Rumor Mill: The Amazon Store is Coming

Discussion
Feb 09, 2012

Okay, I get it, but then again I don’t.

A report last weekend by Good EReader said that Amazon, similar to its Quidsi division, was tinkering with the idea of opening a small store in Seattle to show off items such as its various Kindle models and a widely anticipated Android smartphone line. The idea is that Amazon is taking a page from Apple and will open locations for people who need to touch and experience products in the real world before buying. Makes sense on a certain level.

What I don’t get is why Amazon would add a cost structure that could undercut one of its major advantages over other retailers — namely that avoiding stores has allowed the company to lower overhead and therefore offer better prices at pretty much every turn.

Just recently on RetailWire, a discussion centered on Target’s request to suppliers to help it come up with exclusive products and other means to battle "showrooming," whereby consumers use mobile apps to check prices and shop at Amazon and other online merchants.

Interestingly, a piece on the Wired website suggested an alternative approach; Amazon should open a store-within-a-store as a sort of hedge. If the test proved popular and added incremental volume, then Amazon could look at launching its own standalone locations.

The same Wired article also pointed to a previous rumor that Amazon would open a store, but rather than a boutique, a warehouse style facility.

Discussion Questions: Do you think it makes sense for Amazon to open physical stores? If yes, what form do you think they should take?

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24 Comments on "Rumor Mill: The Amazon Store is Coming"


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Joan Treistman
Guest
7 years 2 months ago

I think it makes good sense to allow people the feel-touch opportunity that can often close sales and allow some up selling at the same time. With the current state of the real estate market, I will guess that Amazon will get some good deals and long-term leases that will insure maximum profitability for this initiative. Realtors will recognize that empty stores don’t generate revenue, and that Amazon may attract more customers for its retail neighbors who need the business.

Verlin Youd
Guest
7 years 2 months ago
It is no secret in retail that it is critical to stay connected to your customers. Likewise, every successful retailer knows that today’s customers — and I would argue yesterday’s as well — seldom if ever limit themselves to one channel when purchasing a product or service. Opening a physical store, even if not profitable on a standalone basis, will give Amazon incremental customer intelligence that can be used to continue to drive their value proposition. A physical store will give Amazon a chance to determine if there are customer segments that they aren’t serving with their web-only presence, a feel for how customers physically interact with their products during the decision process, and will allow them to test things that could apply to a web-only business but are easier to test and evaluate in a physical setting. Finally, if Amazon wishes to remain relevant and continue to grow, they need to have their fingers on the pulse of physical store retailing, especially as a majority of their competition has both physical and online presence… Read more »
Max Goldberg
Guest
7 years 2 months ago

The rumor of Amazon opening a retail store has been around since 2009. A few months ago Jason Calacanis, a successful serial entrepreneur, wrote about Amazon opening a store to allow consumers to have a hands-on experience with products, but no physical merchandise. Consumers would visit the showroom, test the products, order using their Amazon credit card and have it on their doorstep within 24-48 hours.

Amazon has successfully blown up a number of business models in the past. There is reason to expect them to do the same with retail.

Mark Heckman
Guest
7 years 2 months ago

Opening a bricks and mortar store for Amazon has much more downside than up, in my view. Clearly Amazon has carved out a very nice business model by eliminating store costs. While adding stores may help propagate their brand, it could very well jeopardize their cost structure.

Kiosks and stores-within-a-store might be worth pursuing with the right retail partners, given the lower operational costs compared to having their own buildings. Testing this model should be relatively easy to do.

But if I were counseling them, I would tell them to stay digital, keep operational costs as low as possible and leave the headaches of running stores to those that have already conquered that model.

Tony Orlando
Guest
7 years 2 months ago

Welcome to the world of retail, Amazon. Come on in and enjoy what you have been missing. After about a year, they’ll be running back to their bat cave wondering why the hell they ventured into the B & M business. I don’t see the need, as most folks recognize Amazon for what is is now.

Ian Percy
Guest
7 years 2 months ago

Can you spell E-G-O? Amazon won’t be able to resist. Having a zillion people go to your site from the privacy of their own home is one thing, but it’s just a number. No one actually “sees” it. Driving down a trendy street in your Bentley looking at people wearing Amazon gear lined up to get into your store is another whole exhilaration. Everybody can see that!

