Amazon Stores: Books, Branding or the Future of Retail?

Photo credit: Yelp
Credit: Yelp

This past week there has been considerable discussion about Amazon potentially opening several hundred book stores in malls around the country. This was sparked by an article in the Wall Street Journal in which the CEO of mall operator General Growth Properties discussed these alleged plans.

GGP subsequently was forced to issue a short press release that said CEO Sandeep Mathrani was incorrect in his assertion about Amazon’s plans:

General Growth Properties, Inc. Chief Executive Officer Sandeep Mathrani has indicated that a statement he made concerning Amazon during GGP’s earnings conference call held on February 2, 2016, was not intended to represent Amazon’s plans.

Amazon opened a physical bookstore in Seattle last year. I’ve not visited but the store sells books and the Amazon device lineup including Echo. Amazon isn’t the first click purveyor to open stores; there are other e-tailers that have gone from clicks to bricks — notably eyewear retailer Warby Parker. And Google has long flirted with opening stores.

Internet Retailer is now reporting (according to a source) that Amazon is indeed planning to open more bookstores but in roughly 10 markets in the US (not 300), which haven’t been finalized. Re/Code reports that “books are just the beginning,” citing unnamed sources.

This makes sense; it makes almost no sense for Amazon to open a bunch of books-only stores unless those stores served other objectives beyond selling books. The Re/Code piece intriguingly suggests that these future stores will offer a true omnichannel experience and thus be models for the future of retailing:

[The Amazon] retail team’s mission is to reimagine what shopping in a physical store would be like if you merged the best of physical retail with the best of Amazon.

As expensive as they are retail stores are critical for branding and long-term success. Very few online only e-commerce sites are truly sustainable. This seems to run counter to the post-holiday narrative that argued clicks were surging while bricks were flailing. That analysis is superficial.

Ebay had a bad Q4, which is some evidence of what I’m saying. Most of the e-commerce action was at the online divisions of brick-and-mortar brands. Stores give consumers confidence to buy online, with the knowledge they can return items locally.

Amazon was the major pure e-commerce story (although Q4 disappointed). The site captured an amazing 34% of e-commerce visits in November and December last year. Yet the opportunity further develop brand strength and grow sales is there for Amazon. And physical stores are a key part of that potential growth.

Actual stores can serve a range of functions for the company: return/pick-up sites, product showcase and brand builder. Amazon can eventually sell a wide range of products (and services) through physical locations.

What’s also interesting is that Amazon is in a position to create model experiences that do represent the future of retailing. Following a disappointing holiday season, retailers are starting to panic, which may be good for innovation. But they have been slow to develop new customer experiences.

Awhile ago I had an interesting conversation with the folks at SmithMicro about how mobile should ideally be used in retail. Most of retail thinking about mobile has been fairly limited to date: store maps, coupons.

The idea should be to deliver better service and a better overall experience to the in-store customer. That’s how bricks will beat pure-clicks: service + experience. SmithMicro was calling it the “VIP experience.” Identifying when your best customers are in the store, for example, or personalizing experiences for in-store customers are powerful things that can be done on mobile, among others.

Most traditional retailers are not set up (organizationally or culturally) to bring these kinds of next-generation experiences to fruition. Amazon is, however. It will be interesting to see what the company rolls out.

Leave a Reply