Commentary: These are the type of stores Amazon should open

It makes no sense for Amazon.com to open the type of physical bookstores it helped obliterate, not when the online giant already has the physical infrastructure in place to support a large scale rollout of another type of store in one of retail’s hottest sectors.

The notion that Amazon.com wants to open hundreds of physical books stores has been fueled by several recent developments. A physical book store did open last fall in Seattle amid great fanfare because of the symbolism. Other recent physical moves have seen Amazon.com open pick-up locations on college campuses to more effectively fulfill online orders.

However, what really put the retail industry in a tizzy was a comment about Amazon.com by General Growth Properties CEO Sandeep Mathrani during the company’s fourth quarter conference call.

Responding to an analyst question about holiday traffic, Mathrani offered a wide-ranging response and made a passing reference to his “understanding” that Amazon.com has a goal of opening 300 to 400 book stores. A day later, a statement by General Growth sought to clarify things by noting the statement, “was not intended to represent Amazon’s plans.”

Who knows what Amazon.com’s plans are, really, other than founder and CEO Jeff Bezos? While it could make sense to operate some flagship properties in high profile locations to elevate the brand and keep the world buzzing about Amazon, the impact on sales would be negligible, and therefore of questionable value, unless the “stores” were to fulfill an mission more expansion than the typical Barnes & Noble.

The more immediate opportunity is for Amazon.com to capitalize on the red hot off-price, closeout, liquidation space with Amazon.com Outlets. These stores already exist in a sense because Amazon.com offers “Warehouse Deals” which are discounted prices on open box products, like-new returned goods or pre-owned products. Huge quantities of these goods sit locked away in Amazon’s expansive network of more than 100 U.S. fulfillment centers, many of which are located in close proximity to major population centers.

Turning a portion of these facilities into Amazon.com Outlet stores accessible to the public would be hugely popular and beneficial to Amazon.com’s bottom line. Americans' love discovering a deal and what better way to do so than taking a road trip to the actual Amazon.com warehouse. A portion of the facility would be set aside to present merchandise in a no-frills manner and encourage the type of treasure hunting that makes the Costco, Dollar Tree and T.J. Maxx store experience popular. Sure, there would be some operational and staffing issues to work out, but nothing an enterprising company like Amazon.com couldn’t figure out.

The Amazon.com Outlet could also serve as a way to enhance the value of the Prime membership and encourage others to sign up since access to the Outlet would be restricted to Prime members.

Another benefit would be avoiding the shipping costs Amazon.com incurs to transport its Warehouse Deals and other returned merchandise to customers. It would essentially shift the supply chain costs to consumers who would be thrilled to have the opportunity to visit a fulfillment center and realize additional savings by carting their purchases home.

Amazon.com doesn’t need to open outlet centers any more than it needs to open more physical book stores to grow and gain more share.

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