Physical or digital is a false distinction

Monday’s Wall Street Journal report that Amazon is planning to open as many as 400 brick and mortar bookstores has many analysts scratching their heads, and a few trying to make sense of the decision.

I should say “apparent decision,” because the source of the news was a mall operator–and wouldn’t it be good news for malls?–while Amazon has so far declined to comment.

What’s interesting, however, especially from a marketing technology perspective, is how the news is being greeted as a sign that digital shopping hasn’t completely displaced physical shopping; that the latter still has a strong foothold among consumers. Doubtless that’s true, although–as many independent bookstores have discovered to their cost–customers who enjoy physical browsing often still make purchases online.

The downsides to Amazon’s proposed plan seem obvious. Real estate costs, the expense of shipping inventory to stores rather than direct to customers, and competition from Barnes & Nobles’ existing 650 strong store network. Yes, Amazon will be able to match its online prices, making in-store purchases more likely, but those online prices reflect–at least in part–savings in overheads which brick and mortar stores will sacrifice.

So where are the upsides? I guess Apple stores successfully promote the brand, but neither Apple nor Amazon lack for brand recognition. If there are positives, a clue can be found towards the end of Paul Sawers’ Venturebeat commentary: “It’s all about mindshare and being able to cross-promote products, let consumers go hands-on, and offer them expert advice. It’s difficult to replicate that experience in an online environment.”

I think it’s not so much about “mindshare” as about data. Amazon has no problem capturing, analyzing and monetizing data generated by online behavior. But it’s increasingly clear that a true all-round view of the customer can’t be generated from what remains a sub-set of their actions. People still tear themselves away from their screens to walk or drive places, to work and shop and generally interact with non-digital environments. Know your customer offline as well as online (if there’s really a distinction any more), and it enhances your ability to send the right message at the right time to the right destination.

Developments in the Internet of Things–which Cisco compellingly calls the Internet of Everything–mean, however, that the physical environment is often a digital environment too. From smart wearables to smart cars, from interactive displays in stores and on street corners to digitally connected refrigerators, heating systems and parking spots, the so-called physical world is increasingly part of the network.

If Jeff Bezos is investing in brick and mortar bookstores, it’s not because he thinks he can revolutionize Barnes & Nobles’ business model (any more than he bought The Washington Post because he thought he could revive print newspapers). It’s because there’s a growing ocean of valuable digital data which isn’t being generated by screen-based devices (see Pierre DeBois’ recent piece for us on the challenges of capturing it). Amazon needs to be present in the physical environment, not to do physical things, but to plug into these new sources of digital data. And what could be a more natural foothold for the company than a chain of bookstores?

Always remember. Amazon is not a bookseller. It’s a tech company, and a formidable one.

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