Amazon’s brick-and-mortar venture

Amazon are rumoured to be opening a brick-and-mortar store, right in the heart of New York City. This undoubtedly eyebrow raising step from the multi-billion dollar online giant is somewhat difficult to comprehend, given that they are often accused of diminishing sales in high street stores, who struggle to compete with their heavily discounted prices. However, Jeff Bezos has his reasons and upon closer inspection, they appear surprisingly solid.

Famed for selling everything from children’s toys to garden sheds, opening a physical store seems rather illogical. But is it? Home Retail Group, Britain’s largest household goods retailer, are already proving that merging physical with digital can be lucrative, by reinventing Argos from a catalogue firm to a digitally-led business, targeting higher sales from tablet computers and mobile phones and hoping to cash in on easy collection from its 734 stores. In April of this year, the company said underlying pretax profit for the year to March 1 rose to 115.4 million pounds ($194.4 million), slightly ahead of analyst forecasts averaging 112 million, on total sales up 3 percent to 5.7 billion.

Undoubtedly these impressive results will have influenced Amazon’s decision to follow suit. Although it’s believed that the store will initially serve as a pick up and return order drop off point, early predictions are that in time the store may also concentrate heavily on book sales. This would arguably be a good move for Amazon, who have a sophisticated, pre-existing e-commerce framework that they could leverage as part of a coordinated physical and digital store.

For the past couple of years, the American Bookseller Association have been saying that physical retail book sales are actually doing relatively well, despite the negative opinions saying otherwise. According to the Association, since hitting a nadir in 2009, the number of indie bookstores in the U.S. has grown 19.3 percent, from 1,651 to 1,971.

“We know that the popular narrative about all this is that indie bookstores — indie businesses in general — are supposed to be up against the wall fighting the behemoths, and largely losing the fight,” commented Oren Teicher, CEO of the American Booksellers Association

“The data is quite contrary to that. It’s absolutely not true. There are lots and lots of bookstore companies across the country that are increasingly profitable. Now, as with any small business, it’s tough out there and the competition is fierce. But there is a recipe.”

What would be interesting to see, is whether Amazon mirror the pricing of regular bookstores, or reflect that of their online store, which in doing so could likely snap the already taught relationship between the two. Speculation is indeed rife, this is perhaps one of the more controversial moves in the never-ending Amazon vs ‘the world of retail’ war, and we wait in eager anticipation to see how the next chapter unfolds.

Categories: Industry opinion

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