Economy

Amazon considers opening bricks and mortar stores: Report

Patrick Stafford /

Retail giant Amazon may be exploring ways to open bricks and mortar stores, in what would represent a fundamental shift in the company’s business model after remaining online for over 15 years.

 

The rumour also comes as analysts suggest Amazon may open an Australian presence, with the company already setting up data centres and experiencing rising business from local shoppers keen for cheap deals.

According to GoodReader.com, a blog which focuses on electronic reading technology, unnamed sources have suggested Amazon is planning on opening a retail store in Seattle within the next few months in order to determine whether a chain of stores would become profitable.

The stores would focus on a “boutique” appearance, the publication claims, which would sell books from its own publishing line along with Amazon-branded eReader devices and tablets.

Telsyte research director Foad Fadaghi suggests moving from a digital-only model to a multi-channel approach isn’t as strange as it may seem.

“I can understand why they would explore such a strategy,” he told SmartCompany this morning.

“Consumers often see the internet as a discount channel, and it’s increasingly difficult to compete in a discount channel when margins are thin. There are a lot of new competitors, particularly specialists, who are discounting as well.”

“A company that has a premium brand may not be able to extract as much value from its brand retailing different discounted products.”

And that is exactly what Amazon has been doing over the past few years, analysts suggest. By establishing its own line of eReaders, tablets and its own book publishing line, Amazon is beginning to move away from being viewed solely as a discount channel, and more of a traditional provider of products and services.

Although Amazon still maintains cheap prices, Fadaghi suggests a bricks and mortar strategy may provide the brand with a higher value proposition.

“Amazon has had access to those premium products, and now they need the space to sell those experiential products.”

“We’ve said for many years that tablets are a growing product that people need to play with, and selling their own branded tablet in their own store environment is a great way to do that.”

The publication suggests Amazon may go for more of a “boutique” feel, which Fadaghi says could be an option.

“Whether they look at opening a store through traditional property, or just look at some of the more innovative pop-up options, there are plenty of different ways to do that.”

Overall though, Fadaghi says the company needs to look at how the production of its own branded products is affecting how consumers perceive its brand.

“They’re not just seen as the cheap version of a department store anymore. If they do play in that space, then they might see some pressure with other suppliers that are cheaper and more specialised.”

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Patrick Stafford

Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.

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