Amazon’s drive to control the book business is taking a surprising twist. Best known as a book store killer, Amazon is opening book stores around the country. Although the online giant isn’t opening hundreds of stores, as originally rumored, stores are starting to pop up in select cities and a dozen or more are in the planning stages, according to published reports.
The big question: Why? Amazon’s reason for existing is to make the online experience so seamless and efficient, it can deliver any product faster and cheaper than any store. Why bother with an old-fashioned brick-and-mortar operation?
Amazon doesn’t talk strategy, so it’s left to others to speculate. And once you start to scratch the surface, there are signs that physical stores may fit with Amazon’s larger online strategy.
On one level, the stores simply represent promotion and marketing for Amazon. And the retail operations, even if they are financial losers, cost pocket change for Amazon; they can afford it.
Although counter-intuitive, stores fit the big picture for Amazon. Many people misunderstand the company—Amazon is not a retailer, it’s a fulfillment company. Amazon is all about distribution, delivering products as quickly and efficiently as possible. A storefront, even if it serves only as a distribution center, can actually strengthen the network, providing that “last mile” link to the consumer. If nothing else, a store is a pick-up point for shoppers who buy online.
Amazon also recognizes that shoppers still like to hold and touch a product. The first Amazon store in Seattle provides an opportunity for shoppers to integrate with Amazon, as shoppers can quickly and easily use the Amazon site to learn more about the book and read reviews. The stores also feature sections promoting the Kindle reader and other Amazon products.
In many ways, it’s possible that Amazon can simply create a better retail environment. The Seattle store, Amazon’s first, offers a “highly curated” selection of books, notes Wharton School of Business management professor Daniel Raff in a recent article. All the books are displayed face-out, making for less inventory but better browsing, and all the prices reflect Amazon’s steep discounts, the type of pricing conventional book stores will never be able to offer.
Amazon might be looking at bigger goals, using the stores to better integrate customers into its “ecosystem,” Raff says. New technologies might enable Amazon to tap into data about its customers, providing another competitive advantage.
Of course, all the speculation might be wrong and Amazon might be simply trying to kill off its last remaining bricks and mortar retailers.
Wharton’s Web site hosted an interesting discussion of the issues. It can be found here.