Amazon is opening Real Stores?

[Project 2501]

Amazon may open brick and mortar stores to sell products. It appears to be an effort to sell the higher end products not just the Kindle and accessories. But, will Amazon keep prices low enough for shoppers while adding the expense of leasing locations and hiring staff. In the last quarter, Amazon sales jumped over 35% but profits dropped by 57% last quarter from the tight margins and much higher operating costs.

http://www.reuters.com/article/2012/02/06/us-amazon-stores-idUSTRE8152AU20120206


Amazon.com Inc is dipping its toes into the physical world as the largest online retailer offers more products in stores that may benefit from hands-on interaction with shoppers.

Analysts said the move may be inspired by the success of Apple Inc, which has hundreds of its own glitzy stores to show off iPhones, iPads and other gadgets and accessories.
Quidsi, an online retailer Amazon acquired in 2010, opened its first retail store in Manhasset, New York, last year to sell expensive cosmetics and perfumes under the BeautyBar name.
Amazon also plans to open a physical store in its home town of Seattle in coming months to showcase and sell its growing line of gadgets, including the Kindle Fire tablet, industry blog Good E-Reader reported this weekend.

[bunky]

I think this is going to definitely take a chunk out of Amazon's margins. The cost of running stores is pretty high.

ETA: And with healthcare regulations, you have to insure everyone who works for you. Bad idea.

[work4turk]

Brick and Mortar is the thing of the past. I wouldn't recommend any company doing it unless you have monstrous profit margins like Apple.

[Grodgers]

I sure hope they don't. Most of my shopping is done on Amazon. Bye, Bye no tax....one of the reasons I shop there.:(

[bromeliad]

Let me see, free shipping and no sales tax vs. gas used + travel time + state sales tax. Gosh, it sounds really tempting.

[giall]

Interesting. You'd think they'd do much better just sticking to the online stuff.

[dblandon]

These brick and mortar places exist on the idea that they will lure customers in while they are shopping elsewhere. They could make some money this way, but only if they set it up absolutely perfectly like Apple did. I'm not sure if they'll have the same meticulous attention to detail. Don't get me wrong, I love my Kindle, but this plan concerns me a bit.

[soulinstinct]

Y'know, I'm not sure how I feel about this. My over all feeling is, "That's weird." Amazon has always been an internet thing, and many people are buying off the internet. It's possible they could do very well with the stores, but it's also probable that they will do horribly...

[ace1337]

I've heard that some big companies open stores just to act like giant 3D billboards. They lose money by running the store but it keeps the brand in people's heads. I don't know if this is the case here.

[HAdrian1239]

Interesting, but I'd much rather buy from them online....

[Noalani]

I think they're crazy to do this...we had a retail store for the last 18 years here in Hawaii, and we just closed it because, as Work4Turk says, Brick and Mortar is dying. This last year our lease felt like a ball and chain around our necks! We are so relieved to be done with retail and all of the hassle that goes with it. Again, I think Amazon is crazy to do this. Just my opinion.:crazy:

[spamgirl]

Our apple store is the busiest store in the entire mall, literally full as if it's Christmas year-round. If Amazon can do that, they're golden.

[Mac]

If they open a store in one of the malls near me, I think I might go apply for a position! If they want to be great like the Apple stores then I'll get on board...

[bromeliad]

From the Register

http://www.theregister.co.uk/2012/02/10/online_retailers_look_for_offline_premises/

[Noalani]

"Apple has a high-margin business that is strengthened by the tangible allure of its products. None of these other companies can boast the same, though Microsoft comes closest. Employing a cost-heavy offline model to peddle low-priced online goods seems like a match made in profitability hell. ®" (from the Register article)

That's exactly it...Apple has the high margins; its cost of goods is so low it can reap incredible profits. Plus it has its product allure, which attracts the crowds. Amazon has high margins on its Kindle groups but is that enough? And how attractive is the Kindle product line compared to the Apple product line?:crystalball:

I guess time will tell!

[cmkstar - closed]

I must have fallen asleep watching the news the other night, because I totally had a dream about shopping at the "Amazon store" and telling people about it and when they acted confused I was like "Oh, you don't have one yet?".

Back on topic, I agree that if they can stock enough items with a high enough profit margin, I can see them doing really well. I grew up in the "internet culture"... I've always ordered online rather than going to the store. But, my Dad, aunts, uncles... even my sister, don't do a lot of buying online. To be successful, I think they need to integrate the online ordering system into the store though. So if a customer comes in looking for a specific product that isn't in the store the sales rep can pull them over to the computer, show them the product and do the whole sales pitch and get them to order online while in the store (I did holiday work at Sears last year and they're really pushing this).

The other product that Amazon could be looking to pitch in their stores is their books division. Just last week Barnes and Nobles announced they would refuse to stock Amazon's books in their stores (http://www.huffingtonpost.com/2012/02/01/barnes-noble-wont-stock-amazon_n_1247088.html). Brick and mortar presence would strengthen that brand.

[Project 2501]

First of all Amazon doesn't have big margins on what they sell. On physical goods it is believed to be a 4% margin while Apple's is believed to be 40%. The Kindles are rumored to be sold at a slightly under cost. A couple Amazon stores might be opened as marketing tools but to open chain of them would likely drive Amazon under.

