The Amazon Store: Can a Retail Outpost Help Sell the Fire Phone?

Amazon is planning to open a store in midtown Manhattan during the upcoming 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 at which people can pick up deliveries, and the company has played with pop-up stores. Still, a permanent physical store would signify a big departure for Amazon, which prospered precisely because it hasn’t borne the baggage that comes with brick-and-mortar retail: high real estate and labor costs, constraints on inventory, and hours of inactivity each night.

Why is Amazon 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 $4.73 trillion in total retail sales in the U.S. this year, according to EMarketer. That percentage is bound to rise, but there are limits. Some kinds of commerce 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 because consumers need to have some physical interaction with the devices before settling on which they prefer. 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 Amazon is cooking up in its expanding hardware operation, Lab126.

An Amazon store would probably carry more than the company’s 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 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 such as Barnes & Noble have refused to carry them.

Those are decent reasons for Amazon to want to open a store, although it remains to be seen if any payoff will be offset by spending the company must pour into rent and employee training. Will Amazon’s business objectives suffice to draw customers away from countless rival, 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 they have ordered on the website. A physical location at the center of the country’s largest city could serve as a mini-fulfillment center for same-day deliveries, which Amazon has been slowly ramping up. In any event, New York’s skyscrapers probably mean that midtown won’t be the best location for Amazon to launch a fleet of drones.

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