Over the last five years, we have all watched Amazon dominate book sales and many retail book stores have closed unable to compete. So, when I heard Amazon where opening bookstores, I was baffled. When Amazon have destroyed bookstores, why would they start to open bookstores?
On a recent visit to New York I was curious to see just what an Amazon bookstore looked like. See for yourself:
All the books were displayed by their covers, not just their spines. Far more colourful and in my opinion a better retail experience. Yet in doing this, they cannot stock as many books. The ones they do stock are fast moving - they are all highly rated on Amazon.com. Maybe that's part of their commercial advantage? In a typical bookstore, most of the books don't sell many copies, so the inventory moves slowly and you have lots of cash tied up in stock that does not move. All of Amazon's stock is popular and so inventory will move much faster with far less cash locked up.
Maybe their reason for opening is the 25% of the store devoted to electronics? Here is a category that most of us want to touch before we buy. Electronics range from Kindle Readers to the latest voice-activated device called Alexa. Perhaps, this is a smart move because we are set to have many more smart devices in our homes and maybe Amazon want to apply their data mining skills to our homes with smart fridges ordering from an Amazon retail store?
The last possible reason is to encourage more people to join Amazon Prime. Amazon Prime is an annual subscription service which costs $99 a year. But, what do you get for your money? Make your own mind up.
Well... free two-day shipping was where it started, add in same-day delivery in some US cities which some online shoppers would find addictive. What else? Well a Netflix look-alike called Prime Video, a lightning deal which looks like Groupon, Prime Reading which gives free access to some books on your reader. Surely, that's enough? How about unlimited photos storage in the cloud that sounds like a competitor to Google Photos or even Dropbox. Surely, that must be all? No, how about access to Prime Pantry a service that allows you to stock up on household goods: food, beverages, cleaning and beauty items and Amazon Dash which allows you to easily stock up on everyday household goods. Enough? Well there is even something for the kids since Amazon bought a game-streaming platform called Twitch, something for serious gamers. Last but not least is Amazon Channels which gives access to pay-tv.
This is one of the smartest strategic moves I have seen. Every strategy should be based on your competitive advantage. Imagine being on the management team of Netflix, Groupon, Google or Dropbox and asking should we open a bookstore to promote our services? They would have to be crazy to do that.
On reflection, books are where Amazon started, books are where Amazon won the hearts and minds of the customer. So, why not launch a new Amazon business from a part of the business their customers love and their customers trust? On the other side of the world, I crossed the city to visit Amazon books, yet I would not have crossed the road for an Amazon Prime store. So, the reason Amazon are opening bookstores is simple, to get their loyal book customers to buy Amazon Prime. What a smart strategic move!