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Illustration: Rebecca Zisser/Axios

Amazon has reached staggering heights and revolutionized shopping in the U.S. and beyond, but CEO Jeff Bezos still sees a threat: the physical stores he has supposedly vanquished.

The big picture: For all the hoopla around e-commerce, physical stores continue to command some 90% of the retail pie in the U.S. — and will for at least another decade, experts predict. That has left Amazon and other online retailers preparing to set up their own physical stores, with the aim of capturing as much of the remaining pie as they can.

What's going on: Big chains have shuttered stores, but U.S. physical retail is alive and well.

By the numbers:

But the big players in both worlds are betting that the future of retail will be a hybrid of online and offline, pairing the perks of each model. Large Chinese retailers have been at this for years, and now Amazon is embracing the strategy too, opening its third Go store in Seattle earlier this month and planning 3,000 more by 2021.

"You don't get a full picture of your consumer if you're only online or offline."
— Alibaba spokesperson Brion Tingler

There is logic to the hybrid strategy. In a physical store, you can touch what you're about to buy and take it home right away. Online, you can order something delivered to your door with a single click.

  • New retail gives you some of both: it injects tech into physical stores, and gives online platforms brick-and-mortar homes.
  • Shoppers transition seamlessly between both experiences.

An example is the cashier-less corner store, like Amazon Go, where you grab your snacks and just walk out. Machine vision takes care of checkout.

  • Amazon has some competition in this space. Silicon Valley startup Standard Cognition has developed automated checkout and is working with four retailers to outfit their 70,000 U.S. stores with the tech, co-founder Michael Suswal tells Axios.

Reality check: Unmanned stores and smart checkout are already mainstream in China. JD.com has 20 unmanned stores, including one abroad in Indonesia. And Alibaba owns and operates 64 futuristic supermarkets. Both are also peddling the technology to over a million smaller shopkeepers in China.

The key advantage to brick-and-mortar stores is that they control shoppers' experience. And physical stores are leaning into this, thinking carefully about cool interior design or top-notch customer service to make the schlep to the store worth it.

  • Younger, digital-first brands moving into physical retail make sure their stores are Instagram-ready to attract millennials and Gen Zers.
  • Reformation, a women's clothing store, uses iPads so shoppers can build virtual shopping carts. Then, when they enter dressing rooms, the clothes they picked are waiting for them, in all the right sizes.
  • Neighborhood Goods, a startup with $6 million in venture capital money, is calling itself "the department store of the future." The store will have about 25 small brands — from sneakers to bedroom furniture to contact lenses — in the form of pop-ups within a big open space. In the middle, there'll be a restaurant.
"We're not trying replace Nordstrom's or Macy's. ... We're trying to emulate retail as it was 100 years ago. It's about an experience that has been specifically curated for where you are."
— Neighborhood Goods co-founder Matt Alexander

Amazon doesn't intend to be left in the dust. Thursday, it opened a store in New York City called "Amazon 4-star." The shop features goods with 4-star ratings or higher on the site, and swaps out the offerings based on what's trending locally.

Go deeper

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34 mins ago - Economy & Business

Biden's inflation danger

Illustration: Sarah Grillo/Axios

President-elect Joe Biden's $1.9 trillion stimulus proposal has economists and bullish market analysts revising their U.S. growth expectations higher, predicting a reflation of the economy in 2021 and possibly more booming returns for risk assets.

Yes, but: Others are warning that what's expected to be reflation could actually show up as inflation, a much less welcome phenomenon.

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CES was largely irrelevant this year

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Forced online by the pandemic and overshadowed by the attack on the Capitol, the 2021 edition of CES was mostly an afterthought as media's attention focused elsewhere.

Why it matters: The consumer electronics trade show is the cornerstone event for the Consumer Technology Association and Las Vegas has been the traditional early-January gathering place for the tech industry.

The FBI is tracing a digital trail to Capitol rioters

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Capitol rioters, eager to share proof of their efforts with other extremists online, have so far left a digital footprint of at least 140,000 images that is making it easier for federal law enforcement officials to capture and arrest them.

The big picture: Law enforcement's use of digital tracing isn't new, and has long been at the center of fierce battles over privacy and civil liberties. The Capitol siege is opening a fresh front in that debate.