Amazon.com, Inc. (NASDAQ:AMZN) is of course the major player in the e-commerce market, which is expected to hit $2.5 trillion by 2018. The giant is already causing major problems for brick and mortar retailer. Now it looks like Amazon’s attack on retail will be taking an even more direct route.
Though the e-commerce industry might seem lucrative, it represents less than 10% of the global retail market. To tap into the other 90%, Amazon must establish physical stores, and that is what the company is now doing.
Much more efficiently, too. In its first Seattle-based store, Amazon has only used a tenth of the floor area previously covered by Barnes and Noble but has only stocked books that cater to local interests, as measured by Amazon’s flagship website. Everything in the store appears to be relatively discounted compared to competitors.
By having a physical store, Amazon can reduce its delivery cost while also promoting faster delivery. Customers would be in a position to handpick their goods whenever they wanted. The physical store could also act as a warehouse, which would store some of the faster moving goods promoting quick delivery and ultimately resulting in more sales.
If Amazon can embrace the model used in setting up its Seattle bookstores, it would certainly turn up the heat on competition with local bookstores. The bookstore itself incurs relatively low operational cost. If Amazon can maintain a low price in their physical stores, this would make them more competitive giving them an edge on the other 90% of the global market.
Sandeep Mathrani, CEO of Chicago-based General Growth Properties, stated that Amazon planned to open 300 to 400 physical bookstores. This statement and previous speculation about Amazon’s willingness to open up several bookstores have sparked debate and speculation regarding Amazon’s intentions. Amazon opened its first physical bookstore in Seattle in 2015. The store has recorded great success, and this might have an influence on a decision whether to opening up more physical stores.
Amazon is looking to invest heavily in these stores if the first few are successful. The question is, does Amazon have the experience to run a brick and mortar empire? It’s not the same thing as running an e-commerce business.