Will Amazon department stores spell trouble for Kohl’s?
Amazon.com is planning to open several large retail stores in the U.S. that will be its take on the department store model, reports The Wall Street Journal.
The locations, which will measure around 30,000 square feet, will be much smaller than a typical full-line department store and offer Amazon’s various private labels as well as popular consumer brands in categories including apparel, consumer electronics and furniture.
The stores, with locations in California and Ohio, represent Amazon’s latest move into physical retail. The retail giant currently operates several formats with its name on the banner — Amazon Fresh, Amazon Books and Amazon Four Star. Whole Foods Market is the Amazon property with the largest number of physical locations.
Amazon’s connection to the department stores has until now largely been focused on repurposing empty anchor locations in malls to serve as local distribution centers. The company at various times has also been linked to rumors of acquisitions, such as J.C. Penney and Kohl’s, that never materialized.
Kohl’s has frequently pointed to its relationship with Amazon — it accepts product returns for the site in all its stores — as a plus for its business. The chain’s executives have maintained that the traffic to its stores driven by those returns has led to incremental purchases.
Michelle Gass, CEO of Kohl’s, told analysts yesterday on the retailer’s earnings call that Amazon has “been great partners.” She said it was clear from the start of the companies’ working relationship that they had “complementary strengths.”
“We do returns really well and we provide the seamless experience to their customers. And what we get in return is new customers, traffic,” she said, adding, “and one of the things we have actually seen is that our conversion year-on-year is improving.”
Ms. Gass did not offer any statements indicating that a change was forthcoming.
“They’re very pleased in terms of how we support them in their returns process, and both companies kind of share the obsession on putting the customer first and exceeding customer expectations, and we have world-class promoter scores. So plan to continue forward,” she said.
Kohl’s reported second-quarter earnings of $2.48 a share and raised its forecast as consumers have returned to stores with millions of Americans getting vaccinated and state and local governments lifting measures tied to preventing the pandemic’s spread.
- Amazon Plans to Open Large Retail Locations Akin to Department Stores – The Wall Street Journal
- Kohl’s (KSS) Q2 2021 Earnings Call Transcript – The Motley Fool
DISCUSSION QUESTIONS: How would you expect a smaller box Amazon department store to look and operate compared to legacy retailers in the same channel? What would this and the development of smaller box stores by Bloomingdale’s and Nordstrom say about department stores going forward?