6 Reasons Why Amazon May Be Perfectly Situated to Open Hundreds of Stores

Sandeep Mathrani, the CEO of mall development giant General Growth Properties, got many folks' attention on an earnings call late Tuesday afternoon, though the reason had nothing to do with his company's financial performance. According to The Wall Street Journal, Mathrani—speaking about mall foot traffic—said, "You've got Amazon opening brick-and-mortar bookstores and their goal is to open, as I understand, 300 to 400." Adweek emailed Amazon PR but didn't receive a reply by press time, though the e-retail giant has declined comment to other media outlets. So, we asked a few retail experts for their take on the possibility of an Amazon store chain. "It validates that people still want a brick-and-mortar store," said Bob Phibbs, founder of the consultancy The Retail Doctor. "And it shows you should never underestimate Amazon." While Amazon opened a store in Seattle last fall, it still seems counterintuitive that the brand would expand into the chain-store business on such a large scale. After all, isn't that the space it has so thoroughly disrupted over the past two decades? But, to the contrary, our trio of experts offered these six reasons why it would make a ton of sense if Amazon did venture big into bricks and mortar: 1. Location and purchase data Because Amazon has roughly a quarter of a billion online customers, it knows an incredible amount about about Jane and Joe Shopper. "They know where the best customers are," Phibbs said. "So they know where the best places are." Indeed, the e-retailer can map out the cities and neighborhoods where people spend the most money and then open a store there. 2. Real-time shopping stats "Their massive amount of data will definitely affect product mix and pricing," said Michael Koziol, managing director of digital agency Huge's Atlanta office. Indeed, such insights will give Amazon an edge on the stores down the street. At the same time, Koziol doesn't think Amazon's online stats will help it design store layouts. "They'll still have to design the best physical stores," he said. "The stores cannot be some version of the website." 3. Device marketing Doug Stephens, founder of the consultancy Retail Prophet, said Amazon will be able to market and distribute their devices—such as Echo, Kindle Fire and Dash buttons—like never before. The tactile act of holding a piece of technology can influence people to take out their credit cards. "Bookstores are merely a convenient Trojan horse to get [its devices] into people's hands," Stephens said. "These devices are the ultimate gateway to all that Amazon has to offer and a key component of future growth. The inability to showcase these products in a physical way has long been an impediment they need to solve." 4. There's plenty of commercial real estate available Amazon has driven many brick-and-mortar stores out of business—there's no question about it. And that's opened up more commercial real estate vacancies than the marketplace has seen in decades. So, CEO Jeff Bezos' team will pore over the data to find the best locations, and then it will have various options in terms of exactly where to open stores. "I'm guessing these stores will be about 3,000 to 5,000 square feet—boutique real estate spaces," Phibbs said. 5. It's safe to go outside again Koziol of Huge suggested the time is perfect for Amazon to expand offline. The chaos that online retail has caused the physical marketplace has settled down considerably. In other words, the earthquake-like disruption has subsided, and it's safe to go outside again. "The jeopardy has been realized," Koziol said. "So it's the right time to do it." 6. Most retail sales still happen offline While Amazon and other online retailers have chewed away at physical stores' sales, e-commerce still only makes up 9 percent of the overall space, according to Forrester Research's 2016 forecast. Hence, there's plenty of money to be made offline. "While online is and will continue to make up a huge percentage of total retail sales, physical storefronts remain a key factor among merchants and consumers alike," said Nicole Leinbach Reyhle, founder of the retail blog Retail Minded. "What will be interesting to observe is how Amazon may shift their pricing in their stores versus online with the overhead of physical stores certainly impacting this."

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6 Reasons Why Amazon May Be Perfectly Situated to Open Hundreds of Stores

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Christopher Heine

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