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Amazon could become our leading physical retailer before very long

22 March 2017

From veteran publishing consultant Mike Shatzkin:

More than five years ago in this space we contemplated the likelihood that Amazon would just keep growing and growing its share of the book business without any end. Of course, a book business-centric view of Amazon these days doesn’t really do Amazon justice. Books and ebooks are a really small part of their business (although it is, for many publishers, more than half of theirs!)  It might be unfair to say that Amazon alone has crippled retail stores but the impact of online delivery is changing the landscape in ways that are impossible to ignore.

Living in midtown Manhattan, as I have for my entire adult life, has always presented distinct advantages of convenience. With street-level retail on every inch of the avenues and in many of the buildings that occupy the streets between them, the number of choices of restaurants and stores of all kinds within a 5- or 10-minute walk of my apartment has always exceeded what is available to most people within a half-hour drive, even if they live near a large shopping center.

But things have been changing noticeably. Even in midtown Manhattan, the locale with the most walking traffic in the country, retailers are struggling. The number of empty storefronts in my neighborhood is staggering; there are one or two or more on just about every block. It has never been that way before in my experience.

For most of the 45 years I’ve lived here, there was a supermarket in my building and one immediately across the street. Now the one in my building is a large restaurant in a mini-chain called The Smith and the one across the street has been empty for nearly a year. The closest remaining ones are 2-1/2 blocks away in one direction, 3-1/2 blocks in another. This is a big deal when all your travel is on foot and your normal procedure is to carry your bags home.

And, of course, that just means we start ordering more things online to be delivered.

. . . .

It doesn’t take a genius or a futurist — nor require one to be a contrarian — to see that that we are “over-stored” everywhere, not just in the shopping centers being challenged by the gradually-then-suddenly demise of department store chains like Macy’s and Sears. And when you live where I do, the shift to online purchasing is plain to see in the piles of delivered packages our doormen have to deal with every day which becomes a flood that now overflows the pretty large package room in December. And most of those boxes have an Amazon logo on them.

. . . .

Barnes & Noble outlasted Borders primarily because they had a better logistics network supporting their stores. Smart location and inventory selection and merchandising certainly didn’t hurt, but it was the rapid and automated resupply of books as they sold that provided an insuperable advantage.

B&N’s logistics capability pales in relation to Amazon’s. And probably so does the logistics capability of every other retailer. None of them requires the complexity that Amazon does, across not only the widest conceivable range of products but also across millions of retailing “partners” — affilates and Amazon Marketplace sellers — who are integrated into the same supply chain.

In fact, for all the discussion of B&N’s experimentation with “concept stores” and my own suggestion that they should be working on delivering smaller stores, it is Amazon that is doing the most experimentation in the physical store space.

Link to the rest at Mike Shatzkin and thanks to Jan for the tip.

Amazon, Mike Shatzkin

24 Comments to “Amazon could become our leading physical retailer before very long”

  1. Why does this remind me of that Kenny Rogers movie where he was a race car driver ‘adopted’ by a six-pack of kids?

    Mike feels like that ‘bad cop’ eating crow on live TV and the littlest brat closes the cop’s remarks with: “No sh** Dick Tracy.”

  2. Pre-Ordered a game from Gamestop instead of Amazon because I had a gift card. I paid extra so that it would be at my place the day after the game launched (Amazon would have gotten it to me that day, but again gift card). Its two days after the game should have been here. I’ve emailed Gamestop twice with no replies. I ordered the game from Amazon last night. It’s already here and I’m going to be playing it before Gamestop even responds to me.

    THIS is why Amazon is eating everyone else’s lunch. And this is why I am always going to shop at Amazon for things I actually care about having on time.

    • Its’ not just “on time”. I think everyone has a few “B&M fail – Amazon win” stories. My high points are selection, suitability and time savings.

  3. I had a marketing teacher that predicted this general idea (she called it nesting – where people left their houses less and less as more things became directly available) back in 1990.

    And Shatzkin is just catching on.

    • Yeah, it’s not so much that he is wrong (though overly optimistic of Amazon’s prospects) as it’s that he’s ten years late to the realization that it is Amazon’s logistics that make them so effective. (He admits it in the comments.)

      His comments on the bookstores are equally late: he is only now wondering if Amazon stocks different books in different stores? Or that the selection is guided by big data instead of payola?

      Of course, considering the parochial world he comes from (a supermarket in his building, a three block walk is a *long*walk?) this might be him having an epiphany and waking up to the 21st century.

      • To be fair, in New York, 3 1/2 blocks to carry groceries, even for a small family, is a bit of a haul, with no shopping cart, on foot.

