Amazon reportedly planning to open small department stores

Dan Berthiaume
Senior Editor, Technology
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Amazon’s next foray into brick-and-mortar retail will reportedly center on large spaces akin to department stores.

Amazon is planning to open 30,000-sq.-ft. locations set up similar to small department stores, with the first expected to open in California and Ohio, reportedCNBC. The original story appeared in the Wall Street Journal.

At 30,000-sq.-ft., the Amazon format would be much smaller than traditional department stores but would be in line with the smaller store concept now being opened by Bloomingdale’s and Nordstrom. Due to the size of the proposed stores, CNBC speculated that they will primarily be located in strip malls, which are also a principal setting for Kohl’s stores. Amazon and Kohl’s operate a long-term returns partnership; it is unclear if Amazon directly competing with Kohl’s would have any impact on this collaboration.

Amazon reportedly intends its planned department stores to help it sell more apparel and technology goods, both from national brands as well as its own product assortment. The omnichannel giant is said to have initially approached unspecified U.S. apparel brands in 2019 about selling their wares in its department stores.

An Amazon spokesperson declined comment to CNBC. However, the company has been actively expanding into the brick-and-mortar space across multiple verticals. Amazon debuted its first-ever physical store, an Amazon Books location, in Seattle in 2015. The retailer then entered the grocery vertical with a blockbuster $13.7 billion acquisition of Whole Foods Market in 2017. 

Amazon’s Brick-and-Mortar Expansion
Other high-profile brick-and-mortar retail moves Amazon has made in recent years include the launch of its “Just Walk Out” cashierless convenience store format, Amazon Go, in 2018. Amazon leveraged its proprietary cashierless technology to open its first Amazon Go Grocery store in 2020. 

The company also operates brick-and-mortar banner including the high-tech Amazon Fresh grocery store concept, as well as Amazon 4-star, a store format dedicated to top-rated, best-selling, and trending products from its website.

David Malka, chief sales officer for reverse logistics company goTRG, told Chain Store Age that opening physical department stores may provide Amazon with even more value by creating a new means of managing and reduce the cost of returns than it would by launching a new brick-and-mortar sales channel.
“The pandemic facilitated the explosion of online returns,” said Malka. “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 or try on goods as well as to 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 backups.
“Looking to the holiday season and how consumers will be purchasing, the ability for retailers to offer returns and exchanges in ways that are convenient for the customer is how they’re going to end up winning – everyone wants to buy online, it’s just whether or not they look at returns the same way,” concluded Malka.