5 Reasons Amazon Is Experimenting With Physical Stores

Is the online giant of retail also looking to conquer physical stores?

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Is the online giant of retail also looking to conquer physical stores?

Amazon has been dabbling in physical retail since 2015, during which time it’s opened a half-dozen bookstores that double as gadget emporia, a score of campus bookstores that don’t sell books and a convenience store without cashiers. For now, its efforts seem largely experimental, though that may not be true for long.

Although the company already dominates e-commerce, 90 percent of worldwide retail spending is still in brick-and-mortar stores, according to eMarketer. Amazon has the chance to change retail with automation and data-mining technologies borrowed from e-commerce.

“It seems counterintuitive they are investing in any physical stores when they are blamed for the demise of so many of them, but no cow is sacred,” says Sucharita Mulpuru, a retail analyst in Charlotte, North Carolina.

Amazon’s offline ambitions could even boost Amazon’s online operations further, even though they seem to be doing just fine for now. In the first three months of the year, the Seattle company earned $724 million, or $1.48 per share, a 41 percent increase from a year earlier. Amazon soundly beat Wall Street’s expectations of $1.08 per share, according to FactSet. Revenue increased 23 percent to $35.7 billion, above expectations of $35.3 billion.

Amazon doesn’t break out numbers for its retail-store operations. Amazon Chief Financial Officer Brian T. Olsavsky told investors Thursday that the stores represent “another way to reach the customer and test what resonates with them.” He said the company has been pleased with the results, but he didn’t elaborate.

Exactly what it’s learning, and what it plans to do with that knowledge, is the next big question.

Here are five ways physical stores could help Amazon.