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Rumor: Amazon Retail Stores Coming

3 February 2012

From Launch:

Just heard an interesting piece of gossip from a very credible source: Amazon is going to open retail stores and will start making its own branded merchandise.

. . . .

Let’s assume the rumor of Amazon launching big, Costco-like stores is true. What would it be like for folks in Oakland, Los Angeles or New Jersey to drive to a huge mall complex, past Target and Walmart and into an Amazon store?

The first scenario: the store could just be a showroom with display units of appliances and “geniuses” running around showing you the top 25 vacuums in action. Or the top 10 juicers actually making juice.

It could be Consumer Reports meets the Apple Store on crack!

There wouldn’t have to be any inventory, you would simply play with the stuff, talk to a professional and swipe your Amazon Prime credit card (or Amazon phone) and have it at your house in the next 24 to 48 hours.

Remember, Amazon has been experimenting with same-day delivery in some markets with some items. And no inventory might solve its sales-tax problems. I mean, do you have to pay sales tax if you’re selecting the product in the store but technically buying it on your tablet?

. . . .

Amazon could entice you into the space with a physical library.

Yes, Amazon could buy up used DVDs and books and just have them there for unlimited use by Prime subscribers. Ever go to the local library and try to borrow a popular movie or CD? Exactly, the selection is pure garbage.

Unlike digital assets, which require consent of publishers to loan out (thus the small number of books in Amazon’s Lending Library), you can rent out used DVDs and books all you want as long as you bought them.

Link to the rest at Launch

Passive Guy is skeptical about the rumor because of the massive capital and fixed costs a retail network would entail, but Amazon Retail is an interesting thought experiment.

Amazon

13 Comments to “Rumor: Amazon Retail Stores Coming”

  1. P.G.

    Costco and a number of big retail places are definitely hurting, at least here in GA. For years, the tills were busy all day, every day.

    They’re hanging on, although staffing is definitely reduced.

    Similar sort of name, I wonder if some sort of hook-up could be envisaged.

    I hope not, taxation would be a pain.

    brendan

  2. I got an Amazon Basics (that’s their brand name) remote for my camera about 2 months ago. It’s great and $4 less than the Nikon remote. They also have memory cards.

  3. Hmm, at this point, I’m happy the way Amazon functions now as a business model. I think they would just accumulate unnecessary overhead for themselves if they go retail.

    • I’m going to second James on this. While a show room would serve them very well, it might be achieved simply by putting an Amazon stall inside another retailer.

      Ex: You go to BJ’s wholesale club (interesting name, I know!) and next to the Verizon Kiosk is an Amazon Kiosk. The Kiosk has the whole Kindle family as well as a number of other amazon goodies. You don’t buy there, but you can read, see and play.

  4. I’m more than a little skeptical about the whole article, because the author was totally unaware that Amazon had their own branded products, and wrote an update to this article about it (and said Amazon was hiding them!) I bought an AmazonBasics HDMI cable for my television over two years ago, and AmazonBasics items show up in my searches all the time.

  5. I’m inclined to believe that Amazon may be investigating physical stores, but not like this. Microsoft has now started opening stores, like Apple did. If Amazon does open stores, I would think it would be more along those lines, specialty stores for goods that customers want to touch and play with before buying, not huge warehouse stores that have everything.

    • That’s exactly my thought. Why would they take on the trouble of brick and mortar retail? But a more limited focus? A Genius bar idea? It could be cool.

      Honestly, though, I think it would make more sense for B&N to try this — that is, to pull BACK to something more like the Apple stores with their Nooks. For one thing, they’ve already got the infrastructure. Even with their megastores, they are still much more focused than Amazon.

      Everybody I know who bought a Nook bought it because they could take to to the local B&N for help. If B&N spins off the Nook business, I would expect to see Nook coffee shops or service centers cropping up.

  6. I think this is a misheard rumor. It is more likely that Amazon would form some partnership with a local retailer for same-day delivery and showroom space. It would be like the mini-Starbucks in your local grocery store. When Amazon eventually looses the sales tax game (they know they will loose eventually) this would be a nice way to capitalize on the situation.

    I find it amusing that the no one covers the actual big news for Amazon, just the flashy news. For example, in 2011 Amazon increased their head count by 67%, which is massive growth. You’re probably wondering why. Enterprise Support for EC2 and their other cloud services. Which is posed to be a very large money maker for Amazon in the next couple years.

  7. Apple stores (and I presume Microsoft stores, though I’ve never been in one) are really about providing an outlet for customer service and support, not serving as a retail clearing house. They sell a lot of stuff there, but people use them as show rooms and as a way to get stuff fixed — that’s where Apple excels with their stores.

    Amazon doesn’t have a product that is uniquely theirs, except for the Kindle. I don’t know that there’s enough of a support/service need for them to try to create an Apple store experience for that. Kindle’s are pretty simple and work pretty much all the time. And even if they don’t, is there enough profit built into a Kindle to justify a high-touch experience.

    Personally, I think this doesn’t hold water purely from a financial perspective. Amazon already operates at margins so thin they’re two dimensional. I don’t see how they could take on the fixed cost of any kind of significant retail operation and stay in the black.

    They would assuredly be exposed to sales tax — if you operate in that state, the state will take its cut, and a retail store is plainly an operation. The idea that they might avoid it is fanciful at best. That alone will undercut some of Amazon’s price advantage.

    Inventory is expensive. Shipping is also expensive. Will customers who are in the room with what they want to buy be willing to pay shipping _and_ tax?

    Amazon also has an array of products so large I start to sweat just thinking about a number that big. What will they feature in the store? A main reason for Amazon’s online effectiveness is product placement personalization — they know what I buy, and they put things I’m likely to buy on the scree next to it. Not possible in a physical retail environment. So their unique merchandising skills are mostly non-leveragable.

    I can see a lot of reasons why they won’t do this. Any one of them appears to overshadow any reason they would. I’m not holding my breath.

    Rich

  8. Yeah, I’m also skeptical because of the high cost of brick-and-mortar operations. It also seems inconsistent with Amazon’s Web focus. I also don’t see another retailer cooperating with Amazon and letting them do kiosks, unless the kiosks were limited to Kindles or something, because they would just be enabling the whole look-in-the-store, buy-on-Amazon thing.

  9. Amazon routinely cuts off affiliates if the state those affiliates live in decides to try to get Amazon to pay sales tax. Their argument is that they have no physical presence in the state and therefore they cannot be compelled to pay a sales tax. Creating physical stores runs counter to this fight.

    And Christian–why should they believe they’ll lose the fight over sales tax? Given the Supreme Court rulings in the past, it would take either another Supreme Court ruling or an Act of Congress before they’ll have to pay state taxes in states they don’t wish to. The Court has no interest in reversing itself and the thought of Congress getting its act together to pass a tax increase is laughable…

    • They could put one in New Hampshire — no sales tax there. Not much population, either, though I suppose they could stick one next to the liquor store that’s on the NH border closest to Boston…

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