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News Article

Amazon to Open Department Stores in the US: WSJ

By Andrea Villar | Fri, 08/20/2021 - 13:51

While some companies are still struggling to migrate to the digital sphere, e-commerce giant and digital native Amazon now plans to open a series of stores in the US that will operate similarly to department stores. With this move, the company is looking to expand its reach and grow its business in apparel, home goods, electronics and other areas, The Wall Street Journal reported.

This, however, is not the first step taken by the Jeff Bezos-founded company towards the physical retail space. In 2018, Amazon opened the first Amazon Go store, which introduced a 'walk-out shopping' experience, where users visit a cashier-less store, take what they need and upon leaving, their card is automatically charged. Amazon's new project is expected to open its first stores in Ohio and California, sources familiar with the project told the WSJ. The new retail spaces will be about 30,000 ft2 and will offer items from major consumer brands.

Today, Amazon ranks as the world's largest retailer outside of China. Since its founding in 1994, it has driven online shopping, forcing many brick-and-mortar stores to go out of business. One of the most widespread and well-known cases in the US has been that of Toys R Us, which closed three years ago but is making a comeback in partnership with Macy's in 2022.

According to Managing Director of retail analysts’ firm GlobalData Neil Saunders, Amazon’s new project is in line with current consumer trends, which seek to strike a balance between the physical and digital experience. “Amazon knows that the future of retail is multichannel, most consumers still shop using a combination of stores and online,” he told the BBC. “Stores will help Amazon do a much better job of showcasing its offer.”

There are risks to the strategy, Saunders warned, as in the US alone department stores' share of the retail market has gone from 14.5 percent in 1985 to just 2.9 percent today. In addition, the pandemic continues to drive online shopping, making it difficult for brick-and-mortar stores to fully recover from the blow. In Mexico, department store revenues in 1H2021 were 4 percent below those reported in the same period of 2019. El Palacio de Hierro, one of the country's most iconic department stores, saw an 8.3 percent drop in sales during the period.

It is not yet clear whether Amazon will open a physical store in Mexico, which is a common gateway to other Latin American countries.

The data used in this article was sourced from:  
Andrea Villar Andrea Villar Journalist and Industry Analyst