Amazon is continuing its advance into brick-and-mortar with plans for a series of large-footprint department store-style locations, according to the Wall Street Journal, which cited people familiar with the matter.
The new stores would reportedly help Amazon extend its reach in categories such as clothing, electronics and homewares. Amazon already has leapfrogged Walmart to become the largest apparel retailer in the U.S. based on its online sales.
The ecommerce giant is no stranger to physical retail, with seven different physical formats already on the ground including: Amazon Go convenience stores, Amazon Fresh grocery stores, Amazon Books, Amazon 4-Star and of course Whole Foods. These planned department stores would have a much larger footprint than any of Amazon’s existing formats (Whole Foods excluded) — approximately 30,000 square feet according to WSJ’s sources. That would be much smaller than traditional department stores but right in line with the pared-down formats retailers such as Bloomingdale’s and Nordstrom are rolling out.
The department store arena is an interesting one for this perennial disruptor to enter. The beleaguered format was put under even further pressure by the pandemic, with centuries-old mainstays like Selfridges and Lord & Taylor falling victim to changing consumer habits. So far this year, department store sales have accounted for less than 1% of retail sales, according to estimates from Customer Growth Partners.
However, a large-format physical store will give Amazon the opportunity to showcase its growing suite of private label brands and increase sales overall in high-touch categories such as apparel and furnishings, for which consumers still seek out in-person engagement. David Malka, Chief Sales Officer of logistics company goTRG, said that the format also could help the ecommerce behemoth mitigate one of the largest downsides of selling digitally — higher returns.
“While Amazon cited selling more and facilitating exchanges as the reason for opening up physical big box stores, there is going to be immense value to them in helping to manage and reduce costs for returns,” he said in comments shared with Retail TouchPoints. “The pandemic facilitated the explosion of online returns. With so many people buying online, customers are returning items that they may not have if they had bought in-store — for example, if the fit is different than what was expected or the color is off. The opening of more physical locations will allow consumers to see and try on goods as well as return or make exchanges in-store, which will inevitably cut down on the number of returns coming into warehouses. This could also help alleviate supply chain issues.”