Should Amazon open retail stores in the future? What would make it unique?

November 17, 2012
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Amazon is king of the e-commerce space. The company sells all sorts of merchandise and content on its website, and also services the mobile market through its Kindle line of devices. Amazon Wireless also has partnerships with both carriers and device makers to market smartphones, tablets and other devices.

But given the success of Apple’s retail store model, online companies have been keen on venturing out into the brick-and-mortar establishment themselves. For instance, Microsoft has started opening its own stores around the U.S., offering computer packages, Windows Phone devices, accessories and boxed software. Telecommunications companies also have their own physical stores.

But will it make sense for Amazon to open retail stores in the future?

CEO Jeff Bezos thinks so. In an interview with Charlie Rose at CNBC, Bezos says Amazon “would love to.” But there’s a caveat. He says physical retail stores are already very well-served. As such, Amazon would only be going into something similar if it had something unique to offer. “The question we would always have before we would embark on such an thing is what’s the idea, what would we do that would be different, how would it be better… we don’t want to be redundant,” Bezos says, adding that the company wants “something that is uniquely Amazon.”

In the first place, though Amazon’s business model is built on low overhead. The company can afford to offer lower prices as it can save on spending for store space and staff. Bezos himself is aware that the business results may not exactly be good if you’re not the leader in your particular field, in this case brick-and-mortar retail. As such, there is question on what the value proposition will be.

A few thoughts, some of which based on discussion thread at our source article:

  • Niche items are what has made Amazon successful. Merchandise are fulfilled from their warehouses from around the country, so the company does not have to worry about lacking stock. If Amazon were to setup shop, then it will need to rethink its inventory and stocking processes.
  • Amazon employs customer service personnel from around the globe (India, for instance). If it starts running retail stores in the U.S., then it will have to move back jobs in the country.
  • Prices might increase due to state sales taxes and whatnot.
  • Amazon stores could double as pick-up points, much like Amazon lockers set-up in establishments around the country.

Perhaps Amazon could set-up shop, but for a limited offering. For instance, the company could make its Kindle line the highlight of their stores, where customers can check out demo units for themselves before deciding to buy. Amazon retail stores can also serve as service points for these devices. The company could likewise focus on mobile devices. Amazon Wireless already offers great deals on smartphones through its website. Why not at physical locations?

While shopping online does have its conveniences, there are some things that are best bought after a thorough physical inspection, and both users and brands can benefit from such interaction in a brick-and-mortar store.

What could be Amazon’s value for setting up a physical shop? Should it focus on a certain aspect of retail, or should it just stick to what it does best: selling online?

Comments

  • http://twitter.com/MysteryMannnnn Mystery Man

    you elimate any supply chain advantage. You raise inventory and facility costs. you still have transportation costs from online orders then you add retail stores. multiple retail stores would be the end of Amazon.

    stick to innovating and competing with other online companies like netflix

  • rsanchez1

    Amazon is eating retail stores’ lunch. Retail stores are in danger because of Amazon’s e-commerce success. It doesn’t make sense for Amazon to spend money on a physical presence. It makes more sense for Amazon to develop same-day delivery.