Amazon makes a bet on department stores

The news: Amazon is reportedly planning to open department-store-like retail locations, per The Wall Street Journal. The plans are not finalized yet but signal the ecommerce giant’s intentions to further disrupt retail.

The competitive set: In terms of number of stores, other mass merchants and big-box retailers have a serious advantage.

• Walmart has 4,740 US stores, and its warehouse chain Sam’s Club has 499.
• Also in the US, Target stores number to 1,914, and Kohl’s has more than 1,100.

What’s interesting: The square footage of Amazon’s stores will be only a third the size of average department stores—30,000 square feet, as opposed to the traditional 100,000 square feet.

What we don’t know yet:

• Which brands will be offered. But it’s almost certain that Amazon’s private-label brands will be featured in some way.
• Whether any of Amazon’s in-store technology will make it into the shopping experience, like Amazon Go’s cashierless checkout. This is likely, however, given that Walmart was trialing fully cashierless stores in June 2020, per Pymnts.

eMarketer retail and ecommerce analyst weighs in:

“Amazon’s Achilles heel in retail is its lack of a brick-and-mortar footprint,” said Suzy Davidkhanian, eMarketer principal analyst at Insider Intelligence. “Amazon has been experimenting with different retail formats for years, like Amazon 4-star or Amazon Go, and so it is no surprise that it is now looking to expand into the department store channel where it can offer more categories under one roof, like apparel and accessories, that drive a lot of volume and typically are more of an in-store purchase, because you want to try on before making your purchase.

"As for the smaller square footage at these stores, almost all big-box retailers are doing smaller store formats. It's easier to start small and then go big, versus the scaling back we're seeing now at chains like Target, Macy’s, and Bloomingdale’s."