Originally published on February 13, 2001 and brought to you today as a time capsule.
When you examine the state of e-commerce today, one thing is abundantly clear: traditional brick-and-mortars are making the greatest inroads online.
So what’s to stop Amazon.com, the Internet’s most recognized brand, from reversing this trend and leveraging its name to open brick-and-mortar stores of its own?
After all, according to research firm Media Metrix, six of the top 10 gaining retail sites for the holiday shopping season were traditional offline brands such as Walmart.com, BestBuy.com and Sears.com.
So what’s holding Amazon back? Simple — it’s money, honey.
“It would take a lot of money to start up a brick-and-mortar based chain, and I don’t know that the market would reward Amazon for doing so,” Gartner Group research director Robert Labatt told the E-Commerce Times.
Amazon chief executive officer Jeff Bezos has claimed to have tons of cash reserves — reserves that could be used to open some offline stores — whether or not the company gets additional outside investment. However, Labatt pointed out that Amazon will need to use those reserves to reach the company’s goal of profitability by the end of the year.
Labatt added that Wall Street might not take a move into the real world by Amazon too kindly.
“Bezos has said all along his model is more efficient when it’s at capacity,” Labatt said. “How can you go back on that philosophy and save face on the market?”
Despite the roadblocks, the idea of an Amazon store at the neighborhood mall has to be tantalizing for those who wonder how successful pure play e-tailers can be.
From books to electronics, Amazon offers plenty of products with which to stock retail shelves. The company’s existing warehouse fulfillment centers could provide distribution channels for its theoretical offline stores.
Say Amazon then builds on its own well-known brand to create a hipper-than-thou store theme, one rivaling the ambience at such retailers as Barnes & Noble and Borders. Voila. There’s your big name brick-and-click operation.
Paved with Brick
What’s more, Amazon has already made a move in the brick-and-mortar direction. In September, Amazon launched a co-branded toy site with offline toy retailer Toys ‘R’ Us. A January report issued by Nielsen//NetRatings found that the Amazon/Toysrus.com site saw 123 million visitors during the 2000 holiday season, more than five times the traffic of its closest competitor, eToys.
“If [Amazon] were to do it, it would be best to partner with an existing organization or a failing organization that needs the strong brand Amazon has to offer,” Labatt said. “They may have already started down that path by partnering with Toys ‘R’ Us. Toys ‘R’ Us could carve out a 1,000-foot area in its store to act as an Amazon pick-up and return center.”
Standing Its Ground
However, partnerships and alliances seem to be about as far as Amazon is willing to go in the offline world. Although Amazon spokesperson Bill Curry would not comment directly on Amazon’s plans, he stated that Amazon’s focus remains in the e-commerce sector.
“Our core confidence is e-commerce, the core confidence in brick-and-mortars is real estate,” Curry told the E-Commerce Times. “We’re focused on e-commerce; that’s where our expertise is. We don’t know anything about retailing in the brick-and-mortar world.”
In the meantime, Amazon will continue to do what it does best: evolve while the rest of the Net watches its every move.
“We have seen a lot of opportunities in e-commerce to keep us busy,” Curry said.
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