Back in the mid 90s, Amazon was an ambitions dot-com company looking to bring the experience of book shopping to the World Wide Web.
Since then, the online marketplace has expanded into just about every section of consumer goods, including electronics, clothes, toys, jewelry, even food--including its recent purchase of grocer Whole Foods.
What is unique about Amazon's trajectory as a company is the fact that, while it may have started as a disruptive website chasing a wildly ambitious goal, it has since led a new movement for tech companies to bring things back to the real world and reinvent the brick-and-mortar space as well.
It's bookstores are a perfect example.
When Amazon opened its first bookstore, the decision raised eyebrows from the general public. Consumers (and industry elites) didn't understand why a company whose original undertaking was to essentially replace the brick-and-mortar book shopping experience would decide to open a storefront.
Well, Amazon just released their third-quarter shares, and while they exceeded expectations and caused the stock to skyrocket seven percent, it was also cited by CNBC that the $1.28 billion generated from its "physical stores" segment is nearly the same amount generated by its most newest addition to the family--it's Whole Foods stores.
Which means its bookstores are struggling. Big time.
Here's why that's not concerning... yet.
Amazon has quite the track record for being unprofitable for a period of time in order to become massively profitable later down the road. And truthfully, it's not an Amazon strategy, it's a growth strategy that has been deployed by ambitious companies looking to build something behemoth and then cash in at a later date.
Tesla is another great example.
If anything, Amazon's bookstores aren't entire intended to be money-making machines in their own right, but act as physical advertising spaces for the company and a handful of its products.
Again, Tesla showrooms are a great example.
I'm fairly certain the world's most dominant online marketplace didn't decide to launch physical stores with the hopes of moving more of their profits there. Instead, Amazon bookstores act as reminders in the physical world of the company's reach--almost like billboards, except with more utility.
5-10 years from now, the same might be said for grocery stores, swinging profits from physical Whole Foods locations to the online ordering system it operates through.
If anything, it's the model that's worth paying attention to, not necessarily which bookstore is going to turn a profit.
I believe we are witnessing a huge shift in retail, and it's going to be a transition from physical stores as money-making machines into stores that act as interactive advertising experiences.
Just last week, I walked into a Warby Parker store.
There's no chance Warby Parker will ever sell as many glasses in its physical locations as it will online. But seeing a physical store gave me a much more relatable feeling (and a different way of interacting with the brand) than if I had just seen a big billboard that told me to buy Warby Parker.
The same goes for Amazon. And Tesla. And all the other companies that see value in having a physical presence--but have set their expectations accordingly.
Being able to walk into a physical store makes you perceive the brand differently.
A physical store is a less intrusive, more welcoming advertisement.
And for companies whose marketing budgets are bottomless, why buy an ad when you can lease a space? (Or buy an asset, for that matter.)
Amazon isn't opening bookstores to sell more books, necessarily.
It's opening bookstores to remind you to buy more books on Amazon, online.