E-commerce giant Amazon surprised the world last year when it announced it was taking a page from its old-school counterparts by opening a brick-and-mortar bookstore in Seattle. Now, questions are swirling about whether the company might take the concept beyond its hometown.
A report this week in the Wall Street Journal cited a remark from the chief executive of mall operator GGP as evidence of more ambitious brick-and-mortar plans from Amazon. The GGP executive, Sandeep Mathrani, told investors on an earnings conference call that Amazon’s “goal is to open, as I understand, 300 to 400 book stores.” However, it should be noted that it’s not clear what, if any, information Mathrani’s statement was based on. A GGP spokesman declined to comment or elaborate on it. Mathrani subsequently released a statement saying his remarks were “not intended to represent Amazon’s plans.”
Meanwhile, the New York Times reported that a source said Amazon indeed plans to expand its fleet of bookstores, but not nearly on the scale that Mathrani spoke of. Amazon declined to comment about its bookstore plans.
So, while it is unclear whether you’ll have an Amazon Books in your neighborhood sometime soon, it’s worth pondering a few questions about what a deeper foray into brick-and-mortar retailing could look like for the e-commerce giant, its rivals and for malls and shopping centers. (Amazon’s chief executive, Jeffrey P. Bezos, owns The Washington Post.)
Where might Amazon Books stores be located? For answers on this, it might be instructive to look at the location of Amazon’s first store: A walkable, outdoor shopping area in Seattle’s upscale University Village neighborhood. (Which, interestingly, doesn’t have much in common with the big fleet of enclosed malls that GGP operates.)
Jay Klug, a principal at Chevy Chase developer the JBG Cos., said Amazon already has a broker looking for spaces in the Washington area of around 5,000 square feet and that he wouldn’t be surprised to see the company open 10 or more stores here, partly to increase online sales in areas where Amazon already has customers.
He likened the strategy to that of Warby Parker, the eyeglass seller that is popular online which now also has two showrooms in Washington.
“I think they are trying to employ the same strategy as Warby Parker and others to drive more book sales,” Klug said. “What Amazon can do better than anyone else is they can look at the online sales data for an area and they can merchandise that store precisely for that market. Even if people are already customers, Amazon needs those people to remember to buy them again.”
Even though Amazon is relatively untested in physical retailing, experts said shopping centers would likely clamor to get the store as a tenant.
“If I’m a mall operator, I would be trying to get an Amazon store into my mall because it should drive traffic,” said Sean Whitehouse, a partner with retail consultancy Kurt Salmon. “Just the name Amazon, the interest would really pique.”
Is bookselling really the end game? Amazon was born as a bookseller, so it seems logical that it would leap into the uncharted waters of brick-and-mortar retailing with its most tried-and-true business category. But what is perhaps most interesting about a potential boomlet of Amazon stores is not how many books it could sell, but what other purposes the outposts might serve.
“I can see it becoming a destination location where they could add other things later,” said Randy Allen, a former Kmart executive and a senior lecturer at Cornell University who studies retailing.
For example, the shops could become a place where customers could retrieve “click-and-collect” orders, or a place where Prime members are able to return items that they bought online. (That may sound like only a small benefit, but being able to return an online purchase to a store is surprisingly important to shoppers.)
If legions of customers were to start using these locations this way, Amazon’might be able to rein in its growing shipping costs. Think about how much cheaper it is to pick up several customer returns from a single store than to pay for customers to ship them back to Amazon individually. And, similarly, it’s much more efficient to transport multiple orders from Amazon warehouses to a store than it is to get those same orders from warehouses directly to many different homes.
Also, in a moment when consumers increasingly bounce back and forth between brick-and-mortar and digital shopping, Amazon might employ its troves of customer data and technology expertise to innovate on the in-store experience.
“Think about them curating the products in their stores based on the buying habits of their customers in those areas,” said Anjee Solanki national director of retail services at Colliers International. “If they could they do that by every city or town, you can start to imagine why they would do this.”
In other words, stores could become a key bridge to supporting the way people shop these days.
“This is recognition that the future of retail — of which they could likely be the most dominant force — is multichannel,” said Scott Galloway, a professor who teaches marketing and branding at New York University.
Which retailers would be most threatened by this? Experts said mom-and-pop book sellers might not feel too much pain from this, as they often have an emotional connection to their customers. So that leaves Barnes & Noble, which has already taken a serious beating from Amazon in online sales, to feel the most direct hit. However, Barnes & Noble has lately been branching away from its core book business to lean more heavily on products such as toys, games, puzzles and stationery. So, the merchandise in the two stores might not be as directly comparable as you might imagine if you haven’t been in a Barnes & Noble in a few years.
Also, it’s worth noting that Amazon’s first store is only 7,400 square feet, about a quarter of the size of an average Barnes & Noble. So, if Amazon were to move forward with stores in a similar template, those stores would almost by definition have to carry a smaller assortment of items than a Barnes & Noble.
But experts caution that it’s short-sighted to see this as a threat only to a book chain. Amazon could over time add a selection of small electronics and wearables, or goods such as stationery and fine pens, and could slowly start to eat away at the business of other stores in the mall.