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Amazon’s Bricks And Mortar Stores With A Digital Twist

While many brick and mortar stores are moving their sales online, Amazon is reversing and rerouting its online audience to shop at its tech-savvy physical locations. More than anything this may mean a start of a very different kind of economy.

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The e-commerce giant is set to open a 4000-square feet bookstore in Manhattan's Time Warner Center in New York. Last year, Amazon released an annual top 20 list of most well-read cities, which ranked Seattle as number one, followed by Portland. Today, Amazon Books has stores in both these cities in addition to San Diego and is most likely opening four more in Chicago-IL, Dedham and Lynnfield, MA and Paramus- NJ.

By expanding its brick and mortar model across cities, Amazon is entering into the very physical market it once disrupted through its vast online infrastructure and huge network of fulfillment centers. With Amazon Books and one-hour/same day delivery option for Amazon Prime members, the online retail giant plans to integrate the benefits of online and offline shopping. Many of the hubs like Amazon Prime Hub are stocking high volumes of popular but limited line of products that include bestseller books and can be easily delivered in 1-2 hours.

In late 2014, Amazon opened a 40,000 square foot Prime Now Hub to accommodate its customers in Manhattan with same-day delivery. Over the years, Amazon Prime Now Hubs have expanded and positioned additional small fulfillment centers close to the central hubs of many metropolitan cities rather than faraway warehouses. Though the data on Amazon distribution centers remains sparse, it is believed that there are currently 42 Amazon Prime hubs and around 34 small sortable that generally store small items like Books and DVDs.

In February 2016, CEO of General Growth Properties Inc., Sandeep Mathrani had told The Wall Street Journal that there may be as many as 300 to 400 brick and mortar bookstores coming up. This could mean more competition to independent retail bookstores who already have an additional problem of rising rents and number of outlets.

But interestingly the physical retail shift of the online retail giant is not only limited to books. Earlier this year, Amazon revealed an advertisement that got it 40 million views but remained publically accessible to Amazon employees: Amazon Go.

Amazon Go created a utopian atmosphere that showed customers shopping in a hi-tech environment: no cashiers, no long ques and no checkouts. The company states, “Our checkout-free shopping experience is made possible by the same types of technologies used in self-driving cars: computer vision, sensor fusion, and deep learning.”

Amazon’s Just Walk Out Technology may be more than just challenging established retailers. The introduction of Amazon Go and Amazon Books could be restructuring the economy.

The online retail giant first announced its brick and mortar bookstore at University Village, an upscale mall in the city of Seattle. The project was kept wrapped under the secret code name of ‘Project Anne’. A year later, Amazon opened its third store in Portland, home to the world’s largest bookstore independent bookstore, Powell’s books. Interestingly in 1996, Powell’s had declined an offer made by CEO Jeff Bezos to be Amazon’s sole supplier.

The books kept in these stores are based on customer ratings, pre-orders, favorites on Goodreads and curators’ assessments. Through price comparisons, steep discounts, book ratings and reviews and shipping comfort, the app allows readers to physically go into Amazon Books store and browse through books and other Amazon products like Kindle and Echo. They can scan their favorites and place the order online.

In 2011, the liquidation of the second largest bookstore in the US, Borders Group Inc. came at the cost of 11,000 jobs with reasons of growing online competition, high rental rates and increasing debt. In 2001, Borders outsourced its online bookselling to Amazon.com but ended the 7-year relationship, only to digitally branch out independently.

Barnes and Noble too shifted its focus on increasing its online sales to strengthen its digital presence and in 2009 released Nook - a competitor to Amazon’s Kindle. But Nook sales have been falling since 2012 and in its recent financial statements, Barnes and Noble reportedly faced its first total sales drop in three years. It has so far closed many of its stores from 798 in 2008 to 640 in 2016, even though the closedown rate has been slowing each year.

Observers believe that with the advent of Amazon Books, shutdowns of physical independent bookstores are likely. A recent Pew Research study shows that readers prefer books in print than in electronic format which means that physical bookstores still have a certain appeal which may not be wholly replicated through e-books.

In 2016, Powell’s Books CEO, Miriam Sontz told CNBC, "People have tried, and it's just not the same experience. It doesn't have the same serendipity. It doesn't have the same sense of community."

So far, Amazon Books seems more of a novel idea residing in a limited space driven by technology but if it keeps the literary culture intact, then it may just be worth it.

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