Why Amazon Needs Stores

By Doug Stephens

It was reported this week that behemoth online retailer Amazon is planning to open a brick and mortar store location in its home market of Seattle.  The intent, it’s speculated, is to create a destination for the Kindle Fire and a selection of exclusive Amazon content.

Given Amazon’s size and dominance in digital channels, one has to wonder why it would bother with brick and mortar stores at all.  Surely it’s not an effort to make Amazon a household name – that’s been accomplished.  And would the unit Kindle sales of a few stores really make a strategic difference for the company?  Probably not.  In fact, one could argue that the magic of Amazon’s business model is that it moves enormous amounts of product without the burden of operating physical locations. So why stores?  Why now and to what point?

The answer may lie in one very simple truth.  When I try to picture the Kindle Fire experience, nothing comes to mind.  There is no tangible, sensory or emotional connection to the product at all. Whereas with Apple, I can clearly conjure images of crowded stores with people aged 6-60 lining up to try the new iPhone or iPad, my Kindle Fire recall is a vacuum.  And I doubt that I’m alone.

In truth, what Amazon needs to sell over and above the Kindle Fire, is the “Kindle Fire Experience” –and that’s where stores play a strategic role.  It used to be that if you wanted to demonstrate the experience of your product, whether it was snow tires or breakfast cereal, you just bought lots of television advertising.  In fact, in 1965, a mere 3 television ads in primetime bought you 80% of the viewing public!  Today, that number is closer to 117 and that only guarantees you the potential to reach your audience – there’s no guarantee your ads will actually be consumed.  I can’t think of many brands that can afford 117 primetime television ads.

The Store is the Ad

This all signals a much deeper and more historic shift in the strategic purpose of physical stores, which I’ve alluded to before; that being that physical stores will increasingly serve as a distribution channel for brand experiences as opposed to simply products.  On an escalating scale, stores, not televisions, are where people will have their first encounter with new brands and products. The store will serve as the front end of the experience, the buzz agent and the catalyst for consumer evangelism and purchases across multiple online and offline touch points.  So, the store is no longer the end of the marketing cycle but rather the beginning – the living, breathing advertisement for the brand and product.

I believe that Amazon has recognized this fundamental shift.  The question becomes whether the company that did so much to disrupt our concept of the e-commerce experience, can apply the same craft and cunning to the in-store experience.