Three Reasons Why Amazon Should Build a Brick-and-Mortar Store
It's a crazy idea, but there are a few reasons why it just might work.
Earlier this week, Bloomberg reported that everyone's favorite dot-com retailer, Amazon.com (NASDAQ: AMZN), had planned to open at least one retail location. If this report is true (something I highly doubt), it would seem that Amazon intends to enter a market it has spent years trying to destroy.
Aside from being counter-productive (Amazon could hurt its core business by sending customers back to into the retail environment), the dot-com giant would be required to lease several buildings, pay utilities on those buildings, hire employees to work in those buildings, hire managers to manage those employees, and perform a zillion other tasks that are not currently listed on the Amazon business plan.
In spite of the risks, the more I thought about the concept, the more I began to see that maybe Amazon should enter the retail space. Here's why.
3. Sneak Attack
No one will see this coming. Oh, sure, the rumor mill is packed with details regarding how and when Amazon might launch its first store. But no one is taking it seriously. Thus, the company's prime competitors – Apple (NASDAQ: AAPL), which owns and operates several hundred stores, and Microsoft (NASDAQ: MSFT), which plans to increase its retail presence – will not be prepared.
Target (NYSE: TGT), Best Buy (NYSE: BBY) and Wal-Mart (NYSE: WMT) will be equally oblivious to any attempt Amazon makes to enter their market. As far as most retailers are concerned, Amazon is only a threat because it offers lower prices, a larger inventory, and free or low-cost shipping. No one actually expects the company to open a chain of retailers. This gives Amazon a huge advantage.
2. Finally Someone to Show ‘Em How It's Done
Who here doesn't like Target and/or Best Buy? Anyone tired of Wal-Mart and the way other big-box retailers perform? Maybe you're tired of the tech snob atmosphere given off at many (but not all) of the Apple Stores. Whatever the case, if you're unhappy about the current state of brick-and-mortar retailers, Amazon can help.
The company may not be experienced in the brick-and-mortar realm, but it would come to the industry with an unrivaled level of retail expertise. No one knows consumer preferences, low-cost shipping, customer service, and pricing strategies like Amazon. If Best Buy thought it was suffering now, just wait until Amazon opens an electronics-focused outlet down the street. It doesn't matter if the store's square footage is 4,000 or 40,000 – if Amazon is there, consumers will quickly take notice and leave the competition behind.
It might seem like a massacre at first. But in the long run, Amazon will likely teach the competition a thing or two about how to run their businesses. This won't do any good for Best Buy, whose stores are often referred to as Amazon showrooms. But if Target and Wal-Mart can survive an Amazon assault, they will likely learn from the battle and become better corporations as a result.
1. One-on-One Branding
Apple isn't just the number-one computer and smartphone manufacturer in its class. Apple is also the only company that built a series of retail outlets to let consumers touch and interact with its latest products. This has allowed the company to brand itself as a consumer-friendly entity that offers simple and sensible, high-tech products that are unlike any other available. And since Apple's products are typically the best available, and since the customer service dwarfs that of the competition, the Apple Store concept has been very successful.
If this is the kind of thing Amazon hopes to achieve, it might as well bail on the project right now. It will be years before a company is able to successfully replicate Apple's strategy (or come up with a better one).
If, however, Amazon intends to use its retail stores to simply boost and/or reinforce its brand (and beta test future Kindles? We can dream), it could work wonders for the company. And if Amazon can host big product launches from other manufacturers (ex: a midnight launch for PlayStation 4), the stores could do quite well by attracting a variety of consumers – not just Amazon junkies.
Follow me @LouisBedigian
© 2016 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.