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The Amazon store is just a rumor — but maybe it shouldn't be

The online giant has quashed a rumor that it is scouting brick-and-mortar locations, but that doesn't mean it isn't a good idea.

December 7, 2009

London's Sunday Times kicked up some dust this Saturday when it reported that online retail giant Amazon had a "secret plan" to open brick-and-mortar locations. The story quoted unnamed sources, saying the company was "scouring the country" for high-profile locations.

But by Sunday the rumor was debunked, with an Amazon spokesperson telling The Press Association, "We have no plans to open physical stores anywhere in the world."

That's too bad, because "the Amazon Store" could be a really great idea.

"I wish it were that simple"

In the film "The 40-Year-Old Virgin," one of the main characters owns an "eBay store," where people can drop off items they want to sell online. At one point a man comes in and tries to buy some boots from the shelf, but she informs him that that's not possible — he has to go online if he wants to buy them. But I have money, the man insists, and I want to buy them now.

"I wish it were that simple" is her reply.

The confluence of eBay and bricks-and-mortar has never completely made sense, but in Amazon's case, it could be a match made in heaven, and it really could be simple. Amazon originally was just a bookseller, and books are easy to ship. Now the site sells lawnmowers and table saws, which are considerably tougher and more expensive to ship. Having a "click and collect" system, like the ones in place at most major multichannel retailers, could make the Amazon shopping experience much more rewarding for consumers.

Of course, the reason Amazon has such an amazing inventory is precisely because it does not have to stock each item in physical stores, so the selection would have to be limited — Richard Laermer, author of the book "2011: trendSpotting," said the retailer could make a lot of money by showcasing selected items at different locations. Those selections could be rotated on a whim, selected based on availability and markup, and marketed at the local level (just think how well an Amazon store hawking discounted Steelers jerseys and hats would do in Pittsburgh).

Then, there is the relatively inexpensive nature of retail real estate today. Retail consultant Stuart Cross, who worked with the U.K. drugstore chain Boots on developing new store concepts, points out that there is plenty of retail space available, much of it marked down to recession-era prices. The retailer could try the concept out and if it fails, not much has been gambled.

But Amazon is doing well without getting physical, perhaps making this an "it isn't broken, don't fix it" situation. Internationally, the company increased sales by 33 percent in the third quarter of 2009, up to $2.6 billion; net income shot up 68 percent to nearly $200 million. Its free cash flow for the past year was $2.25 billion, almost twice what it was the previous year.

"I find it hard to see how they would gain much from having a physical presence," said Dr. Swee-Lim Chia, marketing professor at La Salle University in Philadelphia. "The gold standard that everyone is looking at is how Apple used its stores to introduce new customers to their many products. But in this case, other than some added convenience for shoppers to be able to pick up their purchases directly, the cost and the resources needed to operate a brick-and-mortar shop would seem to outweigh any such benefits."