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Amazon.com Retail Stores: Another Threat to Small Businesses?

I was torn when Amazon.com, the online-only retailer for books, music, and movies, became popular. I liked the convenience, but it was clear that local brick-and-mortar bookstores would have difficulty competing with Amazon’s prices in the long term. I was swayed enough to the side against Amazon when I participated in a boycott of the company when they filed for a patent for the 1-Click ordering system.

Over the years, though, I’ve come to accept Amazon.com as a part of my life as a consumer, and I shop using Amazon.com for more than just books, music, and movies. I gave into my desire for speedy delivery and joined Amazon.com Prime, as well.

BooksAmazon.com’s aggressively competitive tactics has extended recently to book publishing. With a book publishing arm, Amazon.com has the right to sell its own published books exclusively. With the new tools Amazon.com is offering authors, traditional publishers are having a hard time competing.

This week, I saw that Amazon.com is planning to open a physical, brick-and-mortar store in Seattle. It could be the first step to bring storefronts to more locations throughout the country, but that depends on the results of this one Seattle location. The purpose doesn’t seem to be to keep an inventory of books, movies, and other media on hand to sell, but to focus on Amazon.com’s own electronics, like the Kindle.

I was recently reminded of why I was wary about Amazon.com in the first place. I’ve seen what has happened to local book stores, some of which have gone out of business, and what has happened to Borders, with large, empty stores left in the wake. There are several local book stores that remain, but I can’t say whether the stores are thriving and predict how long they’ll last. I spoke with a book-lover who was mortified that I rarely shop in independent book stores and that Amazon.com is changing the landscape for consumers and hurting small business owners.

If Amazon.com extends its new store front model beyond one location in Seattle, the primary competitive target seems to be Apple, not local book stores. Yet, if the e-book, and particularly Amazon.com’s proprietary version of the e-book, becomes the preferred method of reading for more consumers, and these e-books could be purchased only from Amazon.com, local bookstores will be in danger.

What will a book store look like in the future? Will locally-owned book stores continue to exist as viable businesses?

Photo: shutterhacks [1]
O’Reilly [2], The Globe and Mail [3], New York Times [4]

20 Comments (Open | Close)

20 Comments To "Amazon.com Retail Stores: Another Threat to Small Businesses?"

#1 Comment By Anonymous On February 8, 2012 @ 10:28 am

I could easily predict book stores become more of an electronics retailer with large banners for the books. More like a movie theater, with sample versions of their products in big large flashy banners. Not sure how this will affect the book signing tours.

#2 Comment By Anonymous On February 8, 2012 @ 10:44 am

I’m really torn on Amazon, too. I absolutely love the convenience, but it’s heartbreaking to see so many retailers go out out business. It’s not just bookstores, Best Buy is having a helluva time keeping up with Amazon. My bro, who is a manager there, may lose his job as stores try to restructure to lower costs. As a consumer, I’ve recently pledged to balance out my spending by shopping small at local businesses wherever possible. It might mean I’ll pay a few dollars more, but that is the price I’d pay to keep local businesses around. Then again (still torn), as consumers, shouldn’t we champion efficiency? Perhaps what we really need is more innovation on Main Street from our local businesses, I’m just not sure.

#3 Comment By Anonymous On February 8, 2012 @ 11:21 am

Blaming Amazon for the failure of entire industries is not only silly, it’s giving them far too much credit. Yes, they’re a behemoth, but if you want to place blame, place it on the internet itself. The internet is also causing network TV discomfort. When’s the last time you sent a letter, or paged someone? The list could go on and on. The world of retail sales has changed profoundly, and it’s certainly not the “fault” of Amazon. Amazon saw an opening and people responded. That’s what capitalism is about. They didn’t force any local stores to close, we consumers did that.

I’m a knitter, and I love my local yarn shop, so I make a point of taking all my yarny needs to her first. If she can’t offer an alternative, or I need something very specific, then I’ll hit the internet. But I want her to stay in business, so she has first shot at my cash. But when it comes to my Neutrogena face wash, I have a subscription with Amazon. I don’t think Safeway will miss my $6.

