Why is Amazon opening hundreds of book stores?

No, Amazon Isn’t Crazy to Open Brick-and-Mortar Bookstores

No, Amazon Isn’t Crazy to Open Brick-and-Mortar Bookstores

A blog about business and economics.
Feb. 3 2016 4:42 PM

No, Amazon Isn’t Crazy to Open Brick-and-Mortar Bookstores

Amazon founder Jeff Bezos speaks in Washington, D.C., on Jan. 28, 2016.

Chip Somodevilla/Getty Images

The Wall Street Journal headline sounds like a joke: “Amazon Plans Hundreds of Brick-and-Mortar Bookstores, Mall CEO Says.” That mall CEO, the WSJ reports, claims that the online retailer will open hundreds of physical stores—“as I understand, 300 to 400”—to go along with its single physical location in Seattle. The irony is too delicious to ignore: Amazon, the company that helped destroy countless bookstores, independent and corporate alike, may be wandering into the realm of brick and mortar. But why would it want to? Is this for real?

As the New York Times explains, there may be some kernel of truth here, even if the company’s unlikely to roll out quite so many physical locations. Amazon itself has declined to comment on the matter, and that mall CEO—Sandeep Mathrani, the head of a company called General Growth Properties—hasn’t expanded on the remarks he made on an earnings call earlier this week. There’s reason to believe that there’s something to Mathrani’s remarks, though, because such a move from Amazon would make a surprising amount of sense.


Bookstores aren't quite thriving these days, but they're not in a state of steady decline either. Data from the American Booksellers Association indicates that retail store sales were generally up last year, if only slightly. That steady state may have been enough to capture Amazon's interest, especially given the other possible advantages: Generally speaking, we assume that retailers save money by minimizing their physical presence. As the Wall Street Journal points out, however, opening up more physical stores can help to lower delivery costs. In this regard, these hypothetical Amazon stores wouldn’t just serve to open up new profit channels; they also might help to improve old ones. Matthew Yglesias likewise proposes that Amazon might be looking to streamline its infrastructure, using retail locations to improve on same-day delivery and other benefits of its Prime service.

In this regard, the e-commerce behemoth may actually be learning from smaller online retailers. Companies, such as Warby Parker, which were formerly online-only properties, have increasingly begun to open retail locations. In some cases, these moves may be effectively promotional, a kind of advertising for the brands that has the bonus of allowing them to move inventory. But in many cases, real-world stores help retailers meet customer needs that are difficult to satisfy online and allow them to engage with customers more personally.

Human fallibility is a factor here too. Retail stores encourage customers to try out items that they might otherwise refrain from purchasing, since physical locations make it easier to return an item that disappoints. This was apparently a key factor for Saks Fifth Avenue parent Hudson’s Bay Co. when it purchased online flash sale site Gilt Groupe earlier this year. Some analysts have suggested that’s a consideration in Amazon’s possible brick-and-mortar move as well. As the Wall Street Journal suggests, customers may be more willing to take a chance on an impulse purchase in a physical store—all the more so if they know they can easily renege on their purchase later. In this regard, it’s likely no accident that Mathrani first floated the Amazon rumor in the context of discussing increased mall foot traffic from customers returning unwanted online purchases.

Returns may be less pressing for booksellers than they are for other merchants, but that doesn’t mean physical stores don’t offer other advantages over a website: Whether or not it’s Amazon’s true intent, the company’s  stores—should it ever open them—may work best if they're pleasant places to be, contributing to collective pleasure instead of simply assuaging personal regret. For most of us, reading is a fundamentally solitary act: To take up a book is typically to embrace silence. Nevertheless, bookstores as such may be at their best when they move beyond algorithmic personalization, looking to the interests of entire communities, much as Waterstones has in the U.K. Amazon’s done a terrific job of targeting us in our individuality, selling us on products that appeal specifically to our tastes. With its still hypothetical brick-and-mortar stores, it may have the opportunity to let us expand our palates.

Regardless of what it’s up to, it’s clear that Amazon has money to burn, even if that means making things even more uncomfortable for Barnes and Noble in the meantime. In fact, that might be exactly its intention.