I say ‘go for it’! Let the Amazon tribe have a place to meet!

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
7 years 2 months ago
Amazon has been extremely successful building its brand without a store. What I find interesting and what current Brick & Mortar stores should be paying attention to is Amazon sees the B&M model as a possible threat/opportunity. B&M can be a huge differentiator if done right. Apple dominated the field with a whopping $5,626 per square foot of retail space. Amazon understands that excellent, in-person customer service, holding the item to purchase, and a unique shopping environment can greatly influence a consumer, and they want in. My hope is that Best Buy and other retailers that have been competing feverishly with Amazon learn from this, and realize how important B&M stores can be for a retailer. What should these retailers do? Continue to hire and train the best employees. Optimize inventory and assortment and finally, modify the size of stores. Take a note from Apple’s play book. A small store, limited SKUs with outstanding employees and a unique shopping environment equals over $5,600 per square foot of retail space. Not bad.
J. Peter Deeb
Guest
7 years 2 months ago

Amazon should definitely test the waters with bricks and mortar locations. The testing should include the possible expansion models that would follow. The idea of a store where you can try out and take possession of Kindles, phones, etc, could be married with the ability to access the Amazon site in-store and order online from their vast stores of merchandise.

There are still people who like the personal touch and the ability to order online in the store. Talbot’s comes to mind as a store where you can buy apparel in-store and order online from the store if your size or color is not available.

Bill Emerson
Guest
Bill Emerson
7 years 2 months ago

Not to belabor the obvious, but Apple and Amazon are two different brands.

Apple stores extend a tightly integrated group of products and capabilities into an environment that reinforces the brand (Think Different).

At Amazon, the products themselves are almost secondary. The brand’s strengths are access to what increasingly seems like every product on the planet, ease of shopping, and efficient delivery. How do you represent this assortment in 4 walls? More importantly, why would you try?

My guess is that this will be short-lived. Then again, everybody thought Apple was crazy to open stores. That worked out pretty well.

Ed Dunn
Guest
7 years 2 months ago

Amazon customers do not need to touch and feel at a brick and mortar location, they bought online for over 15 years based on specs and information.

I do not see any AMZN shareholder benefit to creating a brick and mortar location.

Dan Raftery
Guest
7 years 2 months ago

I’m with Wired magazine on this one. The function and purpose of a store-in-store may not be figured out yet, so that both entities benefit. But there has to be a design or two on big retail drawing boards. If not, there should be. Who will be the first major chain retailer to let Amazon into their bed?

Roger Saunders
Guest
7 years 2 months ago

The consumer has many ways to shop. Online happens to be the fastest growing channel over the past several years.

However, human beings still have a penchant and interest in “going to the shopping bazaar for many items … we’re tribal.

How Amazon dodges the tax man on this one is a tribal custom that they will have to answer for.

Tim Smith
Guest
7 years 2 months ago

The beauty of Amazon is that you can shop so many categories; they would likely disappoint too many of their customers. If they want to improve, then cut the lag time from when you place an order to when the supplier actually ships. I quit ordering from them except for really hard-to-find stuff because the expedited shipping — wasn’t.

David Lummis
Guest
David Lummis
7 years 2 months ago

With B&N et al boycotting Amazon-published books, it absolutely makes sense. What goes around, comes around.

Kai Clarke
Guest
7 years 2 months ago

No, no, no. Amazon has built its model around the cutting edge technologies and feedback of the Internet. Brick and mortar stores are more expensive, provide no true presence, and offer no advantage to Amazon’s successful model. Amazon needs to focus on its winning Internet model!

Carol Spieckerman
Guest
7 years 2 months ago

About three years ago, we predicted that Amazon would open stores or form an alliance with a large-scale retailer. Who would have thought they would take on both in a relatively short period of time (owned stores and Amazon’s 7-Eleven site-to-store beta)?

Both make perfect sense as site-to-store scale-builders and owned stores have as much (more?) in common with Walmart’s holiday Walmart.com stores than with Apple retail. The new formula is, sell high-margin, grab-and-go accessories and gadgets in physical stores that can facilitate online orders for lower margin space hogs.

I’ll say it again, scale has been redefined. One channel doesn’t cut it.

