Amazon to save the high street! (Unverified)Posted: February 9, 2012
Is Amazon going to open a shop?
The answer is, that no one outside Amazon knows, and no one inside Amazon is telling. The rumours first surfaced in the autumn of last year, supported by this excellent artist’s impression:
– then, over the past week or so, the chatter has gone into overdrive (and so have the photoshoppers)…
So, let’s suppose Amazon opened a shop – or, more appropriately, a showroom, in downtown Seattle. How would that work? The let’s-not-think-about-this-too-carefully model would be the Apple Store, of course, but Apple’s offer is narrow and deep, whereas Amazon is wide and shallow. Apple manufactures five ranges (iMac, MacBook, iPhone, iPad, iPod; iPod is on its last legs, but iTV may take the space). The scope and capability of each of these devices (basic iPod excepted) is broad enough to support hours of happy browsing, and to ensure that Apple’s store staff are kept busy explaining evermore brilliant applications hidden in the depths of their beautifully crafted merchandise.
Everything is sold at top-of-the-market prices, earning top-of-the-market margins to support the fairly hefty occupancy costs that come with Apple’s first-class locations. The model is splendidly profitable (though I’d continue to advise Apple against over-expansion – they have about 35 stores in the UK at present).
But Apple’s is not a model that would work for Amazon. If you don’t own a Kindle, you will have played with one in a store, or had a go at WH Smith’s Kobo, and will have swiftly concluded that – brilliant though an eReader may be at delivering its simple premise – it’s a one-trick pony that doesn’t need retail real estate to support it. The Kindle Fire does more, of course, but not enough to make a standalone store a viable proposition. No doubt Amazon is considering branded phones and other technology, but their price positioning is the opposite of Apple’s, and Amazon would need a compelling argument for loading retail overheads on to their zero margin products. And aside from the Kindle, pretty much everything that Amazon sells is created, manufactured and supplied by other companies.
The other obvious model is the big bookstore – Amazon as Barnes & Noble. This idea falls at the first hurdle – big book and entertainment stores were a 20th century idea that no longer works today outside of a few major cities. Unless some sort of own-brand battle were to develop, with Amazon, B&N, BAM etc all carrying unique books in their stores and competing against each other for readers – “Better authors, better books, better prices”… I only have to write this out to see what a non-starter it is. Bookshops aren’t like fashion stores. Revenues from full-range book/entertainment stores have fallen, are falling and will continue to fall. Amazon knows this, and they won’t be opening any of these:
Of course, taking B&N as a propotype is misguided anyway – it plays to Amazon’s heritage as the world’s vastest bookstore, not to its future objective – to be the world’s largest retailer, period. This suggests an Amazon department store – nope, that doesn’t work either.
How about an update on this concept?
For readers outside the UK, Argos is a chain of catalogue shops – essentially a shopfront with warehouse space behind, selling a broad range of homewares, furniture, electricals, toys, jewellery and much more. They’re a catalogue outfit which is transitioning painfully to an integrated physical/online model; very little merchandise is on display in the stores. As a retail experience, Argos is distinctly downmarket – grim ambience, basic service, mass-market brands (though everybody shops there at some point). Mind you, that Argos logo suggests a certain synchronicity…
But all of this is a sideshow
Amazon brand showrooms would certainly be interesting, and their introduction of lockers in major cities suggests that some customers are making use of a click and collect operation. But one of the primary reasons for Amazon’s success and for their ability to blow Tower Records, Borders and the rest out of the water is their low margin/low prices model. Unless they execute a stunning strategic leap forward (eg a partnership with a major supermarket chain) the idea of physical shops as a major plank of Amazon strategy still feels premature.
It also presupposes a world in which all of Amazon’s competitors – which include not only other retailers, but also many of their suppliers as well – continue to behave as though Amazon dominance is the only plausible outcome in our retail world. The legacy copyright businesses (books, music etc) have certainly crumbled hitherto, but Amazon will only achieve pre-eminence in the rest of the retail trade if other retailers and suppliers simply roll over and let them.
The threat is being taken seriously, as US bookstore chains have decided not to carry Amazon books; now publishers need to show similar mettle, as the American Editor blog argued persuasively earlier this week.
So, I’m increasingly of the view that we aren’t on a path to an inevitable Amazon-dominated outcome, but that future will be messier and more interesting. Amazon wins when its competitors worry most about protecting their legacy, and aren’t prepared to take some short-term earnings pain as they rethink and restructure. Amazon is focused, rigorous and ruthless, but it’s a corporation, which means (paradoxically) that it’s human, which means missteps and stumbles.
Its competitors need to force those missteps and catch Amazon unawares. This means thinking themselves out of any comfortable legacy mindset into a new and bold one. Brands, copyrights and patents are immensely valuable, but their exploitation is a fluid opportunity, not an enslavement to tradition.
The book/entertainment retailers who have gone out of business fought the last war and lost; good generals develop new strategies in changed circumstances, and Amazon’s best competitors will do the same.
Tools of Change, NYC, February 2012
Enough blogging for the time being, as I am off to New York to speak and debate at the Tools of Change conference. I’m looking forward to meeting many smart people who are focussing on the future – if you’re there, I’d love to meet you, and do drop into our session on the Changing Face of Retail Bookselling, at 10:45 on Tuesday 14th. There is much to discuss!
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