News & Research Archive

Why Amazon's Brick-and-Mortar Stores Are So Important

Oct 24, 2014

 

AmazonFor the first time ever, Amazon has announced its plans to expand its business beyond e-commerce and open brick-and-mortar stores. The retail giant, set to open just in time for the holiday-shopping season on the same busy street as Macy’s flagship store in New York, would mark an attempt by Amazon to connect with customers in the physical world. In addition to its permanent store in New York City, Amazon also plans to open “pop up” stores in San Francisco and Sacramento. They will open kiosks in order to sell their Kindle e-reader, Fire phone and tablets, with plans to expand to more products, based off initial sales results.

Wall Street has responded positively to the move for Amazon while others seem to think of the move as Amazon “entering the market too late.” Either way, Amazon is proving to get more serious about tapping the benefits of a retail presence. Customers will now be able to try out actual products and buy them instantaneously, rather than making purchases on a whim and waiting days for a shipment. Still, some believe that retail leaders such as Wal-Mart and Best Buy, who have converted their stores into distribution centers in order to support their online business, pressured Amazon.

Based upon industry projections, online retail is estimated to grow by $150 billion between now and 2018. However, brick-and-mortar sales are estimated to grow by about $300 billion in the same time period. By 2018, online retail will still only represent 11 percent of all overall sales in retail.

Mobile technologies will also have a dramatic impact for online to brick-and-mortar sales, as mobile sites can direct customers better to purchasing opportunities near their current location.

Why this is so important? For local retailers, Amazon’s expansion to a physical store proves we may have come full circle in meeting buyers’ demands for convenience and pricing. Brick-and-mortar stores offer the added benefits to customers, allowing buyers to “touch and feel” their products before making their purchase decisions.

For smaller boutique shops, this could also mean that new online retailers will want to work with smaller stores and display their products, all while creating “mini distribution centers” within existing brick-and-mortar stores.

What we know for sure is that buyers are always evolving purchasing behaviors. In better times like today, buyers are willing to pay more for better services. Overall market conditions are improving and the ability to see, buy, and take home merchandise is becoming the popular (yet has been a previous) trend in retail.

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Written by: Hans Hansson

E-mail: hans@starboardnet.com


Hans Hansson is President of Starboard TCN Worldwide Real Estate Services as well as a member of the Board of Directors for TCN Worldwide Real Estate. Hans has been an active broker for over 29 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email hans@starboardnet.com or call him at (415) 765-6897. You may also check out his website, www.commercialspacefinder.com.

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