Rumors abound that Amazon, the online retail behemoth, is ready to get physical with a pilot store in Seattle, its hometown. If it works, the concept will be rolled out. If not, hey, we're testing new ideas all the time...
But the strategic question is what the advantages might be. Apple's retail outlets now account for over a third of global sales. But Apple only sells its own products and a few related to it (low-priced iPhone covers, tote bags and the like). Amazon makes very little aside from its Kindle e-reader. So explaining how an Amazon store differentiates it from Sears is going to be a challenge.
Taxes and politics may supply part of the answer. The recession has wreaked havoc with malls and retail chains, causing hundreds of thousands of lost jobs. Those companies and the politicians beholden to them are beginning to question more seriously the tax advantage Amazon has enjoyed from the days when stimulating internet commerce was tantamount to supporting innovation. With revenues in the billions and ecommerce as common as McDonalds outlets, the reasoning behind that tax dodge looks shaky. Amazon's strategic imperative may be that to sustain its growth in the global marketplace having a physical presence could help build domestic support while assisting its entry into new markets.
But the larger question is what a retail strategy adds. Rumors suggest that its profit margins are under pressure due to the amount of investment required to keep the business growing. Stores must not only pay for themselves, but contribute rather than detract from the company's cash flow. Supporters think this will bolster its already strong global brand. Skeptics suspect this is an attempt to build up hard asset values before it caves in to reality and sells itself to a more well-endowed acquirer. JL
Jolie Odell reports in Venture Beat:
Amazon, long the king of online retail, might finally be ready to take on real-world retailers with a brick-and-mortar store.
The store, which has been confirmed by unnamed sources close to the process, is reportedly opening its doors in Seattle sometime in the next few months and most definitely before the end of the year.
The store, the sources tell Good E-Reader, would be a pilot. If successful it could lead to a chain of Amazon stores.
Rather than being a high-inventory big-box retailer on a Target or Walmart scale, the Amazon store is said to be planned as a boutique carrying high-end, high-profit-margin items as well as the brand’s Kindle line and accessories.
In a way, it would be a bit like the Apple stores one sees in every shopping mall these days, with a few big-ticket goodies in other verticals, as well.
The sources said Amazon would also be selling physical books at the stores.
We can see stores like this being popular additions to shopping centers, especially at airports, where bored and captive passengers would gladly throw down for a new book or a new book-reading, game-running gadget from a name they know.
Amazon recently reported lower than expected profits for Q4 2011, in spite of record high sales numbers for e-readers and tablets. The company’s Kindle Fire tablet, which was available for pre-order starting last September, has been the star of the show, selling as many as 6 million units in the final quarter of the year.
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