Amazon Books, University Village, Seattle (Photo: Amazon.com)
Is Amazon planning a big bookstore rollout?
When Amazon.com came along in the 1990s, it changed the way Americans buy books. Countless small bookstores and chains found they couldn’t compete and closed their doors forever. Barnes & Noble is no longer the force it once was. So what does Amazon want to do now? According to Sandeep Mathrani, CEO of General Growth Properties (GGP), it wants to open bookstores — a lot of them.
According to a Wall Street Journal report, Mr. Mathrani said Amazon is looking to open between 300 and 400 stores in malls, presumably quite a few to be owned by GGP. The first Amazon Books store opened last November at University Village in Seattle.
If Mr. Mathrani is correct, it will lend credence to the 57 percent of RetailWire poll respondents who said they thought it was somewhat (31 percent) or very likely that Amazon would open a chain of stores over the next five years.
An Adweek article offered a number of reasons why it made “a ton of sense” for Amazon to open stores. Here’s a summary:
- Improved site selection based on location and purchase data. In short, Amazon’s online business will make it easier to pick the right place to open a shop.
- Real-time shopping stats will enable Amazon to more quickly address product mix, pricing and store design to optimize performance.
- Enhanced device sales as more consumers will have the opportunity to try before they buy.
- Attractive lease rates largely resulting from former brick and mortar rivals closing stores.
- Consumers want to shop in stores and online. Amazon is all about meeting the needs and wants of its customers.
Discussion Questions
Assuming Sandeep Mathrani is correct, why do you think Amazon has decided that now is the time to open hundreds of brick and mortar stores? What are the biggest challenges (internal and external) Amazon will face as it builds out stores?
Poll
BrainTrust
Dick Seesel
Principal, Retailing In Focus LLC
Cathy Hotka
Principal, Cathy Hotka & Associates
For those who have declared the brick-and-mortar store dead, this is convincing evidence to the contrary. Obviously Amazon sees an opportunity given its own dominance in the category and Barnes & Noble’s fading importance. At the same time, there is evidence that the appetite for “real” books (vs. e-books) is rebounding.
As an exercise in true omnichannel retail, let’s see how Amazon applies its mastery of pricing, assortments, logistics and data science (in a category that it understands very well) to a “real store.” From Amazon Books, who knows where this could lead?
I’m not sure why Amazon would take this step, but I know enough not to bet the farm against Jeff Bezos and company. Of the reasons listed above, the only one that makes sense to me is meeting the needs of its customers, otherwise, why take on the expense of brick-and-mortar space?
First, I have been predicting for years that Amazon should open physical stores although I was suggesting Times Square, Michigan Ave., Piccadilly Circus, etc., go big with great signage and brand building value. Secondly, if Amazon creates physical stores, they need to reinvent the experience and create an Amazon experience. A Barnes & Noble with a new name isn’t going to get it done.
I believe books may be the Trojan Horse for Amazon as it explores brick-and-mortar stores. Amazon can bring tremendous value with localization and personalization into its store environment. Connected consumer devices (smartphones, appliances, consumer electronics, security, IoT) will provide Amazon with a more embedded presence with consumers. The best way to sell these devices is to allow consumers to physically touch and feel these devices and learn how they (and Amazon) can make life better for them.
These stores will allow consumers to personalize and touch the Amazon brand allowing a deeper emotional attachment. It’s a perfect way for Amazon to establish a “customer for life” strategy leveraging endless aisle, IoT and their usage business models.
Adweek’s list in on the money. It makes ultimate sense for all those reasons listed. However, the difference between these stores and the traditional brick-and-mortar retailers is that they will be the tail, wagged by the big dog. They will be opened to enhance the online business for both Amazon and the customer. It will be a true blending of what we call omnichannel. I assure you there will be no silos in this operation.
The biggest challenge for Amazon is not to let the stores become independent from their online business in their operations and their thinking (thinking mostly). If they do, they become just like everyone else (Barnes & Noble included). If they don’t, they run away with share like they have done online.
