Amazon's bookstores are generating almost no revenue — and there's an obvious reason why
- Amazon broke out "physical stores" in its earnings report for the first time.
- Most of that revenue came from Whole Foods stores, but Amazon also operates about a dozen Amazon Books stores.
- The numbers show that Amazon Books stores aren't really about generating a massive amount of money — they're likely more intended to be an added benefit for Prime members.
Amazon is officially a physical retailer.
The e-commerce giant broke out a "physical stores" category in its earnings report for the first time. This was the first earnings report since closing the purchase of Whole Foods closed, and the company says the lion's share of the revenue in that category — about $1.3 billion — is from Whole Foods.
That means that Amazon Books stores, which are also included in that category as Amazon defines it as places where "customers physically select items in a store." There are about 12 Amazon Books stores, with three more on the way.
The numbers breakdown means that there's not a whole lot of revenue being generated from the chain's bookstores.
The first and most obvious reason why is that there isn't a whole lot of them yet. Twelve is a small number any way you slice it, and book sales aren't huge revenue drivers for any retailer. There are more than 460 Whole Foods in the world, in comparison.
More likely the real reason is that the bookstores aren't really a place for browsing and discovering books like a local independent bookstore — they're actually just a place for Prime members. There's no compelling reason for a non-Prime member to visit an Amazon Books store, except maybe to check out devices like the Amazon Echo or Kindle.
The books prices for non-Prime members at list price — the same as what you'd pay at Barnes & Noble. Prime members, however, get the books at the price on Amazon.com, which is almost always significantly cheaper.
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A Prime member can just walk in and get a great deal on a book they want to read immediately, but if you're a non-Prime member you're better off just ordering from the website and waiting for it to come.
That means the stores are just another benefit that Amazon has tacked on to its Prime benefits. The benefits for the $99 a year membership constantly expand and most recently includes Amazon Key, the program that lets Amazon deliver packages inside your home. It also includes the video streaming service Prime Video, the music streaming service Prime Music, the ebook service Prime Reading, Twitch Prime, and of course the infamous free two-day shipping.
Amazon is willing to invest heavily in attracting and maintaining Prime members because they tend to spend more on Amazon.com over the course of a year — nearly double what non-Prime members spend. They're also more loyal overall than non-Prime members, shopping twice as often. There's also evidence that suggests Prime members spend more on Amazon the longer they stay Prime members.
Giving customers a compelling reason to shop Amazon instead of another website is crucial as Amazon fends off competitors.
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