How is this bad?
I'm planning to ask all my in-laws for kindle books this Xmas. I love having friends choose books for me: it's a very personal gift, and I end up with more varied reading than if I chose them all myself.
With the new Amazon feature, I get the all the advantages of e-books (not the least important being that my spare room doesn't get filled with yet more books that I probably won't re-read, but don't want to throw away). As an extra bonus they are usually a bit cheaper than physical books, so it's better for my relatives too.
As for the neighbourhood bookstores, I don't think this really changes anything since they would probably have bought the physical books on Amazon anyway.