In addition to what I said in Adweek, Amazon is in the enviable place of having troves of customer detail to know exactly where they should be and how much demand is there. I can’t think of any retailer or business out there able to capitalize on all their Big Data so well.
While of course all of that will come with a cost, I’m sure stockholders will continue to just look the other way.
By 2016 it is abundantly clear that customers don’t live in singularly physical or digital realms. Shopping cuts across all points of interactions with memorable experiences setting the bar for customer expectations. Amazon must move from selling goods and providing great customer service to selling experiences that transcend 20th century retail boundaries.
The idea of Amazon physical stores has been brewing for a while, Amazon is simply responding to consumer demands of a hybrid retail world that mimics how consumers live today. This will give Amazon customers more options while elevating expectations on physical store integration in the experiential value chain.
Challenges? Amazon will need to deal with a significant change to their cost structure and operations. Will each store have a “drone-pad?”
It is inevitable that Amazon will open up brick-and-mortar locations as they need and want to take advantage of the intimacy and theater of shopping. Today’s customers buy many products and not just the commodities traditionally sold by Amazon. They want to try, touch and feel the products using their five senses, not just see an image of what they may want to buy.
Brick-and-mortar retailers have leveraged CRM analytic data for over 40 years to site their store locations and Amazon certainly has that covered. What intrigues me more is the potential to leverage these locations as distribution points for same-day or shorter delivery time within a store radius.
To quote Mark Twain in relationship to the store: “The reports of my death are greatly exaggerated.”
I guess you can only live in the clouds for so long before reality sets in that says the vast majority of sales occur today (and will for a very long time) in good old fashioned brick-and-mortar stores. For all the noise created about online/mobile shopping, consumers are still spending their hard earned dollars in stores.
Sure, online is convenience on steroids, but the experience is lacking in most categories. The experience of browsing a store with real books and real people (both staff and customers) trumps the convenience of shopping online. Not for all consumers, but for most.
Amazon is smarter than your average bear, so I’d be prepared to bet a fair amount on the success of this venture.
Amazon has earned a reputation as the place for books, no matter how they are purchased. They have obviously read all the articles and predictions about the importance of omnichannel retailing. They are simply opening another channel.
No shock that I agree 100 percent with Adrian. My first thought was that they are now going to do with brick-and-mortar what they did online — use books as the gateway drug and hook people on the shopping experience. Then, and only then, they will start adding categories and and make people love their stores as much as they love their website and their app. Should be interesting!
I don’t assume he is correct. Opening Amazon bookstores makes it look more like Barnes & Noble than the shopping behemoth it has become. Amazon, now with one-hour and same-day delivery in many markets, is a terrific logistics operation. Plus, doesn’t opening a bookstore like Barnes & Noble dilute its current image? This sounds like a developer trying to prop up sagging real estate.
Admittedly bookstores hold a unique place in my mind. Perhaps because I remember the first time I entered Johnson’s book store in Springfield, MA. I was amazed at the number of books, pens, etc., the store had. Sadly it closed, as did our local Barnes & Noble last month.
Taking a child to a bookstore where they can see and touch actual books is a far different experience than sitting with them in front of a computer screen looking for books. So is the experience of reading a physical book different than doing so on a tablet, etc.
My ode to books and bookstores is my way of saying I hope Amazon succeeds in opening physical stores in malls. It will allow more people to have the experience of selecting books by picking them up and actually looking at them rather than seeing images on the screen. Hopefully this will encourage more people to read.
I will give you a different angle: Amazon and Jeff are seeing that store-based retailers are coming at them and one thing that they have that Amazon does not have is STORES. So Jeff and the gang have decided to first milk the press rumors about stores and then open stores only when top retailers are closing or trimming off slower growth stores and selling real estate. But first, Jeff said we need to make sure that people see retailers are closing stores, then we open and look more hip (my guess at what he said — not a quote).
If it gains press and attention then Amazon will do it.
Amazon must realize how critical brick-and-mortar has been for their success. For example, quite often the consumables that consumers buy on Amazon come after they buy sample supplies in brick-and-mortar. Physical stores are the most powerful mover in the overall consumer goods channel.
