Amazon (NASDAQ:AMZN) announced that it would open its first physical store in New York. The idea is to test the in-person experience, a first for the 20-year-old e-commerce company, and to serve as a pickup and distribution center for customers.
The store will open in time for the holidays and will be located on the same busy street as Macy's (NYSE:M) flagship, West 34th Street, reported the Wall Street Journal. Across from the Empire State Building in Midtown, the warehouse will carry limited inventory for same-day delivery within New York, product returns, and exchanges and pickups of online orders. Primarily the location would be a place for customers to pick up orders made on the site and to serve as a distribution center for couriers.
And although Amazon has built its business on fast shipping, it couldn't compete with the immediacy of a physical store, until now.
Many analysts believe that this move proves that even a well-established e-commerce company needs to have a physical presence in order to capture consumers. In fact, in a recent report, "On solid ground: brick-and-mortar is the foundation of omnichannel retailing," analysts at A.T. Kearney reported that 90 percent of purchases still happen in stores and 95 percent of them, whether online or not, involve a physical store.
"Even for those of us who discover, shop and buy online, two-thirds of us still go to a physical store to test and trial, return or do something else with our 'online purchase.' It's called omni-channel, and amazon.com just pulled the plug on all those chicken-littles who have said the sky is falling on physical retail," said Mike Moriarty, a partner in the retail practice of A.T. Kearney.
"Online retail isn't a sustainable model," said Pete Coleman, executive VP and general manager, Point Inside, a company that helps unify digital and physical retail through mobile. "Amazon's move to open up a physical brick-and-mortar store in NYC isn't surprising, given that over 90 percent of all retail happens in actual stores. While Amazon claims the store's purpose is for 'marketing the Amazon brand,' we know the real reason is that strategically, Amazon will have to get into physical retailing in order to keep growing once they exhaust the .com channel (which may be closer than we think). The future comes in bridging the online and physical worlds of retail, which we have seen yield tremendous results when done right."
For now the physical Amazon store in New York will serve as a test. Should it fail, it would close. Should it succeed, the company would rollout to other U.S. cities.
The timing of the physical store opening is significant as Amazon and other retailers prepare for the busiest shopping season of the year. This fall, Amazon has launched several new initiatives for the holiday season, including the introduction of #AmazonWishList, which allows shoppers to add items directly to their Amazon Wish List without leaving their Twitter page. In addition, Amazon launched its Login and Pay system—already available in the U.S.—in the U.K. and Germany. The payment tool, which helps streamline the checkout process, helps Amazon shoppers to make purchases from non-Amazon sites by allowing them to use their Amazon account information to complete a transaction.
-See this Wall Street Journal article
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