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Why Amazon.com, Inc (AMZN) Needs Brick and Mortar

Target Corporation (NYSE:TGT), sensing the fact that it was — quite literally — selling Amazon the rope with which to hang it, stopped carrying the Kindle lineup last May.

Critics might be quick to point out that Target is but one store, and many others like Best Buy Co., Inc. (NYSE:BBY) still carry Amazon’s Kindles. That’s true, but as Best Buy’s shares have been obliterated over the last year, its long-term future seems doubtful.

With dedicated electronic retailers in secular decline, and general-purpose stores showing a distaste for Amazon’s devices, the company should consider putting its fate in its own hands.

There would be other advantages to an Amazon store
Beyond copying Apple — providing a place for consumers to test-drive Kindles and receive tech support — Amazon would gain a number of unique advantages from opening stores.

Amazon stores could act as drop-off points for returns, streamlining the process and making it easier and potentially cheaper. They could also act as package pick-up spots — Amazon has begun installing lockers in certain urban areas as a safer alternative to at-home delivery, showing that there is a strong need for such a service.

Further, though it’s hard to quantify, some consumers remain skeptical of online shopping in general. Perhaps having a store where a consumer can talk to an Amazon rep in-person would help to increase trust and ease the transition to online shopping.

Amazon doesn’t have to make an acquisition
Although the chatter has died down, a big rumor for much of 2012 was that Amazon would consider purchasing Best Buy. Obviously, that never played out, and it probably won’t.

Apple (and now Microsoft) have built their operations from the ground up. Buying Best Buy wouldn’t necessarily give Amazon any advantage over developing its own operations, as the company did with both its video game and movie studios.

Thus, it would be wrong for investors to load up on Best Buy’s stock, hoping for an Amazon takeover that will likely never come.

Rather, longtime Amazon shareholders should recognize the strategic value a retail operation would bring to the company. If Amazon never takes the plunge, the company may run into significant strategic problems at some future date.

On the other hand, if Amazon does break into retail, it might make the company more of an attractive investment. If that day comes, Amazon’s critics will probably call it a mistake. But don’t be fooled: It might be one of the best moves the company could make.

The article Why Amazon Needs Brick and Mortar originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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