Look for the first Amazon brick and mortar store to open soon, reports the Wall Street Journal. The store will be located in Manhattan on 34th Street across from the Empire State Building. Here are some issues and a quick analysis related to Amazon’s brick and mortar strategy and the impact, good or bad, it may have on small businesses if the giant online retailer expands the concept across the country.
Why is Amazon opening a brick-and-mortar store?
According to various reports during the past few years, Amazon has considered the possibility for a long time. The New York store will serve as a same-day delivery, mini-warehouse with limited inventory, according to WSJ.com. If that’s correct, the model is similar to the once robust (but mostly just busted now) retail category called catalog showrooms.
It should be noted that Amazon already supports same-day delivery in Manhattan with a network of branded “Amazon Locker” locations where its online customers can have orders delivered for same day pickup.
And, as we’ve also reported, Amazon and Google are ratcheting up their head-to-head competition for local delivery retailing. While same day delivery or same day pickup may seem unnecessary to many Americans, in New York and other major U.S. cities, there are millions of people who don’t own cars because they live in high density areas and have access to dependable public transportation. In many places, especially Manhattan, it is normal for retailers, large and small, to provide delivery for a small fee or even free.
What will Amazon going into the brick-and-mortar business mean to small and local retailers?
It depends. Over the past year, we have tracked the counter-intuitive theory that by competing with big box book retailers, Amazon has been the unanticipated ally of small independent booksellers. Amazon is not going into physical space retailing to compete at a small scale with small businesses; it is doing so to compete at a big scale with Walmart,Target, Staples and other big box retailers. It should not be surprising that nearly all big boxes are experimenting with smaller store concepts that will also have online ordering, in-store pickup capabilities.
Also, as a large provider of fulfillment services to small businesses, it’s not a stretch to predict the company’s local delivery service and mini-warehouse approach could be accessed by certain small merchants or manufacturers in a similar way.
No doubt, some local retailers may be clobbered.
When Apple went into brick-and-mortar retailing, one group of small businesses were crushed: the small retailers who had become Apple’s distribution channel when major retailers refused to work with the company. Many independent Apple retailers and small chains went out of business, but others have flourished by serving niche professional markets like video and music production. The mass appeal of Apple’s mall locations have provided an attractive alternative to the tech-savvy power users of Apple products. (We know, we have a tight and loyal relationship with one.)
Bottomline
No doubt, Amazon will have a negative impact on some segments of small retailers. But the types of retailers they would most likely challenge are those who have learned how to compete already with the online giant in ways that Amazon won’t be able to replicate with a mini-warehouse model (e.g., personal service, niche and local merchandising).
More importantly, it is doubtful the lessons Amazon learns in a store located on one of the busiest (and expensive to operate on) city blocks in the world will provide much insight for the online retailer of what will work in middle America where most of its customers are found.
Longterm, expect to see most of the big box retailers have small footprint outposts where customers can pick up merchandise they ordered online.
(Illustration by SmallBusiness.com from image by Google Street View)