Amazon Strikes Back, Plans to Try Its Hand at Bricks-and-Mortar Retailing

Brick-and-mortar retailers who fear Amazon.com will put them out of business may be further dismayed to learn that the online giant is reportedly planning to move into -- what else? -- brick-and-mortar retailing.

Goodereader.com, citing sources within Amazon, says the company plans to open a retail store in its hometown of Seattle this year.  Amazon made no public comment on the report, which says the store will be a boutique rather than a superstore, featuring Kindles and other Amazon products, including books published by Amazon's new in-house publishing unit.

It's not thought the Seattle store will necessarily be the first of a flood of similar stores.  Rather, it's seen as an experiment that may or may not lead to a nationwide rollout.

Response to BN?

To at least some extent, the physical Amazon stores could be seen as the company's response to Barnes & Noble and other booksellers who have proclaimed they won't sell Amazon's titles. By opening its own stores, Amazon can ensure at least some retail exposure for its titles while providing another layer of competition for the bookstores who are treating it as a pariah.

The issue of sales tax may complicate Amazon's plans, however.  The online retailer has been very aggressive in seeking to shield itself from paying state and local sales taxes, going so far as to close warehouses in states that try to tax its in-state sales.

Tax law generally provides that if a company has physical assets in a state, it must charge sales tax on merchandise sold in that state, even if it is shipped in from somewhere else.

Opening retail stores around the country could raise Amazon's tax liability by several billion dollars.  Industry speculation has it that the company may try to shield the stores by incorporating them as a separate shell company, a strategy that would undoubtedly be challenged but might nevertheless prevail.