Will Amazon continue its brick-and-mortar expansion with department stores?

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Will Amazon continue its brick-and-mortar expansion with department stores?

Now that it has conquered physical book and convenience stores (the inaugural Amazon Go Store in Seattle is pictured above), Amazon is now reportedly taking on the department store format. (Brianccc3a/Wikimedia Commons/CC BY-SA 4.0)

Not content with presiding over a growing empire of bookstores and grab-and-go mini-marts, online shopping behemoth Amazon is now reportedly planning to launch physical department stores.

As sources familiar with the move explained to The Wall Street Journal in a story published yesterday that has since sent shockwaves through the dying brick-and-mortar retail sector, the footprints of the department store-styled Amazon emporiums will be in the roughly 30,000-square-foot range. That’s far more compact than the embattled (and in some cases, defunct) shopping mall anchors that Seattle-headquartered Amazon has helped to decimate—Macy’s and its bankruptcy-surviving rival JC Penney among them—and more akin in size to a typical T.J. Maxx outpost. As noted by the Journal, the size of the planned stores is also comparable to that of the small-format locations that historically voluminous retailers like Nordstrom, another Seattle retail heavyweight, have been trying on for size as of late. In other words, don’t expect a Sears-sized in-person shopping experience complete with a hair salon and lunch counter.

The first of the “several” Amazon department stores will reportedly open in California and Ohio according to sources. Amazon Books, a B. Dalton-ish-sized bookseller that failed to charm critics when it debuted in 2015 in Seattle, currently boasts roughly two-dozen stores spread across the United States. The retailer’s grab-and-go convenience stores, dubbed Amazon Go, are limited to multiple locations in New York City, Chicago, San Francisco, London (as Amazon Fresh), and, of course, the Seattle area, which is also home to two full-sized format Amazon Go Grocery locations. Amazon’s evolving and largely urban brick-and-mortar presence also includes Amazon 4-star, a chain of modestly sized physical stores peddling a curated selection of top-rated and selling items from the Amazon website. It debuted in 2018 in Manhattan and has since expanded to other locations including the notorious American Dream mall in New Jersey. The company also operates Austin, Texas-based supermarket chain Whole Foods Market, which it acquired in 2017 for $13.17 billion.

As for its supposed planned department stores, it’s unclear whether they will, like Amazon Go locations, offer cashier-less technology. It’s also unknown if Amazon is aiming to populate traditional shopping malls, potentially moving into abandoned anchor store spaces, or into existing storefronts within suburban-style shopping centers/strip malls. The former seems unlikely considering the reported footprint associated with the company’s planned foray into department store-esque commerce. Emptied-out anchors might be too big and Amazon already has a presence in an increasing number of shopping malls across the country in the form of delivery distribution centers, some of which encompass entire erstwhile malls, not just contained within empty anchor stores killed off by the rise of online shopping over the past decade. (Amazon is now the world’s largest retailer outside of China, trumping big-box powerhouse Walmart for the first time this year.)

As for what type of merchandise the new department stores will sell, that’s not entirely clear although shoppers can likely expect a range of goods across a variety of categories including clothing, electronics, and household items. Both Amazon private labels and “top consumer brands” will reportedly play into the mix, with an emphasis on the former. As reported by the Journal, apparel could be a focal point considering that buying clothes online (Amazon was named the top U.S. clothing retailer earlier this year) can be somewhat of a crapshoot regarding sizing, quality, and comfort. It also noted that physical Amazon department stores would “give customers even more instant gratification than the quick shipping offered by Amazon for online purchases.”

The Journal added:

“Amazon executives have felt that bricks-and-mortar stores would enable better engagement with customers and provide a showcase for its devices and other products to shoppers who otherwise might not have tried them, a person familiar with the matter said. The company has sought to innovate in bricks and mortar while building a network of stores that could glean insightful customer data and provide new shopping experiences.”

As noted by Gizmodo, the above provides a glimpse into what is likely Amazon’s key motivation in competing with a handful of dying department stores by further expanding and enlarging its physical retail footprint, and it has little to do with catering to fussy online clothing shoppers: the acquisition of precious consumer data.

Amazon has dismissed the Journal’s reporting as hearsay and has declined to comment to multiple major news outlets that have picked up on the story.