Amazon’s Brick-and-Mortar Folly

Feb 7, 2012   //   by Michael   //   Blog, Posts  //  Comments Off on Amazon’s Brick-and-Mortar Folly

Word in the blogosphere is that Amazon.com plans to open a brick-and-mortar retail store in Seattle in the coming months. According to an article in The Fool, quoting a blog post from Good Ereader, “Amazon’s store would sell high-margin items including e-readers, its Kindle Fire tablet, and Amazon-published books.”

This would be folly.

Amazon built itself on being a disruptive business. Now, by building a physical store, Amazon threatens to entrench itself with a right turn into the very business model that it so thoroughly upended.

Amazon’s key competitive advantage – and its core competency – is that it is a cloud-based store. That core competency includes tightly managed overhead costs, no sales tax and minimal employee salaries. For a behemoth like Amazon, it runs a lean organization. Opening a physical store not only would be confusing branding: Amazon practically defined the online shopping experience through low costs, aggressive pricing and superb supply-chain management; but also would go against the grain of what Amazon has become known for: Knocking brick-and-mortar competitors such as Borders out of the book business.

Apple strengthened its position by opening brick-and-mortar stores in 2001 because they allowed the curious general public to see, touch and experience their products. This was but one more piece in Apple’s consolidation of the brand buying experience. An Amazon store would do the opposite, as the Amazon experience lives online, not in stores, and is not tied to any particular product – not even the Kindle. Amazon IS online shopping.

Article referenced in this post: Rumor Report: Amazon’s New Retail Store

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