Before I natter on a bit more, John Battelle (as usual) has nailed it in pithy form in his Business 2.0 story:
It's pushing Amazon's virtual-commerce business model -- where you can buy
anything you want online -- into the bricks-and-mortar local retail space.
Amazon wants to be part of any kind of commerce.
Update: And finally, before I natter, check out this very funny note from John Aboud, via Seth Godin.
Commence my nattering. Here's what this announcement actually means:
1) Amazon used to sell stuff. Call that the "database model" where they shipped first information, and then goods, from a centralized location.
2) Amazon created the marketplace. Call that the "network model" where they acted as an info-mediary who brought together buyers and sellers, with goods shipped around the periphery of the infospace, peer-to-peer, without Amazon actually ever touching them.
Note that quarter to quarter, Amazon derives either a majority, or all, of its profits from the marketplace.
3) Now Amazon has created what I would call the "embedded network model" which extends the network model into the fabric of everday life. Contrast to the marketplace -- you don't care who the seller is, or where the seller is, you just want the goods you found on this mystical Amazon site to show up at your doorstep. In the "embedded network model" Amazon is enabling you -- with your real location, real needs, and real-world context-- to seek out merchants who are also local, physical, and with whom you may interact directly. Today, it's not really embedded -- it's just a first-step extension of the marketplace model. But look where it can go:
1) Amazon links to the catalogs and inventory of the merchants, and you can search that. Amazon provides "merchant tools" (which eBay and PayPal are also working on) to help merchants do this.
2) Amazon offers its Visa card/shopping cart as a pre-payment system for its users. Want a pizza? Find it online, order it online, pay online, and go pick it up.
3) Amazon, working with a delivery partner, enables local delivery from local merchants for same-day, or perishable, goods. Speciality grocery + Amazon = WebVan 2.0??
And these are just the commerce implications. The non-commercial (social) implications are even more interesting -- see my previous comment on the Viper Room. Very, very interesting.