retail news in context, analysis with attitude

The Wall Street Journal is reporting that Amazon, the world's pre-eminent online retailer, plans to open the first bricks-and-mortar store in its two-decade history - on 34th Street in New York City, just west of Fifth Avenue, across the street from the Empire State Building, and a couple of blocks east of Macy's in Herald Square, which, ironically, used to describe itself as "the world's biggest department store."

However, a New York Times story this morning throws some cold water on the Journal piece. While real estate sources say Amazon is buying the building, Amazon is not commenting, and "whether there will be an Amazon store any time soon on 34th Street seems an open question. The two retail outlets in the building, a Mango and an Express store, recently signed new leases. Juliana Ochoa, store manager at the Mango store, said the retailer had no plans to move out of its space."

According to the Journal, the building at 7 West 34th Street "would function as a mini warehouse, with limited inventory for same-day delivery within New York, product returns and exchanges, and pickups of online orders. The Manhattan location is meant primarily to be a place for customers to pick up orders they’ve made online, but will also serve as a distribution center for couriers and likely one day will feature Amazon devices like Kindle e-readers, Fire smartphones and Fire TV set-top boxes, according to people familiar with the company’s thinking."

Perhaps more importantly, the Journal writes, the location "would mark an attempt by Amazon to connect with customers in the physical world. Amazon has built its business on competitive pricing and fast shipping. Until now, though, it couldn’t compete with the immediacy of a traditional store."

In its coverage, the New York Times writes that "Amazon’s opening of a physical store is one of those stories that is constantly the subject of speculation in the technology news media, similar to what the next iPhone will be like or what the iPhone after that will be like. The Journal’s report of a possible Amazon store immediately became the top article on the Techmeme site, which collects technology news.

"Part of the fascination is the irony: The company that basically invented e-commerce would be acknowledging the virtues of old-fashioned shopping. Partly, also, it seems inevitable. For all their focus on the future, technology companies have been expanding to traditional retail for quite a while."

And, the Journal reports: "Amazon has experimented with physical stores before, including pop-up shops and locations run by subsidiaries. Last November, Kindle-brand pop-ups appeared in U.S. malls, selling e-readers and tablets from vending machines. Its Zappos unit has a store near its Kentucky distribution center and once operated a few outlets in its hometown of Las Vegas; and its Quidsi unit runs a cosmetics store in Manhasset, N.Y.

"Amazon also has set up large metal lockers in convenience stores and parking garages around the country, to accommodate deliveries and returns. The lockers don’t offer same-day delivery, however. The lockers have been a popular option, and Amazon has expanded them to a number of cities, including overseas, after initially just offering them in Seattle."

CNBC reports that Amazon "risks increasing costs related to retailing such as paying leases and hiring workers. But if the store is successful, it may set a precedent for additional stores in other cities.

"Amazon has been researching and scouting a possible store for several years, said a person familiar with the project. Two years ago, the company went as far as scouting spots in Seattle, where it is headquartered."
KC's View:
If Amazon's concept for this store is to create a unit that can serve as a showcase for its private label technology offerings, and it can mimic the Apple Store approach without becoming a clone of the Apple Store (which essentially is what the Microsoft Store is), then this may not be the worst idea in the world, and it might prove to be a concept worth expanding.

But I think that Amazon has some other things to which it ought to giving a higher priority…

• End the spat with Hachette. It's stupid at this point … and the bad PR you are getting will end up subverting any wins you achieve.

• Fix Subscribe and Save. It is my impression, and it has been confirmed by people a lot smarter than I, that because Subscribe and Save has gotten to be too expensive, some manufacturers are backing away from supporting it, which has led to a cutback in availability. Amazon instead seems to be throwing its support behind its Prime Pantry service, which does not seem nearly as attractive to me. (Or, maybe they just have to do a better job selling Pantry and convincing me to use it.)

• Amazon Fresh. I'm hearing too many reports of out-of-stocks and delivery problems. My suspicion is that there may be too many people who specialize in algorithms working on this project, and not enough people who actually understand grocery and customer service.

I just hope that the NYC store idea, if it is being accurately reported, isn;t the beginning of a national chain of stores that will hang around Amazon's neck like an anchor … and is the kind of mistake that its bricks-and-mortar competitors would love to see Amazon make.