Amazon's NYC bookstore is not really for selling books

Daniel Roberts
Writer

Amazon opened its first New York bookstore this week, its seventh physical bookstore in the US, in the upscale Time Warner Center shops at Columbus Circle in Manhattan.

Opening up physical bookstores may look like a strange move for the company accused of killing off physical bookstores. But the stores serve a number of strategic purposes for Amazon, and selling books may be the least of them.

Most media discussion of the store has centered around the method of display: books are shelved with the covers facing out (as opposed to the spines) and with a user review from Amazon.com below every book, plus the number of total reviews the book has and its average score. Only books with 4 stars or higher can earn a spot in the stores, with the exception of a few new releases.

Most of the sections are organized based on data from Amazon.com (Highly Rated: 4.8 Stars & Above; Frequently Wished-For on Amazon.com; If You Like, You’ll Love) or data from Kindle (Page Turners: Books Kindle Readers Finish in 3 Days or Less).

A display shelf in Amazon’s bookstore (Daniel Roberts)

All of this has led to the criticism you’d expect the book world to have when the big bad guy moves into town: Quartz wrote that the store “sucks the joy out of buying books.”

But the other striking characteristic of the store is a large section for products that aren’t books: Amazon hardware devices like the Echo and Echo Dot.

That’s no afterthought. Think of Amazon’s physical bookstores as a proving ground for its many other, larger brick-and-mortar plans.

A test for future Amazon stores

“This is a way for them to figure out how to do physical stores,” says Spencer Millerberg, CEO of e-commerce researcher One Click Retail. “Amazon started [in 1994] in physical media like books and CDs that were easy to stock and sell cheap and didn’t expire. Now they’re doing consumables, groceries, clothing, and what they’re trying to do there is really, really hard. They don’t understand the minutia and mistakes they’ll make in the meantime. This store is just a beachhead for Amazon in order to get into consumables, clothing, and electronics, all in physical retail.”

Indeed, Amazon had planned to open its first Amazon Go, a cashier-less convenience store, in Seattle in early 2017, but in March it delayed the opening. That may signal it hasn’t quite figured out the kinks of brick-and-mortar yet.

The bookstores could be useful for some of Amazon’s other business endeavors, too. “They’re never going to tell you, but you can sense that you might need a physical location for drones to do delivery,” says Millerberg. “Having these stores act as distribution hubs is not a bad way to go, or having these function as a physical place to touch and smell their devices is not a bad way to go.”

And of course, it’s yet another Amazon venture that it hopes can buoy Prime memberships. The store is cashless: you must pay with a credit or debit card, or Amazon Prime members can check out with the Amazon app (and get a discounted price).

Using a bookstore as a showroom for Amazon devices

There’s a dirty word in the bookstore business: “showrooming,” which refers to when people browse a physical bookstore (or Best Buy or Macy’s) to make decisions, then buy nothing and go home and order the books online. The irony is that in Amazon’s store, showrooming is encouraged, and feeds itself: people can browse physical books and then buy them on their own Kindle instead (right in store), or do the same for Amazon tech gadgets, a la Apple Store.

Jennifer Cast, VP of Amazon Books, in an interview at the store, rejected the showroom label, but then went on to describe the store as exactly that.

“I wouldn’t call it a showroom,” she said. “The way that people use showrooming in retail—we’re fine with that too—but with our devices, customers have been asking for a place that they can test drive for a long time. And here, not only can you see the Kindles, and they’ve got books on them, but Echo can play books on Audible, so there’s obvious synergy between our devices and books. We are completely agnostic here. We have a lot of physical books in this store, and our goal is not to showroom, our goal is to encourage you to discover a book. But if you want to buy an Audible book, or a Kindle book, or you don’t want to schlep the big cookbook that you found and loved, ship it home, we don’t care.”

Amazon now sells more in groceries and clothing than books

Physical media (books, DVDs, physical video games) made up $8 billion of Amazon’s $136 billion in total sales in 2016, according to One Click Retail. Consumables (grocery, fresh, beauty products) surpassed that at $9 billion. Apparel (including shoes and handbags, too) was bigger yet, at $11 billion. Hard-copy books are now Amazon’s smallest category, apart from digital books ($3 billion).

In other words: the table stakes for Amazon’s bookstores are low. But what it stands to gain is knowledge and lessons for additional brick-and-mortar efforts down the road.

What booksellers have to fear

That’s not to say that smaller booksellers don’t have to worry about Amazon invading their space. On the Amazon store’s grand opening day, multiple shoppers inside told Yahoo Finance they were impressed with the presentation of the books—many noted the covers facing out and liked the change—and said they plan to return. (See the Yahoo Finance video at the top of this page, from the grand opening.)

Jay DePaolo, owner of the wellness-focused specialty bookstore Choices in Manhattan, predicts, “The initial brick-and-mortar store will cause a great deal of excitement because it is Amazon and it is something new.” But he isn’t too worried in the long run, because he’s not convinced Amazon can change buyer behavior back to physical stores: “Once the initial hoopla is over, if people can get it online cheaper and faster, especially the youth, [Amazon] will phase this out and within three years they will close the stores. Look at what happened to Borders and Barnes & Noble.”

Independent and specialty stores like DePaolo’s have proven an exception to the larger brick-and-mortar crisis, and there’s something Amazon’s store has in common with the bookstores that do remain today: they contain quite a lot of items that aren’t books. DePaolo says his store once sold 75% books and 25% gift items; it’s the opposite balance now. “I believe in today’s market if you’re not doing several things in your business, you won’t last,” he says. “Today you have to wear many hats.”

Even if selling books is a secondary goal, if the store does well you can trust Amazon will open more of them. For now, it has two more planned in New York City this year.

Daniel Roberts is a writer at Yahoo Finance, covering technology and media.

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