The death of bookstores across America has been a years-long epidemic toppling several prominent chains. Yet here we are in 2016, and Amazon has plans to open its own line of physical bookstores.
And we’re not talking about just a handful, either: According to Investor’s Business Daily, Amazon hopes to open up to 400 bookstores in the next few years. At first glance, the idea almost seems absurd: When dedicated booksellers like Barnes & Noble are struggling to maintain a brick-and-mortar presence, why would Amazon mess with a formula that is working so well?
But it’s all a matter of innovation. Amazon’s drive to build physical stores is inspired by its effort to invest in online-to-offline channels, and its business model is similar to practices being pioneered by prominent Chinese merchants.
Investing Into, And Beyond, The Showroom Experience
For years, Amazon has benefited from retailers in a subtle-but-important way: Shoppers could visit a physical store, check out products, and then go home to order them online. Or, even worse, they could compare prices in-store on their mobile phone and go order from Amazon if the price suits them.
As Amazon’s continued success topples its competition, those benefits are diminishing. But the value of seeing products first-hand is real, and some consumers still like to purchase products in-person so they can bring them home immediately.
Amazon understands that, which is why it’s building physical stores. These retail locations will build out an online-to-offline selling model that Amazon can use to deliver a better customer experience.
Through those stores, customers can go shop in-person and bring home Amazon products instantly. Or, they can go online, fill their Amazon shopping cart, and have them ready to pick up in a store — sometimes immediately.
So physical stores are a showroom for Amazon, but they’re also, ultimately, the mechanisms for a fast-rising commercial business model in which retail stores also function as distribution centers. And with up to 400 stores established across the country, Amazon can build a vast distribution network that penetrates deep into the American consumer experience.
In the near term, this investment into O2O commerce will run up a long bill of expenses for Amazon, and without much return on revenue. But once these stores open and prove their value to consumers, the company will be at the American forefront of a dramatic change on the retail landscape.
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