Are Amazon’s investors panicky?

It has been a rough few weeks for Amazon.com Inc shareholders. Since the company’s disappointing July earnings report, its share price has fallen by a double-digit percentage and its market value has dropped by a couple hundred billion dollars. Investors are worried about slowing e-commerce sales growth and profitability pressures at its key Amazon Web Services cloud-computing unit. And the benefit of the doubt that shareholders granted founder Jeff Bezos for so many years has apparently started to vanish now that he’s off to other adventures.
So what is the internet giant looking to do next to get its business back on track? Expand more into physical stores. Really?
The Wall Street Journal reported that Amazon plans to open several brick-and-mortar retail locations similar in size to smaller-sized department stores. According to the report, the stores will be around 30,000 square feet and are expected to offer products such as apparel, electronics and consumer goods while also facilitating exchanges. It says the plans are not settled and could change.
At first blush, the larger stores do make sense for certain types of items that could benefit from more touch and feel. For example, it would be easier for consumers to try on clothing for fitting purposes compared with purchasing it online. Furniture is another area where the in-person shopping experience can add value. And more distribution for Amazon’s growing array of private label goods, along with its Kindle e-readers and Alexa devices, could help on the margin. Beyond that, I’m skeptical about the need for Amazon to have a larger omnichannel presence. Some say the stores may make the e-commerce return process easier. But returning orders is already extremely convenient.
Physical retailing is difficult and Amazon’s success in this possible venture is far from assured. In a recent interview, hedge fund manager Steve Mandel explained the secret to merchandising success is product curation. And unlike online commerce, you can’t just put everything up for sale. It requires a different level of specialised expertise.
Amazon’s track record in this area has been poor. When the e-commerce giant bought Whole Foods, analysts were excited about the potential for the company to disrupt and innovate in brick-and-mortar retailing. That failed to materialise. No big changes have been made at Whole Foods, and the chain’s sales have faltered.

—Bloomberg