I also wonder if Amazon is fighting to maintain growth in certain business like books and music. I would postulate that they have run into a wall where growth is too slow in those categories without stores. But since those numbers are very hard to track down we don’t know right now for certain.
Isn’t calling what Amazon is apparently opening “bookstores” like still thinking that Amazon is just a bookseller?
These are points of distribution that will undoubtedly be more purposeful than simply selling books. No doubt. Amazon should never be underestimated.
There is compelling evidence that shoppers still like the brick-and-mortar experience. Especially in book stores. And the word “experience” is an important part of it. I’m sure that Amazon won’t open all the stores at once. They will test — and then test some more.
One thing that we must remember is that Amazon is always pushing the envelope. While they don’t like to lose, profit is not always their motive.
The University Village store here in Seattle is well done although not perfect. On the plus side, it’s an attractive store and they have done a great job with the visual merchandising strategy of having all titles face out. On the other hand, there are some puzzling gaps in the assortment and the price lookup process places an odd burden on the consumer. I’m sure they are using this first store as a test-and-learn environment.
If Mr. Mathrani is correct then this isn’t just about books. Amazon has growth plans for the Kindle and Alexa business and probably has additional devices in its product pipeline. A well-designed bookstore may just be the backdrop for their real agenda which is to present their proprietary device line to consumers on their own terms.
Amazon must sense a demand from its customers to take on the challenges of opening a brick-and-mortar bookstore and they probably have a secret — customers who shop multiple channels spend more!
Guessing these stores will also have lockers for online goods delivered to a store, driving traffic.
I find it ironic that Amazon was at least partially responsible for many of the bookstore closures. And now they want to open as many as they closed. If this is what they want to do, they will be successful. One thing is certain, never ever bet against Amazon.
We’ve seen solid brands like Borders go out of business. Another big one, Barnes & Noble, is tightening by closing stores (including one a mile from me on Dec. 31 2015 which makes me very unhappy.) We’re usually told these chains cannot compete with Amazon’s massive online selections and that the rapid rise in popularity of e-readers has lessened the need for brick and mortar bookstores which are very costly to maintain and stock and to staff with knowledgeable booksellers.
I try never to second guess Amazon because they seem to be ahead of the curve so much of the time. But their opening physical bookstores at this time does not sound like a winner to me.
First off, hundreds of stores can add value to Amazon’s fulfillment process. Using their analytics and science to place the stores in just the right location will indeed help them get product closer to the customer if only for online fulfillment.
Book stores? I know that consumers are swinging back to real books again, however, how big is that market? I don’t know the answer to that so I am simply asking the question.
I say thumbs up to the stores and let’s wait and see on the book part of it.
For my 2 cents.
I’m guessing that each of these stores will lose money … but will further advance the storyline that Amazon will be one of the world’s universal retailers.
You have to wonder how much money Amazon will make by selling the sales information from each location….
Amazon has plans to open book stores, I think, because their market share has slowed or stopped growing. Many people simply don’t like e-books. They only buy paper books. To grow market share and sales they must offer paper books locally as not everyone has internet access, can, or will buy over the internet.
The challenge for Amazon book stores is to sell merchandise at the same price as e-books. Their competitive advantage of downloading an e-book or shipping a book from a specialized warehouse will not be competing with a store. This is why their competition went out of business. So now paying rent, paying sales associates and holding store inventory will increase their cost of delivery. Amazon book stores will be another not-for-profit Amazon business.
If opened in select markets and near Barnes & Noble outlets, this will probably be the final knockout blow to the Barnes & Noble chain. Amazon sees depressed rents and wants to pick up choice real estate locations to expand their footprint. Brick and click and name recognition will aid in this endeavor
Economically the only way this makes sense is as Apple-type technology stores. And in fact that is the PRIMARY focus of their first store in Seattle, not books. The center of the store is all about technology.
The other thing that might fly is the large children’s section. For young kids there is nothing quite like the touch and feel of real books, with real-imaginary characters on the covers.
The third function is simply mind-share, that Amazon is now a part of OUR community, not just helicoptering in with packages. In dense populations, the brand value of presence may justify these stores.
