CHICAGO - A report that Amazon is considering building up to 400 brick and mortar stores sent investment wires buzzing, and will stir some excitement among architectural woodworkers if the rumor proves to be true.
The story hit the front pages today after General Growth Properties CEO Sandeep Mithrani said during an earnings report that Amazon would open 300 to 400 brick and mortar stores. As Mithrani put it in a transcription by Seeking Alpha:
And just case in point, you go to Amazon opening bricks and mortar book stores and their goal is to open as I understand 300 to 400 book stores, and it should sit back and say that the last mile is all important, which is why Bonobos is opening bricks and mortar store and Warby Parker is opening bricks and mortar stores and Birchbox is cutting their overhead to open bricks and mortar stores. [Read more of his Mithrani's statement at the end of this report.]
The likelihood is not outlandish. Amazon did not confirm or deny the story, but Mithrani did issue a statement the next day clarifying that his words did not constitute a plan by Amazon to open retail outlets. And in fact, the first Amazon Books did open in November 2015 in Seattle, at the University Mall right across from a Tommy Bahama store and next to a Banana Republic.
That outlet, like many book stores, is loaded with solid oak book cases and reading tables and chairs, hardwood floors, and a high design interior. Amazon, which single-handledly put Borders Bookstores out of business, also operates AbeBooks online store for specialty book shops.
Mithrani, for his part, suggests that Amazon and other online retailers need a brick and mortar presence not just to sell, but for a very practical reason: 38 percent of online sales end up returned. For Amazon, this has become extremely expensive. A retail outlet as a drive-to return center would help contain the cost of returns, as well as give etailers a more direct connection to customers.
Here's more of Mithrani's GPP earnings report statements transcribed by Seeking Alpha
I think as we continue to measure them we're happy to give the data because the irony is that the loan traffic is actually up and one of the biggest pain points during the holiday season was lack of parking. So we're obviously seeing people come to the mall. We're seeing then stay longer at the mall. They're shopping a lot of fewer stores when they come into the mall, but they’re definitely roaming the malls and shopping.
So if you've got the product the retailer -- the consumer is redoing the research on their mobile device and coming into the mall to shop which is why still to date from a soft goods perspective, almost 95% of all soft goods are bought in the bricks and mortar store.
And I think the other fact is that people are really built into the equation is that the return rate on the soft goods is incredibly high. I think its 38% of eCommerce purchases of soft goods that are bought online or returned in the bricks and mortar store.
So to really get a true and proper understanding until the retailer stock to show you exactly what the return rate is and how it’s being impacted is really hard to evaluate in this Omni channel world why one growth is bigger than the other because you have to take the return rates into account, which really no one does.
E-tailer Bonobos' store interior in Chicago.
And just case in point, you go to Amazon opening bricks and mortar book stores and their goal is to open as I understand 300 to 400 book stores, and it should sit back and say that the last mile is all important, which is why Bonobos is opening bricks and mortar store and Warby Parker is opening bricks and mortar stores and Birchbox is cutting their overhead to open bricks and mortar stores.
It’s a very interesting evolution because the cost of the last mile is that important. And again the mall business if you appreciate which is more focused on fashion is very different than a staple business where you’re buying commodity and so you know in the mall business, the impact of eCommerce is a lot less, it’s actually your friend not your enemy.
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