Amazon is planning to open a store in midtown Manhattan this holiday season. The retail outpost, as reported by the Wall Street Journal, would be Amazon’s first permanent physical store even if it’s not the first physical location for customers. Amazon already operates lockers where people can pick up deliveries and has played around with pop-up stores as well. Still, a store would be a big departure for Amazon, which prospered precisely because it hasn’t had the baggage the comes with brick-and-mortar retail: high real estate and labor costs, constraints on inventory, and several hours of inactivity each night.
So why is it following Apple and Microsoft into physical retail? The most basic answer is that most shopping happens in stores. E-commerce will account for only 6.5 percent of the $4.73 trillion in total retail sales in the U.S. this year, according to eMarketer. That percentage is bound to rise, of course, but there are limits. Some kinds of commerce that work best in person.
Take the Fire Phone, which Amazon so far hasn’t convinced many people to buy. The retail experience is seen as vital for selling phones, since people need to have some physical interaction with the devices before deciding which one they like. Amazon’s phone was available in AT&T stores, but the company is probably ready to try hawking it on its own terms. The same is true of tablets, e-readers, and whatever else is cooking up in its expanding hardware operation, Lab126.
An Amazon store would likely carry more than its own products. After all, Amazon has lots of information about what sells. The company already boasts about tapping into data from its website to determine which features to include in its set-top boxes and tablets, and it could do the same when looking to stock its shelves. The shop could also give top billing to books from Amazon’s own publishing division, which haven’t sold in heavy numbers in part because competing stores like Barnes & Noble have refused to carry them.
Those are decent reasons for Amazon to want a store, although its arguable whether they’re offset by the spending the company will have to pour into rent and employee training. But are Amazon’s business objectives enough to draw customers away from the countless other ground-level temptations on Manhattan’s retail-heavy 34th Street? One thing the company could offer is a place for people to pick up items that have been ordered on the website. A physical location at the center of the country’s largest city could also serve as a mini-fulfillment center for same-day deliveries, which Amazon has been slowly ramping up. But the skyscrapers probably mean midtown won’t be the best place for Amazon to start flying its army of drones.
