The biggest shopping site on the web has its sights set on the physical world, and while that might not have a major impact on smaller businesses in the immediate future, it could have a major impact down the road.
Are you concerned about Amazon setting up shop in the physical world? Let us know in the comments.
Amazon will soon open a new brick-and-mortar store across the street from the Empire State Building, and on the same street as Macy’s flagship store. This is according to The Wall Street Journal, which says Amazon is testing this physical location concept. If it proves successful, expect to see Amazon stores in more cities. If it doesn’t, then don’t.
When envisioning what an Amazon store could look like, any number of images could come to mind. This is, after all, the largest online retailer, which offers just about anything you could want to buy and then some. Don’t expect a Walmart-like store, however (at least for now). This store is reportedly more about customer service and Amazon-branded items.
According to the report, the store will function as a “mini warehouse, with limited inventory for same-day delivery within New York, products returns and exchanges, and pickups of online orders.”
It says: “The Manhattan location is meant primarily to be a place for customers to pick up orders they’ve made online, but will also serve as a distribution center for couriers and likely one day will feature Amazon devices like Kindle e-readers, Fire smartphones and Fire TV set-top boxes, according to people familiar with the company’s thinking.”
If the experiment goes well, and Amazon expands into other locations, it’s probably not out of the realm of possibility that we’ll see the stores offer more and more types of items and grow in size. The company has already expanded its online services to include groceries (in multiple capacities). A more Walmart-like store from the company doesn’t seem incredibly far-fetched.
Amazon has operated pop-up stores for its Kindle and Zappos brands in the past, so brick-and-mortar isn’t an entirely new idea for Amazon, but a true Amazon store is something we’ve yet to see. As the company looks to sell more of its hardware, even something as simple as this initial experiment could prove very important for the company. Some stores have already stopped carrying Kindle devices in retaliation to the competitive threat of Amazon.
Amazon hasn’t officially commented on the new store yet. A spokesperson for the company even went so far as to state that the company has “made no announcements about a location in Manhattan,” though the Journal’s report seems pretty sure that it’s happening – in time for the holidays even.
Some are already freaking out over the potential for the company to come into the world of the physical storefront. New Republic says, “Amazon must be stopped,” and calls it a monopoly. That notion is being heavily debated, but the first two paragraphs of that article do a pretty good job of summing up Amazon’s power (which would only be added to in the physical realm) whether or not you agree with the monopoly premise:
Before we speak ill of Amazon, let us kneel down before it. Twenty years ago, the company began with the stated goal of creating a bookstore as comprehensive as the great Library of Alexandria, and then quickly managed to make even that grandiloquent ambition look puny. Amazon could soon conjure the full text of almost any volume onto a phone in less time than a yawn. Its warehouses are filled with an unabridged catalogue of items that comes damn close to serving every human need, both basic and esoteric—a mere click away, speedily delivered, and as cheap as capitalism permits.
Rather than pocketing the profits from this creation, Amazon has plowed revenue into bettering itself—into the construction of well-placed fulfillment centers that further hasten the arrival of its packages, into technologies that attempt to read our acquisitive minds and aptly suggest our next purchase. Shopping on Amazon has so ingrained itself in modern American life that it has become something close to our unthinking habit, and the company has achieved a level of dominance that merits the application of a very old label: monopoly.
It goes on to put Amazon in the company of Walmart and Google with the “monopoly” label. It also talks about how Amazon has left “competitors undercut” and “suppliers squeezed,” and brings up the recent dispute with publisher Hachette.
It’s a long and interesting article that’s worth reading, but some have taken issue with it.
Vox, for example, writes:
The simple fact of the matter, however, is that Amazon doesn’t have any kind of monopoly. In the sale of physical objects it faces fierce competition from the likes of Walmart (whose market capitalization is still worth about $100 billion more than Amazon’s), Target, Home Depot, Ikea, the Gap, and other major retail chains. In the sale of digital goods it faces fierce competition from Apple and Google. It is true that in some of these markets Amazon has a rather dominant market share. But having a lot of the market is not the same as having a monopoly. A monopoly needs to involve a lack of choice and some kind of barrier to entry. Everyone gets their e-books from Amazon because they’re just as cheap as Apple’s e-books, but they work on a much broader range of devices. But if Amazon started offering an inferior e-book product to Apple’s, then customers could and would switch.
One important hint about Amazon’s non-monopoly status can be found in its quarterly financial reports. That’s where you find out about a company’s profits. In its most recent quarter, for example, Amazon lost $126 million. Losing money is pretty typical for Amazon, which is not really a profitable company. If you’d like to know more about that, I published 5,000 words on the subject in January. But suffice it to say that “low and often non-existent profits” and “monopoly” are not really concepts that go together.
New York Magazine similarly disputes the notion that Amazon is a monopoly, saying:
Amazon is a fearsome competitor forcing other retailers to compete or die, to be sure. It also might be a bad actor, and its harassment of Hachette might necessitate a legal, regulatory, or even legislative response. But it is hard to see how it is a monopoly.
Amazon does have something like a monopoly over the books market, and that monopoly has become harmful, as evidenced by its deplorable treatment of Hachette. But this is cherry-picking. Books are Amazon’s oldest business, and the one where it controls the biggest market share.
Regardless of how one views the situation, an expansion by Amazon into the brick-and-mortar world (especially if it starts hurting established offline retailers significantly) is going to do little to quell the notion that it is a monopoly by those who perceive it to be.
A lot of people don’t see Google as a monopoly, but that hasn’t stopped huge government probes, in some cases requiring changes to the company’s business.
At least players like Walmart have the resources to take the company on. It’s the small businesses like those who were already hurt by the Walmarts of the world in the past, who may really be concerned, should Amazon stores start popping up everywhere like Walmarts have. On the other hand, at least Amazon enables third-party businesses to sell things too, so there could be some opportunities for the little guys as well.
Obviously it’s way to early to know how things will play our or even if this becomes a concern. First, Amazon has to open a store, and then it has to be successful enough for the company to expand the project.
Do you think Amazon is a monopoly or will become one? Share your thoughts in the comments.
Image via Wikimedia Commons
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