Can Amazon Really Do Better in Department Stores?

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Amazon.com (NASDAQ: AMZN) is reportedly looking to open its planned chain of department stores as early as next year, and those locations promise to be as tech-packed as you might imagine a store operated by the online retail giant.

Yet just because the ecommerce leader slams their name on a bunch of physical sites doesn’t mean they’ll be more successful than traditional department stores in today’s retail environment. The retail industry, while significantly improved, is still struggling – and Amazon hasn’t been particularly adept at operating brick-and-mortar stores.

Image source: Getty Images.

A destination for tech-savvy consumers?

Amazon has emerged as the largest online clothing retailer, with analysts estimating it will sell as much as $ 45 billion this year. The the Wall Street newspaper says he could open his department stores as early as next year. However, while a traditional department store is typically 100,000 square feet, Amazon’s will be much smaller, at around 30,000 square feet.

While stores will allow Amazon to showcase its own clothing brands, the retailer is likely hoping to differentiate itself by infusing stores with heavy flashes of tech.

The the Wall Street newspaper says one possibility is that consumers could scan QR codes on clothing, which would instruct employees to remove them from clothes racks and put the items in locker rooms. While trying them on, customers can use touchscreens to alert employees that they want to try different styles or sizes – or maybe even see the options suggested by the artificial intelligence systems. The workers then collected the items and brought them directly to the customers’ lodges.

While this concept may seem very difficult for workers who are constantly running to and from the locker room, there are other reasons why an Amazon department store might not be a winning idea.

A jumble of clothes on racks and on the floor

Image source: Getty Images.

A worn out experience

Amazon’s existing footprint of physical stores has never exactly informed its sales growth. In addition to its Whole Foods Market chain of 500 stores, it also operates dozens of bookstores (Amazon Books), appliance stores (Amazon 4-Star), grocery stores (Amazon Fresh), and convenience stores (Amazon Go). .

Second-quarter sales at these stores were $ 4.2 billion, up 11% from the period a year earlier when most retail outlets were closed, but 3% below the second quarter of 2019, even though there are more physical locations in operation today.

Additionally, the name Amazon made to sell clothing online was primarily based on third-party retailers using its platform. Despite launching private label products in 2016 and expanding its portfolio to more than 100 brands, it’s not necessarily Amazon’s products that are driving its earnings.

There is nothing specific about Amazon fashion that would appeal to consumers. Online, it’s usually the price that differentiates its products, but The Wall Street Journal says the clothes it will showcase in its stores will be an assortment of casual styles similar to those one might find at The hole.

While this could also include designer clothing to increase consumer interest, there is nothing particularly new in this approach to the department store model to make it stand out.

A fashion faux pas

Department stores in general may not be dead, but the business model is still struggling. Location data from mobile devices from analytics firm Placer.ai recently revealed that pedestrian traffic in shopping malls has recovered all the ground lost during the pandemic, but momentum may have stalled as visits started to decline again in August.

It may have something to do with the fourth wave of COVID-19 powered by the Delta variant which is still ongoing or the Labor Day holiday schedule – but generally speaking, malls are still in a rough spot. battle continues to attract buyers.

It’s possible that opening Amazon’s department stores will help malls, but those clothing stores don’t look likely to have much of an impact on the tech company’s bottom line.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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