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Amazon opens a new chapter with plans for brick-and-mortar bookstores

In what might seem at first glance like a parallel sci-fi universe within the retail economy, online giant Amazon, the company that broke the back of the Borders bookstore chain five years ago, confirmed last week that it plans to open a third brick-and-mortar bookstore on the West Coast.

The Seattle Times on Friday reported that the behemoth of online retailing will open a bookstore at the Washington Square mall in Portland, Oregon. Amazon already has a store that’s up and running in Seattle and, according to the San Diego Union-Tribune, plans to open another store near the University of California, San Diego, campus this summer.

Observers have differing views about whether Amazon’s foray into more traditional sales venues is part of a bold new business strategy or simply a more experimental toe-in-the-water approach.

“I would hazard to guess that before the end of 2017, we’ll see between 50 and 75 Amazon stores in the U.S. market,” Doug Stephens, a retail futurist and the author of “The Retail Revival: Re-imagining Business for the New Age of Consumerism,” said in an email to AMI Newswire.

Stephens said that Amazon’s main motivation for creating a chain of retail outlets is the company’s difficulty in getting people to purchase its array of digital devices, including the Kindle Fire, Fire Phone and the new Amazon Echo. The latter is a wireless speaker that users control with their voice, allowing them to tap into different services that provide news, music, sports scores and the weather forecast.

“Much of their inability to sell these devices has been because they haven’t had the advantage that a company like Apple has had of being able to get the products into people’s hands and allow them to try them in a physical store setting,” Stephens said.

The new Amazon stores will give customers a chance to try out the digital devices and showcase how the company offers an array of products built around publishing, news, music and entertainment, he added.

Charles O’Shea, a retail analyst for Moody’s Investors Service Inc. in New York, noted that Amazon currently depends on third-party carriers to complete online deliveries. The company absorbed billions of dollars in shipping costs last year, O’Shea told AMI Newswire, and anything it can do to better control that “final mile” of customer deliveries is a positive development.

With more physical locations come more opportunities for the company to reduce its need to outsource deliveries, O’Shea said, but it’s also true that Amazon may not yet have an overall brick-and-mortar strategy.

“It’s too early to draw conclusions about the end game,” he said. “It will be interesting to see how deep they want to go.”

O’Shea said that despite Amazon’s dominance in online commerce, about 90 percent of retail sales still take place in physical stores these days, though online sales are increasing at a greater rate than sales in traditional outlets.

According to Amazon’s 2016 news releases, the company also announced plans to open eight new pickup locations — most of them near universities — this year. These staffed locations will allow customers to pick up and return Amazon orders.

During the annual Code Conference — a meeting of leaders in the digital technology industry —  that concluded earlier this month in Rancho Palos Verdes, California, Amazon’s chief executive officer, Jeff Bezos, said of the new Amazon bookstore plans, “We opened one and announced another and will probably open some more.”

Bezos said the company is currently rolling out experiments and learning from the experience of having opened a bookstore in Seattle. The Amazon bookstores will allow the company to provide their customers with a new kind of experience rather than serving customers who are simply looking for a specific book title, he said.

“It’s about browsing and discovery and having a really fun space to wonder around in,” Bezos said during the conference, adding that independent bookstores are currently seeing a rebound in their fortunes.

He described Amazon’s bookstore prototype in Seattle as carrying a relatively small number of titles — 5,000 — that are chosen based on data the company has acquired.

Amazon is currently trying to figure out the optimum store size for its needs and seeing how the stores will fit in with its Amazon Prime memberships, which provide subscribers with services such as the ability to borrow books from the Kindle Owners’ Lending Library, Bezos said.

At the Seattle bookstore, books are displayed on shelves with their front covers facing the customer, and visitors can also try out all the company’s digital devices.

Stephens said his prediction on the expansion of the Amazon bookstore chain is based on the importance of having a physical presence as well as his observation that the company assigned a dedicated team to the project.

He added that the stores would also ease delivery costs by providing drop and return locations for Amazon’s online orders.

“These costs represent a significant drag on Amazon’s profitability,” Stephens said, “so if they can create a more efficient supply chain by dotting the landscape with small, multi-use stores where customers can pick up orders or drop off returns, it will help their financial results immensely.”