The Wall Street Journal reports today that Amazon will open its first brick-and-mortar store in Manhattan. Here's the description of the first site:
Amazon’s space at 7 West 34th St., across from the Empire State Building in Midtown, would function as a mini warehouse, with limited inventory for same-day delivery within New York, product returns and exchanges, and pickups of online orders. The Manhattan location is meant primarily to be a place for customers to pick up orders they’ve made online, but will also serve as a distribution center for couriers and likely one day will feature Amazon devices like Kindle e-readers, Fire smartphones and Fire TV set-top boxes, according to people familiar with the company’s thinking.
What do we make of this move? As an experiment, it may serve a very useful purpose. Innovative companies test ideas and conduct well-designed experiments frequently. They recognize that such experiments may fail, in the sense that they do not achieve desired business results. However, they view them as successful if tons of learning emerges from these tests. Could this site in Manhattan drive a great deal of learning and innovation at Amazon? Definitely. However, the logic of a major brick-and-mortar expansion at Amazon escapes me. Leasing incredibly expensive space in the middle of Manhattan to serve as a place for customers to pick up online orders does not seem to make economic sense. If the store is meant to be a flagship, focused on providing a fun and engaging retail experience for showcasing the firm's digital products, then one might be able to make a case for it. Of course, a "flagship" strategy would entail a very limited number of brick-and-mortar locations. Does Amazon need such flagship locations to build the brand and sell more digital devices? It does not seem so; they already have a strong brand and have achieved great success with the Kindle. Is the brick-and-mortar location all about same-day delivery? Well, one could achieve that without leasing high-priced retail space on 34th Street in Manhattan. It will be interesting to see how this experiment evolves, and to understand precisely what Amazon's aims are with this brick-and-mortar strategy.