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This is why Amazon will open physical bookstores

Mike Elgan | Feb. 9, 2016
Brick-and-mortar bookstores are a great idea for Amazon. Here's why.

echo amazon echo
The Amazon Echo

Amazon is also a major enterprise cloud storage and hosting site. It's a major book publisher itself, and a major marketplace for downloadable content like movies and music. Amazon is also a leading maker of consumer electronics, including the Amazon Echo and a line of book readers, among other things.

Taken in aggregate, Amazon's business has no significant resemblance to Barnes & Noble's.

Barnes & Noble sells books. Amazon sells everything. Or, more specifically, what Amazon sells is the impulse to buy everything from Amazon.

Amazon competes through innovation and services. For example, Amazon is driving innovation in delivery. Its "one-day delivery" program has made Prime membership a coveted service. The company has experimented with ways to drive the delivery time down to less than one day, with initiatives that include the use of couriers, "lockers" and drones.

Retail locations will help Amazon win on delivery. Retail stores could double as product pickup locations, distribution warehouses and, eventually, drone airports from which products are flown to nearby homes and businesses.

Another Amazon innovation is the use of "gateway drug" products, which are designed primarily to facilitate the buying of more products from Amazon.com. The Kindle line of e-book readers is for easy ordering of Amazon e-books, as well as other products. The Fire TV products are designed for easy Amazon Prime Video rentals.

I think it's no coincidence that Amazon's retail store group is headed not by a bookstore guy, but by a Kindle guy. Steve Kessel is in charge of the retail store initiative. He is best known for launching the first Kindle reader. Based on Kessel's track record, it's likely that Amazon sees physical bookstores as a great way to sell e-books, too.

Amazon's most successful homegrown product, the Amazon Echo, exists to let you order products on Amazon by talking.

The Amazon Echo is super compelling to anyone who tries one. The trouble is, there's no way to try it unless you buy it.

Retail stores will help. They'll become showcases where people can try an Echo to see how it works, and that will lead to a lot more people buying Echos.

Each Amazon retail store will be much more than just a gateway drug to Amazon's products. It will be a gateway drug where people will buy gateway drug products like the Echo.

When Barnes & Noble sells a book, it sells a book. When Amazon sells an Echo, it sells a lifetime of easy ordering of everything from Amazon.

Amazon is hyper-aware that mindshare is everything. You'll notice that every year, just before the holidays, Amazon CEO Jeff Bezos makes a huge drone announcement. The obvious purpose of this annual stunt is to get people thinking about Amazon just as they're about to begin their holiday shopping.

 

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