February 07, 2012, 8:30 AM — So one of this week's juicy rumors is about Amazon getting into the brick & mortar retail business. As far as I can figure out the story started at Goodreader.com who sited the always mysterious "sources close to the situation."
The story goes that Amazon is building a boutique retail store in Seattle as a test run to see if a chain of similar stores would be profitable. According to the story the test store will open in the next few months.
So what do we think about this rumor? My take is that while Amazon might be opening a store in Seattle, it's going to be a one-off or at most one of a very small-scale chain. The beauty of shopping at Amazon is convenience and, at least for those of us who live in states with a significant tax (6.25% here in Massachusetts), avoiding sales tax. Right now Amazon only collects sales tax in states where they have a distribution center. As soon as they plunk down a retail store they have to start charging tax and customers like me start going elsewhere.
My opinion is that such a change would significantly hurt their online sales. Goodreader acknowledges this and says Amazon is "currently working out the logistics and tax loopholes before they launch." I'm really dubious that such loopholes exist, and I don't believe that the loss of online revenue would be balanced out by brick & mortar sales.
Of course I'm neither an accountant nor an analyst, just a guy with a blog.
Now various states have been gunning for Amazon for a while, trying to find a way to force them to collect sales tax in all states that have such a tax. It could be that this Seattle store is a way for Amazon to get their feet wet in brick & mortar just in case they lose this battle with the states. Once they have to collect sales tax there's no reason for them not to offer a brick & mortar store, so maybe this rumored chain of store will be limited to Washington and states where they currently have a distribution center (as well as states with no sales tax) for now, and ready to expand beyond that if/when they lose their battle with the taxman.
Still, what would you expect to find in an Amazon boutique? Certainly they couldn't offer the huge catalog of books and, well, stuff that we can buy from Amazon.com. Kindles are an obvious choice but you can already buy a Kindle in many retail locations. Books? Sure, but if we wanted to go to a brick & mortar store to buy books, Borders would still be around and Barnes & Noble's physical stores would be thriving.
I'm just not seeing the angle that Amazon sees (if the story is in fact true). Is anyone else? Please leave a comment with your thoughts on why a chain of Amazon brick & mortar stores makes sense. I'm crowd-sourcing this one because I just don't get it!
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