Amazon’s Brick-and-Mortar Store Shouldn’t Come as a Surprise

Did you do a double-take when you heard that Amazon’s opening an actual brick-and-mortar outlet? The web’s biggest store, the one that has posed such a threat to traditional retailers, is planning to open an outlet right in the heart of New York City, just footsteps from that department store grande dame, Macy’s.

Actually, it’s not as surprising as you might think. As Darrell K. Rigby, a partner at Bain, explains in a recent HBR feature, many retailers are now combining digital and physical consumer experiences. We’ve seen it for years, but in the more familiar storyline of traditional retailers create websites. “In the early days of the digital revolution, many leaders of established companies did their best to ignore the upheaval, convinced that the threat from new technologies wouldn’t ever amount to much,” writes Rigby. “As that premise faltered, many flipped in their thinking, concluding that digital would inexorably destroy their positions. To survive, it seemed, they’d have to stop throwing money at the old businesses, salvage what they could, and launch independent digital ventures. The existing units probably wouldn’t survive, but disruptive digital businesses could replace the zombies in a company’s portfolio.”

We all know how that turned out. (I’m looking at you, Sears.) Digital operations don’t tend to obviate the physical ones.

The problem with this binary thinking — digital or physical, not both — is that customers weave the physical and digital worlds together seamlessly and they want business to do the same. They expect to pay the same price for a TV at Acme Appliances that they’d pay on acmeappliances.com. In fact, notes Rigby, some of the biggest retailing success stories, showcase strategies that fuse digital and physical experiences. Macy’s, for example, now allows customers to order merchandise online for store pickup. Soon its Herald Square flagship will have interactive directories and apps that guide shoppers through the stories. Digital technologies are transforming physical businesses — not annihilating them.

Thus, the Amazon move makes a little more sense. As others have noted, digital retailers like Warby Parker and Bonobos have already opened physical stores. Andy Dunn, the CEO of Bonobos, told Rigby, “We were wrong at the beginning. In 2007 we started the company, and we said, ‘The whole world is going online only. All we’re going to do is be online.’ But what we’ve learned recently is that the offline experience of touching and feeling clothes isn’t going away.” In Amazon’s case, the New York store start out as a place to pick up and return orders — something potentially more convenient for customers in the city, especially for last-minute needs during the holiday season — but it could evolve to become more of a traditional store that features Kindles and the new Fire smartphones (devices people may want to try before they buy). Will Dunn’s insight hold true for Amazon’s vast array of products? We may soon find out.