Amazon.com, Inc. (AMZN - Free Report) yesterday opened a brick-and-mortar bookstore in New York City. The new 4.000 square-foot store is located at Manhattan’s Shops at Columbus Circle, a place popular for the erstwhile Coliseum Books. It is one of the two stores planned for the Big Apple.
The New York store joins six existing stores across Seattle, San Diego, Chicago, Portland, and Massachusetts. Amazon appears to be well prepared to implement the brick-and mortar strategy across the U.S.
Amazon is going the brick-and-mortar way with other merchandise as well. The company’s first brick-and mortar grocery store branded Amazon Go is expected to open in Seattle and will offer a “check-out free” experience to customers.
Amazon opened its first brick-and-mortar bookstore known as Amazon Books at Seattle’s University Village shopping center in 2015.
We note that Amazon’s stock has underperformed the Zacks Internet Commerce industry over the last one year. The stock has appreciated 39.4% compared with the industry’s gain of 45.3%.
Despite this underperformance, we believe there are a lot of factors that could turn the wheels in favor of Amazon. These include expansion of Prime, its brick-and-mortar initiatives and efforts around AWS. The company capitalizes on its execution strength, robust performance and technological prowess.
It’s Not Just About Books
Besides stocking 3000 books at a time, the new bookstore (like all other Amazon Bookstores) serves as a platform to increase customer loyalty to the Amazon brand.
Books are sorted on the basis of Amazon.com customer ratings, pre-orders, and sales are displayed with their front covers containing titles. The stores also display customer reviews and sales figures with the books.
The prices are the same as on Amazon.com but the books don’t have a price tag. This is Amazon’s way of making customers download the Amazon app so that they can have a look at the prices. Customers can check out like a regular bookstore or with the Amazon app.
Physical bookstores serve as a medium for promoting Amazon Prime and devices and the newest addition is not an exception. At the stores, the company offers discounts to those who subscribe to the popular annual service. The stores also showcase Amazon gadgets such as Kindle e-reader, Echo speakers and a range of AmazonBasics items.
Physical stores also help Amazon with showrooming. Its stores have friendly sales people who help customers in product search, installation and use of Amazon apps and even return of merchandise.
Amazon.com, Inc. Net Income (TTM)
Though Amazon’s strategy of opening brick-and-mortar stores is mainly to diversify its business against some tough competition from Alibaba (BABA - Free Report) , ebay (EBAY - Free Report) and Wal-Mart (WMT - Free Report) , we believe these could make for a more personalized experience that some book readers prefer. We note that every industry matures and falls. Amazon seems to be gearing up well in advance should online retail ever bottom out.
Currently, Amazon is a Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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