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Amazon Books: Why The E-Tail Giant Is Thinking Small

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With Amazon recently announcing it will open an Amazon Books store in Chicago, the e-Commerce giant will have four brick-and-mortar stores operating by early 2017. Like any major move Amazon makes, these openings attract intense interest from the rest of the retail industry, with merchants and analysts alike forced to prepare for the brand’s next plan of action.

“If I was a retailer and I was paying attention to what Amazon was doing, I’d be very curious as to why they’re taking these steps, and wondering what the processes and rationale behind these looks like,” said Steve Rowen, Managing Partner at RSR Research. “Amazon is opening stores…okay, you have my interest. Taking it a step further, Amazon is opening very small footprint stores that are narrow in the products that they’re selling. The most important part is: why are they choosing this format? It’s not just Amazon; a lot of the retailers that ‘over-retailed the world’ are closing big stores and opening smaller ones in urban settings.”

With that in mind, retailers are going to have to gain a greater understanding of their demographics to get a sense of how their brands approach brick-and-mortar going forward. It’s no secret that many traditional retailers have been struggling in the wake of this “over-stored” environment, with the products purchased becoming less important to consumers than the overall shopping experience.

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In the case of Amazon, the retailer not only showcases books based on online reviews and consumer data, but also includes a central hub that displays the latest technologies the brand has to offer, such as the Fire TV, the Kindle and the Echo. However, brands seeking to follow this display model must be forewarned: the technology demonstrated always has to have a purpose.

“If a retailer operates a lot of brick-and-mortar stores and they want to give themselves a shot in the arm, I don’t think tech for tech’s stake is the answer,” Rowen said in an exclusive interview with Retail TouchPoints. “It’s more of a case of whether there is a justifiable reason why the retailer should roll out more devices within the stores. What problems do they solve for the consumer?”

Amazon Goes Where Its Competitors Crumbled

Even though Amazon has finally built a physical space to merge its books and technology, it still isn’t clear what the retailer’s end game is, considering how slowly it has rolled out brick-and-mortar stores. Currently, only its Seattle location is open, despite initial speculation that the San Diego location would open up in summer 2016.

Rowen believes this go-slow approach may actually be a smart strategy. “It only makes sense that Amazon is looking at the physical realm,” Rowen said. “Yes, Borders and other booksellers have had massive trouble historically maintaining these large footprint stores, but in a lot of ways, that may be why Amazon is going about this exactly the way they are. They’re not opening up a Walmart-sized distribution center or attaching a Costco-type membership; it’s more of a way for them to get their feet wet and understand what makes for a great retail experience.”

It is ironic, however, that Amazon has been opening stores dedicated specifically to book sales, given that the e-Tailer played a major role in accelerating the decline of such stores. The only major bookstore chain left, Barnes & Noble, unceremoniously canned its CEO in August in the midst of a brand repositioning effort that has failed to turn the business around. In its most recent quarter, total sales for Barnes & Noble dipped 6.6%, while the company’s physical bookstore sales declined 6.0%. Realizing that it has had tremendous difficulty reeling in foot traffic, the brand cut its same store sales guidance for the remainder of its fiscal year.

But given Amazon’s allure as an e-Commerce retailer that sells almost anything and delivers within a quick time frame, the brand already has a reputation as a ‘must-visit’ site that Barnes & Noble simply doesn’t provide anymore within its stores. That already puts Amazon at a great advantage as it goes physical, especially if the company isn’t yet devoting significant funding and space to these bookstores.

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