        • I’ve done bigger loads and longer distances.
          When I was in high school I would walk home from school to save the fare for buying comics and paperbacks.
          No snowdrifts but 45-60 minute walks with a full load of textbooks under the tropical sun builds up the leg muscles, if nothing else. 😉

          I’ll grant that he would be at greater risk of getting mugged, though.

          • Now trying being a 35 year old mom with two kids out of strollers.

          • The point isn’t you can’t do it. It is why do you want to? Why go to half a dozen stores looking for what you want because all their inventory control and selection is for crap and then stand in line because they’re understaffed and THEN carry it all home when Amazon will bring it to you free shipping in two days?

            Amazon does a great job, but half the time you’d swear stores are trying to help them.

            Just go to BN in Union Square and watch the employees chase everybody out of the area with the chair because they want to get it cleaned up two hours before closing time. Yeah, fine, you guys clean that up because god forbid you get out three minutes later…meanwhile I’ll be home where I’ve got chair right in front of my computer.

            • In defense of the employees. They don’t get paid for those 3 minutes, but will still be held accountable for the work being done.

              It’s a corporate policy driving the lunacy.

        • I have a nice sized foldable cart for hauling groceries that fits a Costco trip sized amount of stuff. Bought it on Amazon.

          • I remember lots of 100-pound, 80-year-old women hauling those two-wheeled carts more than 3 blocks. They must have been made of sterner stuff than Shatzkin.

            • Homeless people, too. I’m from a small town, and went to college in Chicago. In a phone call home I described the ingenious alternative to shopping carts that the homeless all seemed to have. My mother thought the concept was brilliant so in a care package she sent me fancy tapestry-covered cart. /country mouse

    • That reminds me of a short story in a SciFi anthology about matter transport/teleportation (late 70s? Early 80s? – showing my age) where people only ever teleported from their house to where they were going and had completely lost touch with the natural world. Some kids accidentally found their way outside into a recovered natural paradise.

      I have forgotten who wrote it.

  4. In the beginning, no one saw Amazon coming.

    Okay, I’ll accept that.

    But now, that everyone knows what Amazon is capable of–why, oh why are their competitors doing so little to actually compete?

    There’s no excuse!

    • They don’t have corporate structures that allow them to remain in the red and reinvest in a section that isn’t profitable yet – in the corporate world of their competitors, ONE quarterly bottom line below predictions, and heads will roll.

      Amazon has been doing this as a business model since it started.

      • Exactly.
        Amazon has been profitable since day one practically. But instead of sitting on a tiny cash hoard and remaining a bookseller Bezos has been spending the money just as fast as it comes in (but not faster!) in growing the efficiency and scope of his infrastructure and logistics.

        For the past 10 years or so they’ve been reinvesting over a billion a year so they’ve built a monster infrastructure that will take massive amounts of time and money to match.

        https://www.nytimes.com/2015/10/23/business/walmart-plays-catch-up-with-amazon.html?_r=0

        Walmart has been trying since 1999 and are currently spending over a billion a year themselves. And falling behind.

        Amazon is running a Red Queen’s Race.

      • If Amazon’s quarterly cash flow turned negative, Bezo’s head would be rolling with them.

  5. A few years ago, the gripe was about the advantage Amazon had because they were not brick and mortar and thereby could escape paying taxes that traditional retailers had to pay.

    Now, years later, the gripe is that Amazon is creating brick and mortar stores?

    • The gripe that will not speak its name is that Amazon knows how many pages of each book consumers read. They know what consumers like, not just what they buy.

  6. > Living in midtown Manhattan, as I have for my entire adult life,

    that explains a lot.

  7. I just came home from three days in (mostly) midtown Manhattan, and the selection of shops he discusses is mind-blowing. I must have seen forty small pastry/bake shops on the streets as I walked (my buddy and I logged something like ten miles with no real strain) but NOT A SINGLE GROCERY STORE. Yeah, I know I’m yelling. I never saw one, nor a single mixed-merchandise store such as Meijer’s or Target.

    As part-time homemakers, both of us wondered how the groceries were purchased and gotten into the home. It seemed insane to me that the balance of shops on those busy streets was so lopsided. If you craved delicious-looking pastry, though, you had a plethora of options…

    Other than that I loved NYC, which I didn’t expect to do.

    And PG, can we EVER stop calling Shatzkin “veteran publishing consultant?” I opt for “veteran bad guesser.” There. Sorted that for ya.

    • They exist inside the buildings, for the occupants of the buildings, and people shot there almost every day, to get just what they are cooking that day. My step-sister lives there, and this is how she lives. Its crazy to me.

      Although growing up in Milwaukee, two of my father’s city apartment buildings had the same set up.

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