Amazon.com, Inc. (NASDAQ:AMZN) is primarily responsible for the death of many brick-and-mortar retailers that were once loved by many. With the continued proliferation of e-commerce and its disruptive impact on the retail scene, many investors have grown incredibly wary of all physical retailers out of fear that their digital counterparts may eventually suffer the same fate of many bankrupt brick-and-mortar players.
With Amazon leading the revolution, investors probably want to avoid getting caught in the behemoth’s path as it moves into new sectors to disrupt. Looking back, it’s easy to forget that Amazon started out as primarily a seller of books online. Given Amazon’s success over the years, one would suspect that brick-and-mortar bookstores have gone the way of the Dodo Bird.
This clearly hasn’t been the case, however, and it may be natural to think that the physical bookshops that remain are “investable” and struggling to make ends meet given how easy (and cheap) it is to get any book delivered to your door at the cheapest possible price through Amazon.
You’d be wrong again, especially in the case of Indigo Books & Music Inc. (TSX:IDG), Canada’s largest book, gift, and specialty toy retailer. The company has been gaining attention of late as it readies to expand into the U.S. market, a move that could send shares into the stratosphere!
How has a physical book retailer been able to cope with the immense disruption from e-commerce giants?
After all, books are pretty much custom-tailored to an online platform. So, unless you get satisfaction out of smelling the fresh pages of a book before you buy it, the physical bookstore experience is inconvenient versus that of a digital platform. Scanning through bookshelves for a title can be time-consuming, and if you can’t find it, you’ll need to talk to a sales representative. The last thing that millennials want to do is talk to an actual person when a digitized solution exists!
The secret to Indigo’s recent same-store sales growth success story has been twofold. The intriguing non-book items (toys and gifts), as well as the enhanced customer experience.
The comfortable décor just makes you want to stick around and if you’re in a fully-loaded Indigo, it may even have a small café or a Starbucks Corporation (NASDAQ:SBUX) chain attached to it.
One does not simply wander into a Starbucks and not get lost in the bookstore that’s attached to it!
Moreover, Indigo’s neat little trinkets have also drawn a considerable amount of traffic into its stores, and if you head into your local mall-residing Indigo, you’ll see that the stores are typically chock-full of people playing around with the neat desk toys — from stress relievers to cube plants!
As for the books, the way they’re featured in the store allows a shopper to better discover new titles that they may not have come across on a website. Sure, there’s a hit list on Amazon that’s filterable by genre, but there’s really nothing like viewing an intriguing title that’s in your face.
Fellow Fool contributor and Indigo bull Will Ashworth pointed out, “High-end shoppers with disposable income [are] looking for a good in-store experience. Clearly, [Indigo CEO] Reisman’s going into this [U.S. expansion] with her eyes wide open.”
I think Ashworth is right on the money, and I’d encourage investors to consider nibbling away at shares today while they’re hovering around in limbo. The U.S. expansion could be a big deal, and when you consider what Indigo still has to offer the consumer, I think investors ought to finally put the fears over e-commerce disruptors to rest.
Stay hungry. Stay Foolish.
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Fool contributor Joey Frenette owns shares of Starbucks. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Gardner owns shares of Amazon and Starbucks. Tom Gardner owns shares of Starbucks. The Motley Fool owns shares of Amazon and Starbucks. Starbucks is a recommendation of Stock Advisor Canada.