Craig Sundstrom
Guest
7 years 2 months ago

Curiously, no one has mentioned what seems like the biggest “no” reason of all: they would give up their de facto sales tax exemption in any state they open in. Now perhaps they are only planning stores in states where that is already true, or perhaps — as here in Oakland, where the A’s every move is seen as evidence that a new stadium is just around-the-corner — it can be seen as evidence they feel the free-ride is about to end soon, anyway.

Mark Burr
Guest
7 years 2 months ago

Yes. They should open them soon, if not sooner. They should be warm cozy places. They should have soothing colors. They should have comfortable chairs and leather sofas. There should be an aroma of coffee in the air. There should be a sound of a latte’ steaming in the background. Off to the side there could be a small selection of their best items.

Was I just there this morning? Yes, indeed I was and to my surprise, there was a Starbucks logo on the front of the building. And there were at least six people with open laptops and and amazon.com on the screen.

I think they already have physical stores. They have them in all different shapes and sizes of buildings. Some even look like homes. They exist anywhere there is internet access.

Do they need something beyond that? No.

Matthew Keylock
Guest
Matthew Keylock
7 years 2 months ago

Will it be a store or a showroom? They’ve benefited from other retailers actiing as their showroom, but they don’t showcase Amazon’s own products and services.

I imagine they would have a number of ideas that it is worth investigating on this small scale.

Herb Sorensen
Guest
7 years 2 months ago
There is just as much reason for Amazon to open bricks stores as for bricks stores to have e-commerce. I’ve been writing about the Convergence of Online, Mobile and Bricks (COMB) retailing for some time. Of course bricks has some added capital and management costs, but I personally believe bricks stores are here to stay, permanently, for a lot of reasons I’m not going into now. It is more important to focus on the fact that Amazon is the preeminent SELLING organization in the world, while Walmart is the preeminent logistics organization in the world. Bricks retailing is dominated by logistics considerations. But Amazon is no slouch when it comes to logistics, either. Several years ago I regularly did presentations on “The Amazonification of Walmart,” speaking only to their individual strengths, and the need for Walmart and their bricks relatives to get a clue about selling. Mostly, they haven’t, since their logistic brains dominate their organizations from top to bottom. I’m going to quote here from “One Click,” the recent book about Amazon and Bezos:… Read more »
Christopher Krywulak
Guest
Christopher Krywulak
7 years 2 months ago

It makes sense for Amazon to open a physical store, for the same reasons it made sense for eBay to install a pop-up store in London, for PayPal to open one up in NYC, or for Android to open one in Sydney. Whether or not consumers walk out the door with a purchase, the brand is getting in-person exposure; people become more comfortable dealing with the e-commerce provider and relationships are built. Particular to Amazon’s case, the Kindle Fire is getting hands-on exposure — showing consumers the wealth of Amazon content available at their fingertips. To quote Doug Stephens, “The store IS the ad.”

Jerry Gelsomino
Guest
7 years 2 months ago

If I were Amazon, I’d be most anxious to open a physical store as an R&D effort to learn directly about consumers’ browsing and shopping habits! Warehouse, full-line, and convenience stores all make sense.

Bill Hanifin
Guest
7 years 2 months ago

Amazon should resist the temptation to open physical stores, even “store within a store” as Target has allowed to happen lately. I question which big box or multi-department retailer would be willing to showcase Amazon as they are all in a competitive death match with Amazon.

Consumers don’t need to see a physical Amazon presence and Amazon could risk its sales tax advantage should it open physical stores.

Taken together, I think the choice is clear.

Tim Callan
Guest
Tim Callan
7 years 1 month ago
It’s pretty clear that the e-reader market is going to transform pleasure reading in a fundamental way and that whoever owns the reader has a massive advantage in this new book marketplace. And suddenly Amazon’s virtual-only advantage becomes a disadvantage. Apple and Barnes & Noble are out there putting their e-readers in stores where people can hold them and play with them. That’s the fundamental strategy behind Apple stores with all the company’s products, and Apple stores outperform any other retailer on a profit per square foot basis by a factor of two to one. And Barnes & Noble gives big air time to Nook, putting the Nook store in the best place in the store. Even the Android tablet gets a lot of attention in the thousands of Verizon and AT&T stores across the nation and similar treatment from other carriers in other markets worldwide. These examples show Amazon the power of brick-and-mortar retail in winning that e-reader computing platform which will keep earning and earning for years to come. I believe with the… Read more »
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