Dispatches from the Digital Revolution
Recently, I’ve been seeing reports that Amazon will soon be opening physical stores. After reports of slipped net income at Amazon, the Financial Times posited that “the potential for increased sales and local marketing opportunities offered by a move into physical retail could be an attempt by Amazon to try and offset those losses.” I’m not convinced. If Amazon is trying to recoup losses, opening a physical store is the last thing it should do.
For one thing, Amazon has consistently sold its products at a very low margin or even at a loss to the company in order to gain market share. Where this could be an effective tactic for a company with no physical retail presence, it’s a dangerous business model for an actual store.
Somebody‘s got to pay the surly teenagers and Master’s grads to work the registers and know the merchandise. (Oh, and there’s rent, warehousing space, utilities, and collecting sales tax to think about, too.) Much of what brings customers to Amazon isn’t the product recommendations or the Gold Box deals—it’s the prices. While Amazon’s booming online business could theoretically support a store that does nothing but bleed money, it seems kind of boneheaded.
If competitive pricing won’t bring in customers, then would a huge selection do the trick? Maybe. But although some sources speculated that a physical Amazon store would be a sprawling big box store like Walmart or Target, Michael Koslowski of the Good E-Reader blog wrote, “They [Amazon] intend on going with the small boutique route with the main emphasis on books from their growing line of Amazon Exclusives and selling their e-readers and tablets.” In other words, they would imitate Apple’s success with Apple stores.
I guess only time will tell if that would be a wise move: opening an Amazon store, not to sell everything you can buy on Amazon, but to sell Amazon product. Personally, I suspect that Kindle doesn’t exactly have iPad’s cachet. And I’d be unlikely to go to a bookstore that only sold one publisher’s books.
The idea of a physical store kind of undoes everything that people like about Amazon: huge selection, no sales tax, one-stop shopping. And, oh yeah, not having to go farther than the nearest Internet device for any of it.