In an increasingly digital world, imagine the value of having a platform to display “samples” of products that you can take with you or have delivered to your door later that same day. A network of stores provides this platform. No need to stock a large inventory or every size and color, simply provide a physical sample of products consumers would like to touch and feel before buying. Start with books and expand to other products. What concessions would manufactures offer to have their products displayed this way? Maximize the revenue/square foot and keep the store fresh by rotating new and interesting products through the store.
Here’s what I said a year ago, when the 34th Street location was bandied about.
1. Amazon is Data driven and Customer Centric
2. Laboratory
3. Sell Fire
This is fallacious logic and poor reasoning. Amazon is all about not having brick and mortar stores. This is the crux of their retail model and I don’t see them abandoning this at this point of their growth as a corporation. Amazon is focused on the Internet and how they present products to consumers in the marketplace, not about traditional retailing, and all of the baggage which comes along with it.
We have an expression about store opening announcements: the higher the number, the higher the degree of BS. And this number seems pretty high. If they would’ve said 100, it’d be much more believable.
Having said that, I’ve always felt like Amazon was saying, “Hey bookstores, here’s how you do it today.” So, would they be successful with 100 stores? Given the track record, I’d have to vote yes.
Looks to me like Amazon is moving into brick and mortar to establish a hyper local presence in select communities and I’d bet that machine learning and AI assisted in determining this O2O shift.
Coupled with shopper feedback from the Seattle storefront, I can see quite a masterful plan here. Amazon can roll-out stores on a timeline that works with the adaption rate of shoppers, to make sure it is successful. And honestly, who wouldn’t lease to Amazon?
I want to see Amazon physical stores expand beyond the walls of brick and mortar, though. I love that Amazon calls itself a “store without walls” and it would be awesome to do, say, Amazon book trucks that visit urban and rural areas, for instance.
Amazon has the data needed to pull this off. The company has a very good idea of what shoppers want and how much they’ll pay for it, but they previously lacked in-person customer service and didn’t provide a physical experience of products.
Amazon saw the success other retailers have had with pop up shops and it’s clear that their Seattle store exceeded goals. It seemed like an odd move last fall and at the time of that announcement, I don’t think many people would have believed that hundreds of more stores would be coming so soon.
Opening more stores shows the importance of omnichannel retail. As many big box retailers are closing numerous stores, it’s so interesting that Amazon is doing the opposite. They’re clearly on to something here.
Amazon’s decision to open physical stores may be the best proof point to date that brick and mortar retail isn’t dying. That said, the company is sure to face some challenges as they enter more traditional retail territory.
For one, they’ll have the unique brand challenge of ensuring that the in-store experience across 400 distributed stores is consistent with the online brand experience Amazon customers know and love.
Second, the Amazon brand is built around speed and customer service, but brick and mortar agility requires a very different approach. Brand, process, and experience consistency relies on a distributed team that has to be hired, retained, and continually aligned and trained.
Retailers have historically made very little technology investment in that area, so it will be interesting to see how Amazon applies its technology to innovate and manage the physical store experience.
I think there are myriad reasons for why Amazon is venturing into brick and mortar now. Amazon has a successful e-commerce blueprint they can follow for their physical stores.
A company like Amazon has used data collection and analysis for several decades to better serve their end users online. This trend is sure to continue by embracing the latest data collection and analysis trends for physical retail locations.
Another reason to expand into brick and mortar now is to provide additional fulfillment channels. Amazon’s largest expense must be shipping. By opening physical locations, they immediately have mini fulfillment centers that should help Amazon save on shipping costs as their Prime membership numbers grow.
In regard to challenges, square footage constraints and inventory management are a couple of issues that could stand in their way. For a brand that has become a source for consumers to purchase everything from toothpaste to furniture, it might take some readjusting to determine which titles should ultimately make it to brick and mortar.
Experiment with stores? Yes. Open hundreds? Not unless the experiment works. Instead, I envision Amazon address omnichannel retail in new and innovative ways (kiosks, mobile, etc.). My prediction for Amazon’s investment in malls would be short-term, pop-ups only; not full-blown storefronts.