In what would be a great touch of irony, the Wall Street Journal reported last week that Amazon is actively planning to open physical retail locations similar to department stores.
It’s is ironic because Amazon has played a key role in the struggles of the department store format , with dramatically lower share of US retail sales than in the past, hundreds of store closings and bankruptcy filings by several major department store chains.
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| Can Amazon make a success in a format that its own success has helped push many into deep financial challenges? |
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The new Amazon stores, said to be first planned for locations in California and Ohio, would be about 30,000 square feet in size, and will feature apparel, household items, electronics and other categories, insiders told the Journal. A traditional US department store comes in at about 100,000 square feet, though that is already changing before the Amazon news.
Amazon has not commented on the Journal report.
The stores will have a footprint similar to scaled-down formats that Bloomingdale’s, Nordstrom, and some other department-store chains have begun opening of late. It is unclear what brands Amazon will offer in the stores, although the company’s private-label goods are expected to be feature prominently.
The move adds to Amazon’s growing roster of physical stores include grocery chain Whole Foods, a new separate Amazon grocery store concept (being revamped), and the Go convenience stores. The report says Amazon approached some US apparel brands about two years ago with the idea of opening large-scale stores that would showcase their products.
The expanded store footprint would enable Amazon to offer consumers a bevy of items they could try out in person before deciding to buy, especially apparel.
As a side note, a generation ago, department stores comprised 10% of traditional retail sales according to estimates by the consulting firm Customer Growth Partners. Currently, they account for less than 1%.
There have been a number of interesting comments on the report.
The Atlantic magazine, for example, noted the new stores could be used to encourage customer pick-up instead of costly shipping to homes, and that they may reduce even more costly returns in many categories, notably apparel an home décor/furniture.
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The Atlantic added that with the news, “Amazon, and maybe a handful of its largest competitors, will go about deciding how you get to buy the things you need, with very little meaningful pushback. They’ll set prices, they’ll set labor conditions, and they’ll decide which things are too inefficient for you to buy online. Apparently, those things will go into a store.”
 Jan Rogers Kniffen, a former retail executive and JRK Worldwide Enterprise founder said on Yahoo Finance Live after the news that "Amazon should be out there buying Kohl's. They'll get their 1,000 stores in one fell swoop, and they can put anything they want into them.”
The Gizmodo web site offered this take: the move is all about data collection.
While Amazon of course has lot of data about on-line shopping, “that still left the company with a pretty large blind spot: data from real-world, in-store purchases. Meanwhile, those real-world retailers - including names like Target, Walmart, and CVS - have started launching ad networks of their own, offering data from the real-world purchases happening outside of Amazon’s sight. An Amazon-branded department store would potentially bring those dollars back into Amazon’s pockets, and then some.”
Can Amazon make a success in a format that its own success has helped push many into deep financial challenges? Should be very interesting to see.
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