Amazon.com to open first physical store in Manhattan: DJ

Amazon.com plans to open its first brick-and-mortar store, Dow Jones reported. It will open on 34th Street in Manhattan across the street from the Empire State Building just in time for this year's holiday season.

The experimental pop-up store will function as a small warehouse, holding limited inventory for same-day deliveries only in New York. The store may also host tech showcases for items such as Kindle e-readers, Fire phones and Fire TVs.

A customer may order an item online and then pick it up that same day in the store.

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Amazon stock was down 2 percent in midafternoon trading Thursday.

An Amazon spokesperson declined to comment to CNBC about the project, except to say, "We have made no announcements about a location in Manhattan."

Andy Tenke | CNBC

The reported location of a new AMZN store at 7 West 34th Street,near Herald Square in New York.

The company risks increasing costs related to retailing such as paying leases and hiring workers. But if the store is successful, it may set a precedent for additional stores in other cities.

Amazon has been researching and scouting a possible store for several years, said a person familiar with the project. Two years ago, the company went as far as scouting spots in Seattle, where it is headquartered.

"Same-day delivery, ordering online and picking up in-store are ideas that are really catching on. Amazon needs to be at the center of that," Matt Nemer, a Wells Fargo analyst, told Dow Jones.

Other companies such as Wal-Mart and Home Depot have already incorporated this order-online, pick-up in-store model. Clothing company Bonobos opened 10 stores in 2011 and plans to expand to 40 stores by 2016.

Amazon tried brick-and-mortar experiments before, such as Kindle vending machines that sold tablets and e-readers in malls.