Next Moves – A Guest Post from Llenrock Group
Oct 30, 2014
This post from Eric Hawthorn is part of our Llenrock Group guest post series and originally appeared on the Llenrock Group blog.
Amazon.com, one of the great success stories of the late-90s tech boom and an e-commerce juggernaut of the last decade or so, rarely shies away from surprising investors, customers, and the media alike. While Amazon (NASDAQ: AMZN) is no longer the world’s largest eCommerce company–having lost that title following Alibaba’s(NYSE: BABA) record-setting, $25B IPO–the Seattle-based company founded by Jeff Bezos is still something of a bellwether when it comes the future of internet, and to an extent, brick-and-mortar retail. Recently, news surrounding the company has been somewhat surprising. As the Wall Street Journal reported a few days ago,
Amazon.com Inc. plans to open a store in the middle of New York City, according to people familiar with the plans, the first brick-and-mortar outlet in its 20-year history and an experiment to provide the type of face-to-face experience found at traditional retailers
We’ve all seen Amazon enter and attempt to improve/disrupt other industries and services. First there was the book industry (check), then expansion to other goods and services on its website (successful), then attempts to disrupt and revolutionize the publishing industry (done), the introduction of e-readers and tablets (successful), cloud-hosting (not sure how successful they’ve been with this) and smart phones via the Fire Phone (okay, you can’t be good at everything…). Typically, we expect Amazon to move in a direction that is progressive, that breaks with tradition, but in this case, it seems to be drawing attention for its decision to expand in a more traditional way, or to fuse Amazon’s digital-commerce innovation with old-school brick-and-mortar retail. What will this Midtown Manhattan Amazon store, expected to open in time for this year’s holiday shopping season, offer its customers? How will it operate?
Amazon has been largely tight-lipped on the subject, though there are reports that customers will be able to try out select merchandise (presumably Amazon-exclusive stuff like Kindles and Kindle Fires), order other merchandise in-store, and pick-up their purchases in the same day.
And the East Coast isn’t the only place Amazon is returning to the old-school retail model. c|net reports Amazon is opening “kiosks” at two locations in San Francisco and Sacramento, California:
The stores will be set up as kiosks in shopping malls where customers should be able to check out such products as the Kindle e-reader, the Fire phone and tablets, and the Fire TV. The San Francisco kiosk will set up shop at the Westfield San Francisco Centre, a mall located in downtown San Francisco on Market and Fifth streets, not far from where many tech companies have offices.
Again, it seems that Amazon-produced technology is central to these store concepts.
So what does this mean for the commercial real estate and retail sectors? Here are some potential implications of an Amazon/traditional-retail union:
- Optimist that I am, I immediately think of the positive implications of this strategy: should Amazon continue to develop and open brick-and-mortar locations, whether store fronts, kiosks, or inline/anchor mall spaces, the company’s strong brand and unique offerings give a great advantage to landlords, who will have one more potential tenant–and one that can drive customer traffic to the property and other nearby retail stores. Amazon’s move is an investment in traditional retail real estate.
- On the other hand, Amazon’s foray into this retail scene also creates a new challenger in an already competitive retail market, and some may argue Amazon may begin to threaten even healthy retail competitors like Macy’s. (Incidentally, Macy’s operates its flagship location just blocks away from Amazon’s planned Midtown store. Coincidence?)
- Finally, this may influence other retailers, both traditional and online, to replicate Amazon’s model (which, admittedly, already seems more than a little reminiscent of the Apple Store’s showroom concept). But this is good news once again for traditional retail, as this means other online powerhouses could begin to lease space in major shopping malls and CBDs.