kindles and Alexa-powered Echo smart speakers and tablets.
On top of that, the stores were also used as a way to sign up customers to trials for subscription services, such as Amazon Prime and the audiobook service Audible.
Once the pandemic hit, and the bookstores reopened after a months-long shutdown, some store leaders urged store managers to increase the percentage of customers who agreed to sign up at checkout for a free trial of one of these services.
But this prodding took a shady turn in some cases.
Prior to the pandemic, store customers could view one of the free trial offers on a screen in front of them. But to reduce customers potentially spreading germs once the pandemic hit, bookstore cashiers were also given the ability to sign the customer up for a trial from their side, after explaining the offering and asking for permission from the customer.
However, employees who worked at some Amazon Books stores on the East Coast told me that their managers often automatically signed customers up for free subscription trials, such as the audio service Audible, without giving them the choice.
"They would tell them, 'This is your subscription. You can cancel it anytime,' instead of giving them the choice to hit 'No thank you,'" a former bookstore employee told me. "I don't think customers even realized it."
Many didn't, not until months later, when they would return to the store, befuddled or irate, to inquire why they were being charged for a subscription they didn't remember registering for.
In October 2020, Chris Garlock, an assistant manager in one of the Amazon Books stores, emailed a regional manager explaining that a former colleague had observed store employees accepting the free trial on behalf of a customer without getting their prior consent. Garlock had also looked up internal data that showed that some colleagues were signing up store customers for free trials at abnormally high rates compared to their previous performance and that of employees at other stores.
"A consistent pattern like this does real damage to a brand's reputation and business," he wrote. "But more to the point, it is unethical; to trick or defraud a person into receiving something they didn't choose is wrong and shouldn't be something we allow or condone at Amazon."
For several more months, though, internal data indicated that managers and sales staff at several stores were still signing up customers for free trials at abnormally high rates. Finally, in early 2021, store managers received a stern reminder of the right way to offer the free trials to customers.
"Good on them to do that," Garlock told me, "but this is something they should have done months prior."
Amazon spokesperson Jordan Deagle told me that there was no corporate mandate to increase sign-ups for free trials of Amazon subscriptions. In early 2019, after some Amazon Books customers complained about being signed up for free trials, division leaders reviewed training and explained to associates how to more clearly explain the terms and conditions of the subscription trials to customers, the spokesperson said.
But Deagle declined to comment on how or why such behavior was occurring well into the following year.
Managers were also known to offer on-the-spot discounts to unload Amazon devices to help hit internal goals for units sold. Rumors spread among staff in some stores that some managers even occasionally bought store merchandise themselves to boost sales, only to later return it.
"Digital subscriptions and device sales were much more important than any of the book sales," another former store associate said. "That's what our manager made sure we knew."
The e-commerce giant just couldn't break away from its digital DNA, even in a physical store setting.
Before Amazon announced the closures publicly, store leaders received a message instructing them to shutter their storefront at 1 p.m. local time that day.
As soon as the store was shuttered, they received a follow-up message with the bad news: all Amazon Books stores were closing at the end of April.
The announcement was made shortly after Amazon had hired a longtime retail executive, Tony Hoggett of UK supermarket giant Tesco, to take over the physical store operations. Though the decision to cut the Books stores, as well as a smaller chain called 4-star that sold general merchandise, was made before the new executive joined, there was little surprise inside some corners of Amazon that it happened nonetheless.
"It had very little clear direction of purpose, and no real differentiating factor," one corporate employee who worked in the store division told me.
From a financial perspective, the meager revenue generated from the stores served as a sore spot to those leading the much more crucial e-commerce business. In a way, the resentment was not all that different from what fueled the Walmart battles between e-commerce and store leaders, but reversed.
Amazon's drive to building the Everything Retailer had hit a pothole. A big one.
Adapted from WINNER SELLS ALL: Amazon, Walmart, and the Battle for Our Wallets, by Jason Del Rey. Copyright © 2023 by Jason Del Rey. Published by Harper Business/HarperCollins Publishers. Reprinted with permission.
Editor's note: On Wednesday, the Federal Trade Commission sued Amazon, alleging that the tech giant "knowingly duped millions of consumers" into signing up for Amazon Prime and made it difficult to cancel a membership. The suit was the result of an Insider investigation in early 2022. In an email Wednesday, an Amazon spokesperson told Insider's Eugene Kim that the FTC claims were false, adding, "The truth is that customers love Prime, and by design we make it clear and simple for customers to both sign up for or cancel their Prime membership." Read Insider's story for the full statement.