NEW YORK — Is the online giant of retail also looking to conquer physical stores?
Amazon.com has been dabbling in physical retail since 2015, during which time it’s opened a half-dozen bookstores that double as gadget emporia, a score of campus bookstores that don’t sell books, and a convenience store without cashiers. For now, its efforts seem largely experimental, though that may not be true for long.
Although the company dominates e-commerce, 90 percent of worldwide retail spending is still in brick-and-mortar stores, according to eMarketer. Amazon can change that with automation and data-mining technologies borrowed from e-commerce.
“It seems counterintuitive they are investing in any physical stores when they are blamed for the demise of so many of them, but no cow is sacred,” said Sucharita Mulpuru, a retail analyst in Charlotte.
Amazon’s offline ambitions could boost Amazon’s online operations further, even though they seem to be doing just fine. In the first three months of the year, the Seattle company earned $724 million, an increase of 41 percent from a year earlier.
Revenue increased 23 percent to $35.7 billion.
Amazon doesn’t break out numbers for its retail-store operations. Amazon Chief Financial Officer Brian T. Olsavsky told investors last week that the stores represent “another way to reach the customer and test what resonates with them.” He said the company has been pleased with the results, but he didn’t elaborate.
Exactly what it’s learning, and what it plans to do with that knowledge, is the next big question.
At Amazon’s six physical bookstores — six more are on the way — books are arranged on shelves face out. While that takes more space, Amazon isn’t trying to cram all its inventory into these stores; Amazon figures you can order everything else from your phone.
Amazon also devotes a lot of space to its Kindle e-readers, streaming TV devices, and other gadgets, so you can try them out before buying. Tutorials are offered on weekends.
Wedbush Securities analyst Michael Pachter said physical bookstores are good places to win Kindle converts, as “the only people who don’t have Kindles who should have Kindles are luddites who also read.”
Amazon opened its third bookstore in October, near Portland, Ore. Miriam Sontz, CEO of Powell’s Books in Portland, calls Amazon’s entry “an acknowledgement of the inability of the Internet to provide a certain retail experience that book buyers enjoy.” That includes conversations with fellow shoppers on what they’re reading, and having a book cover or blurb grab you as you walk down the aisle.
Robert Hetu, a retail analyst at Gartner, says online customers tend to go to a website knowing what they want to buy. By contrast, customers visiting a physical store often make impulse purchases, even if they go in with something specific in mind. Amazon could learn more about that serendipity from its stores and perhaps find better ways to increase impulse buying online, Mr. Hetu says.
Amazon is also testing a grocery pickup service at two sites in Seattle. Once it launches, Prime members can order groceries online and pick them up from one of these stores, or crews will take the orders to the car.
Amazon already makes heavy use of robots at warehouses to fulfill online orders. Now Amazon is trying to bring automation to retail. The Amazon Go convenience store in Seattle uses sensors to track items as shoppers put them into baskets or return them to the shelf. The shopper’s Amazon account is automatically charged. The store is expected to open to the public soon, after a test with Amazon employees.
Amazon not only saves money on cashiers but could use the data to manage inventory and even assess when to discount items, said Ms. Mulpuru, the retail analyst.
Mr. Hetu suggests that Amazon might even license its technology to other retailers, the way it rents out its data centers to businesses and groups to power their websites and other digital needs. That business, known as cloud computing, made up 10 percent of Amazon’s revenue in the first quarter, as sales grew 43 percent to nearly $3.7 billion.
First Published May 2, 2017, 4:00 a.m.