Online Retailer Amazon to Open Hundreds of Physical Bookstores
Seattle-based company Amazon.com, Inc. has been known for the past two decades as the country’s largest online retailer. After opening its first physical bookstore in one of Seattle’s outdoor malls last November, however, reports suggest that Amazon is now looking to expand its reach into the world of brick-and-mortar retail. Seeing success with its first store, which carries the same low prices as its online base, the company has made plans to open three to four hundred more bookstores, according to chief executive of mall operator General Growth Properties, Inc. Sandeep Mathrani.
These efforts are likely partially motivated by Amazon’s realization that its hold over the book retail industry is growing but not yet solidified: while Barnes and Noble shares dropped 2.3% to $7.90 toward the end of 2015, Amazon shares also fell, albeit by less. Furthermore, consumers still prefer the immediate possession of purchased books; Amazon has clearly noticed this inclination, as it has begun efforts to entice those who would normally shop for books in-store by beginning a one-hour delivery service in around 20 cities, same-day drop-offs in others, and physical locations at select universities where students can pick up and drop off items.
Amazon is not the first online retailer to go down this path; in general, e-commerce retailers are increasingly establishing physical stores and pop-up stores. For example, Amazon’s own footwear division Zappos has been experimenting with retail outlets in the U.S., likely feeling pressure from other online retailers — from Bonobos to Warby Parker to Shopbop — that have also begun to open up stores. This is a smart move for e-commerce companies wishing to branch out; online sales accounted for merely 5.2% of total retail sales in 2012, and are projected to make up only 10.3% of total retail sales by 2018, revealing — perhaps surprisingly in this day and age — that the vast majority of purchases are still being conducted in-store.
Even for an online retail giant like Amazon, physical stores are uncharted territory. Although the company has already established its flagship store in Seattle, as well as kiosks in numerous Westfield shopping centers across the U.S., it will still take years — and huge investments of resources — to branch out into a large franchise. To optimize chances of success, the company will need to thoroughly design and analyze performance of its new brick-and-mortar stores, and can best do so using real-life, real-time data.
Amazon should quickly and effectively gauge how its physical stores fare in order to evaluate how to best design and staff them — and to decide whether opening hundreds more would even be an endeavor worth pursuing. In-store analytics would play a crucial role in helping Amazon both understand the current state of retail and best adjust its new stores to thrive in it. For example, obtaining store traffic data and conversion rates would help Amazon get a sense of how many potential customers are actually making purchases.
From a consumer perspective, perhaps what will be most interesting to see is whether Amazon, which has rarely had to worry about designing physical storefronts or training retail employees, will be able to create and manage stores that provide the ultimate shopping experience for customers. So far, its flagship store in Seattle’s University District has received generally positive reviews from shoppers — receiving an average of 4 stars on Yelp — in regard to both its products and customer service, but it will need to keep this up on a much larger scale if more stores are to be opened across the nation. Until then, die-hard Amazon customers will just have to stick to making their book purchases online.