As for books, Amazon didn’t create the ebook, they just improved on it and figured out a way people would actually read it. FWIW, Amazon offers free apps to make any computer or tablet an Amazon ereader – you don’t have to buy any kind of device from them to be able to read ebooks you buy. The Amazon program, in reality, is a boon to authors. The Bix Six publishers have always given the authors the tiniest portion of the profits – 17% if you’re lucky, but typically much, much less. With Amazon, authors get to keep upwards of 70% of their sales. To me, that benefits ‘small business’ (authors) exponentially more than the status quo. (And for the record, Borders was hardly a mom&pop!)

And while we’re on it, Amazon’s marketplace has also opened the door for the creation of many, many small businesses. My husband and I earned a tidy little income with our marketplace ‘storefront’. We could never have afforded to open a physical store.

So for all its faults, and I’m not saying they don’t have any, I see Amazon as a trailblazing company that has allowed individuals to profit from their success. I don’t see Apple doing that.

#4 Comment By shellye On February 14, 2012 @ 10:01 am

Very well said, LD! You’re absolutely right; Amazon didn’t force any stores to close. We (the consumers) did that on our own when we shifted our spending from the mom & pop shops to Amazon and other online retailers. Jeff Bezos started Amazon out of his parents’ garage. He was a small business at one time, too.

#5 Comment By Ceecee On February 8, 2012 @ 11:34 am

I think there will always be a need for physical books where I live…..we are near the beach and some people would be reluctant to take their e-reader onto the sand, especially on a breezy day, which is every other day at the beach. And who wants to leave an e-reader sitting in your beach bag when you go for a walk….or for a dip. Better that you have a paperback to tote to the beach or public pool.

#6 Comment By Anonymous On February 8, 2012 @ 11:40 am

It is unfortunate for the small independent bookstores that are being put out of business but Amazon is amazing. Not only can you search and find books immediately through Amazon, to check on availability of books on Amazon new or used, to see related books, to the 1-click ordering system, it is so darn convenient.

#7 Comment By wylerassociate On February 8, 2012 @ 12:07 pm

unfortnately more local bookstores will go out of business as technology grows and makes life more convenient for consumers. I just don’t see how successful amazon brick & mortar stores will be if they sell specialty items like the kindle.

#8 Comment By Anonymous On February 8, 2012 @ 12:33 pm

While I am not a fan of e-books, I highly doubt this would be successful. Amazon’s pricing is lower than everyone else’s because of sales volume and low overhead. Once you step into the retail arena, your costs skyrocket. If they make a trial run of these stores, I don’t expect them to last long. A more conservative guess would have them owning kiosks in the mall, rather than full-blown retail space to sell Kindles.

#9 Comment By Anonymous On February 8, 2012 @ 1:04 pm

Are losing sight of the market mice? The fittest will survive while those that sit on the backsides and are less innovative will not. Borders is a fine example but it wasn’t Amazon that did them in – it was their own unwillingness to move forward into the future with the velocity necessary to succeed. It’s nice to have an affinity for the local Mom & Pop shop but spending more than the value you’re getting is charity. This sounds mean and callous but the fact remains that the market will change and little groups (even big OWS ones) of activist will not divert it significantly. Unlike Borders, Amazon didn’t just focus on the Kindle market, they focused on the bigger bookselling market. That’s why you can get Kindle-ish software for free and read the books on anything from a PC to a iPad. “Build a better mousetrap……

#10 Comment By Anonymous On February 8, 2012 @ 1:29 pm

It will take a generation to actually have a significant difference, but it has already had a huge impact. I think there will always be a place for a book store or library, but it has to change to reflect technology and consumer desires. The book store of the fuutre will have more things unrelated to books to maintain a margin. I find it odd that an new book that you can get electronically is a similar price to a published one. That has to change too.

#11 Comment By Anonymous On February 8, 2012 @ 3:42 pm

Don’t forget sales taxes.

