Amazon reportedly plans to open department stores

Company’s latest move comes after years of competing against brick-and-mortar retailers

Last modified on Thu 19 Aug 2021 12.13 EDT

Amazon is planning to open department stores after years of competing against, and in some cases helping to destroy, the very same traditional brick-and-mortar retailers.

The company’s latest move to bricks and mortar, first reported by the Wall Street Journal, comes after Amazon earlier this week eclipsed even Walmart in overall sales to become the world’s largest retail seller outside China.

Although Amazon already operates physical retail locations, including bookstores and tech-focused shops, they are often found in high-traffic urban areas.

The plan comes four years after Amazon purchased Whole Foods as part of an attempt to remake consumer-facing food industry, using the chain for walk-through shopping and as home-food delivery and returns hubs.

Last year, Amazon opened its first cashier-less supermarket, with no checkout lines, that uses technology to add items that a customer picks up to their Amazon online basket account.

With the opening of Amazon department stores, that strategy is set to expand to sales of Amazon’s private-label clothing, household items and electronics as well as independent brands. According to Wells Fargo Amazon is already the largest seller of clothing in the US.

But clothing is a notoriously difficult business to succeed at online, with customers only able to guess at fit and quality, and plagued by high rates of returns. At the same time, many fashion brands have resisted Amazon’s approaches, preferring to maintain their own pricing, distribution and image-management.

According to the Journal, some of the first Amazon department stores are expected to be located in Ohio and California. The retail spaces will be a relatively modest in department store terms of around 30,000 sq ft, matching scaled-down formats that existing department store chains, Bloomingdale’s Nordstrom, have developed.

Amazon’s strategy of recreating what it had once destroyed will come across as deeply ironic. Department stores, founded in the late 19th and early 20th centuries were once crucial to the growth of consumer-facing economy and of shopping as a pastime in its own right.

But over the past several decades, the vast variety stores lost out to specialized discounters, fast-fashion retailers and online players.

According to Customer Growth Partners, a consulting firm, department stores account for just 1% of retail sales so far this year, compared with 10% – excluding auto, gas and restaurants – a generation ago.

Those troubles, deepened by the Covid-19 pandemic, caused nearly all the largest department store chains, including JC Penney, Neiman Marcus Group, Lord & Taylor and Barneys, to be sold, placed under bankruptcy protection or closed down entirely.

At the same time, the easing of pandemic restrictions has produced new enthusiasm for traditional bricks-and-mortar consumerism with chains, with Macy’s and Kohl’s anticipating strong sales when they reported on Thursday.

“People are absolutely returning and shopping in department stores,” John Idol, the chief executive of the Michael Kors parent Capri Holdings, told analysts last month.

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