[bromeliad]

In some ways, this article will always be relevant when talking about Apple's success; please substitute android OS (Kindle Fire) for DOS/Windows

http://cs.calvin.edu/documents/christian/ecosessay.php

Kindle Fire is just one android-base tablet among many; as the kindle is just one e-ink reader among many too.

[scoots53]

I don't think it would make a lot of sense for Amazon to open a brick and mortar store.

In relation to Apple, they are really in the business of selling content (like books) not hardware (just a device to get the books in your hands).

I think we sometimes forget that Amazon is primarily a book store!

[axslinger - closed]

True...although they are the best out there to get CDs and other forms of music, at least in my opinion.

[slund]

I really hope that open stores will not cause Amazon to go under. I shop online from Amazon several times a month.

[pickupapenny]

I don't see this as being a big part of their business strategy. As others have noted, Amazon is primarily a digital content/low margin-high volume business. The former doesn't need stores while the latter is already dominated by companies like Wal-Mart and KMart.

[Drkangel]

I think opening stores would be a mistake. If they wanted to get their products out in stores they should partner with a store that is already established like best buy or wal-mart. That way they have the product in a store without the overhead of rent, salary, and benefits.

[tkitten]

I would love to see an Amazon store in my area. Although I love shopping online, sometimes I like to get my items quickier without paying 1-day shipping charges.

[sweetberry]

No, they have Barnes and Nobles beat. Starting a brick and mortar store is just giving B&N the market share of online sales. Its like Microsoft opening stores to compete with Apple. Stick to what you know and leave the other side of the industry alone. Amazon always rebounds in the end of a profit sales fall.

[lizj97]

I hope they remain online. When I do buy online I always check them out but I doubt I would go to a real store for their products.

[julesverne]

This is interesting. I can't believe Amazon would go this route. Maybe they will adopt the Sharper Image approach and only sell in Airports, etc.

[Rob79]

Makes sense. In the past it was "start with B&M then go online", now it's "start online and then go B&M"... I think it's a cool idea, after all Walmart needs a real competitor :P

[johnsmith]

From what I understand, Amazon is actually going to be starting small, and doing the "Sharper Image" approach, primarily selling Kindles (and their new Kindle Fire). It's a way of getting these well-priced devices into consumer hands who might otherwise only see them online and then forget about them. Once you actually take 5 minutes to demo the device, you might change your mind about it. That's the idea.

They could pretty easily expand further down the road, because of their massive supply chain. At that point, that's when they'd consider pushing into true retail (ala Walmart/Kmart/Target).

Most companies have actually dabbled in retail a little bit. Microsoft has at least one "Microsoft Store", Nintendo has a few stores, Nokia and Sony both have stores. They're typically smallish, but it's an important alternative way to get customers to experience your products, rather than only hearing about them.

(btw, Amazon already sells their Kindles in Best Buy and other retail stores, this move simply helps emphasize their brand)

[Goatus]

This would be an even worse idea than netflix opening an on demand cable channel.

[Pattyben]

It will be interesting to see how it will work out. To me Amazon "On Line". ;)

[folly412]

Not sure what they're aiming for here. Do they feel there is enough market share to enter the specialty consumer electronics store market, or are they trying to steal from Apple? Either way, I don't like it. Space and people cost money, and they don't have enough exclusive products or culture around them to make the stores unique. I guess I understand the desire to have something more unique than your usual Best Buy display, but I don't know that this is the answer. Anyway, they're probably going to come in close to $60 billion in revenue this year, so they can afford to take some risks.

[valdp]

I sure hope they don't. Most of my shopping is done on Amazon. Bye, Bye no tax....one of the reasons I shop there.:(

You don't pay sales tax if you shop on Amazon??? WHAT?? How did I not know this! I never shop online, though I might have to start.

[johnsmith]

You have to remember that Amazon is branching out beyond mere online retail and also into digital media with their Amazon Prime service, which sells movies, tv shows, and also their digital music (mp3) sales. They're trying to position themselves as a strong competitor to Apple and their iTunes platform.

Apple sells phones and tablets, those devices are then used to purchase media (music, movies, tv shows, ebooks, videogames, apps) from Apple via their iTunes store.

Amazon sells tablet / e-book readers now, and those devices are likewise used to purchase media through *Amazon's* digital store.

The more Amazon devices they get into consumer hands, the more media they'll sell via those devices. It's an additional revenue stream beyond their already popular online storefront.

If consumers don't own Amazon devices, Amazon will lose digital sales marketshare to Apple and other companies, so they've got to do everything they can to help drive adoption of tablets and e-book readers.

[araenel]

Weird to me too...if anything if I even visited a store I might see something I like and then go home and order it, haha.

[GrimReality]

As neat as this sounds it wouldn't do me much good due to living in the middle of no where. It'd be cheaper for me to purchase online and endure the shipping time than to travel to one of these..

[shebillah]

I just hope the prices would be good. Something between Wal-Dump and Worst Buy.

[Nyxalinth]

I wouldn't mind checking one out. And I agree with Shebillah on the price range.