The fact that Amazon and other internet merchants don’t have to charge sales taxes gives them an advantage. That advantage is negated if Amazon opens a physical shop. Also generally my understanding is that if you conduct business in a state then you have to charge sales taxes for purchases within that state. So assuming i understand it right, setting up a physical shop in a state could force Amazon to charge sales taxes for all purchases within that state. I’m not totally sure if I have the rules right though. But if I am right here then Amazon would likely limit their physical stores to the states they already have operations and already charge sales taxes.

Personally I shop at Amazon a lot. Its usually due to their large selection and cheaper prices. Its not ‘mom and pop’ shops losing out vs Amazon either. If I wasn’t buying at Amazon then 99% of the time I’d have bought at a major chain store. All the mom and pop shops were already killed off by walmarts, best buys and home depots of the world.

#12 Comment By lynn On February 9, 2012 @ 8:56 am

I already pay sales tax on Amazon. Others don’t?

#13 Comment By Anonymous On February 9, 2012 @ 11:19 am

Court rulings led Amazon to begin charging sales tax in any state where they had a physical presence. They are actively fighting charging sales tax in the other states. I live in Missouri and even though I must pay sales tax if my online purchases are over a set amount, Amazon does not charge me at the point of sale. A nationally imposed sales tax amount (not a national sales tax) which would be returned to the state where the purchase is made is being considered as an alternative to Amazon having to figure out what to charge for each and every taxing venue in the country.

#14 Comment By Anonymous On February 8, 2012 @ 4:22 pm

I guess that’s kind of cool. Maybe they can take over that spot left empty by BORDERS. Hopefully they won’t impact our favorite bookstore – Powell’s.

#15 Comment By Anonymous On February 8, 2012 @ 4:41 pm

Amazon is providing a valuable service, enabling customers to get cheapers prices, seriously stimulating the ship to home industry, employing a lot of people, and is doing it all in a way that makes people happy.

To look at Amazon as a small business killer is to ignore all the small businesses that sell their product via Amazon and all the other benefits it provides in general. Amazon is doing business well. The more revolutionary, innovative companies we can create, the better off we will be as a society. We shouldnt be willing to halt economic progress for the sake of innefficient small bsuinesses.

#16 Comment By Donna Freedman On February 9, 2012 @ 2:02 pm

I don’t have an e-reader, being one of those dinosaurs who loves the physical act of reading: holding the tome, turning the pages and, when confronted with a shocking plot twist, going back and re-reading the previous pages to make sure I didn’t miss any clues.
However, as I age I expect an e-reader will be a big help because it will let me adjust the type size. And an author friend of mine has decided to go with e-publishing for the reason stated above: She’ll actually get to keep some of the money that way. Additionally, she’s a savvy marketer and will be able to promote her work in the way she knows will benefit it. The big publishers, she says, are generally clueless about using social media.
Short form: I will be sad when books fade away, even if it takes another generation. Then again, I was a newspaper journalist for 18 years and I’m having to get over that, too.

#17 Comment By Anonymous On February 10, 2012 @ 3:34 am

Ahh the free market at it’s finest. Giving people exactly what they want, then having them complain afterward “wait… that’s not what I wanted”.

#18 Comment By Anonymous On February 10, 2012 @ 7:11 pm

I think bookstores have to adapt like any other business. The most successful ones I know do more then just have rows of books. They’ve transformed themselves into social centers, hosting meetings, serving food and drinks, author readings, large local interest sections and also selling a large quantity of used books. Local bookstores can survive and thrive as long as they make themselves a destination point.

#19 Comment By qixx On February 20, 2012 @ 7:29 pm

I see another option of the Amazon storefront. It could be a pickup location for packages. Don’t have Amazon Prime or qualify for free shipping. Pick it up in-store for free. Plenty of other retailers do this. It would also allow Amazon to reduce some of its shipping costs. They would not need much of a store front. Just some space for the ship to store items. If and when the Seattle Amazon store opens i’ll check it out. But like when i go to Apple stores i will likely not be buying anything there.

#20 Comment By Anonymous On July 5, 2012 @ 10:57 pm

It isn’t just small retail stores. Competing on price against Amazon as a small online seller is even worse. The future is going to be Walmart and Amazon. People vote with their money and they want the lowest price.