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Team Amazon Stakes Out the Department Store Playing Field

Amazon appears ready to shake up brick-and-mortar retail once more. The Seattle based-retailer is planning a foray into large-format locations that would resemble traditional department stores, CNBC reported. The Wall Street Journal previously broke the story, citing people familiar with Amazon’s plans. 

Among the first such Amazon department stores would be locations in Ohio and California, according to CNBC. These would average around 30,000 square feet: comparable to a Kohl’s or T.J. Maxx, but only about one-third the size of a full-line department store. 

Such a footprint would be suited to sales of apparel—an area where e-commerce is often at a disadvantage because shoppers can’t try on clothing before buying it—as well as technology products, according to CNBC. 

Citing the WSJ report, CNBC said Amazon began sounding out U.S. apparel brands about large-scale stores two years ago, although isn’t clear which brands would be stocked. The department stores would also sell Amazon’s own private-label goods. 

The move would mark Amazon’s latest experiment with physical retail stores after stealing market share in the retail landscape from incumbents with its e-commerce business. The company recently overtook Walmart as the world’s largest retail seller outside of China. 

In recent years, the company bought Whole Foods Market, operating in both brick-and-mortar stores and as a component of Amazon’s same-day grocery deliveries.  Amazon has also opened brick-and-mortar bookstores, Amazon-branded grocery stores and cashierless convenience stores. 

CNBC reported that Amazon’s entry into department stores would put even more pressure on a segment of retail that’s already struggling. J.C. Penney, Lord & Taylor and Neiman Marcus were among the retailers that filed for bankruptcy in 2020. 

Nordstrom and Macy’s have been investing heavily in an effort to attract new customers, including opening smaller-format stores and improving their e-commerce businesses. In the latest iteration of these efforts, Macy’s said this week that it would roll out Toys”R”Us shop-within-shops at about 400 stores beginning next year. 

The decline of traditional department stores has been challenging for mall owners. For many years, department stores helped bring foot traffic to malls, but now landlords are turning to grocery stores, restaurants and gyms to bring in customers. 

Based on the size of the store Amazon is reported to be considering, it will likely open in strip centers, reported CNBC. Kohl’s locations operate primarily in this type of setting, while Macy’s has been testing smaller stores closer to suburban shoppers. 

Although Kohl’s and Macy’s had upbeat quarterly earnings reports this week, both retailers are still in the early days of efforts to improve their businesses and win back shoppers. Both stocks have made huge gains this year, but market values remain far below historical levels, CNBC reported. 

The news rippled across the retail industry, particularly hitting the stocks of big-box rivals. Target, Bed Bath & Beyond and Best Buy shares fell roughly 1.5% in premarket trading following the WSJ report, while Walmart shares were down about 1%, CNBC reported. 

An Amazon representative told CNBC that the company doesn’t comment on rumors and speculation. 

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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