Last week’s reports of Amazon planning to enter the department store game sent shockwaves through the retail community. Anyone who is anyone had to be thinking, “Oh, boy. Here Amazon
But such a move is so Amazon in so many ways.
For example, Amazon loves to tease something that feels audacious, only then to proceed down a path where the very idea itself, e.g. a newfangled department store, is nothing more than a small experiment of spilled milk tipped over on the doorstep of the American consumer to see who and how many people lap it up.
In other words, the “tease” is nothing new for Amazon.
Whether it be Dash buttons that were meant to change the world or 3,000 Amazon Go
It is an Amazon’s ethos to experiment. An Amazon department store will be exactly that from the get-go, an experiment, same as always. Which is a distinction that is important to remember because this fact alone sheds light on exactly what its “department store” experiment could look like now and into the future.
Here then are three hypotheses of exactly what Amazon’s department store of the future could look like and why one, in particular, stands out above all the rest:
The simplest iteration of what an Amazon department store could look like, and albeit the one that was most often reiterated by journalists that covered the story last week, was as a showcase experience for Amazon’s apparel business, arranged similarly to how the American public views the traditional department store today.
Put simply, there is no f-ing way this happens.
Amazon has no legacy in bricks-and-mortar retailing for fashion apparel, and what muscle memory it does have in physical retailing by way of Amazon 4-Star (its most aggressive physical store push outside of grocery to date), looks like the offspring of Jackson Pollock and a Sharper Image catalog. To say Amazon 4-Star stores are well merchandised would be a delusion of grandeur. But they also don’t need to be either, and more on that later.
However, apparel shopping in the physical world, via a department store, is meant to be inspirational. And to do it right requires inventory investments and field operations that seem like investments too silly and too cumbersome for Amazon to make.
So, on a scale of 1 to 10, the likelihood that Amazon’s first department store ends up resembling a new twist on a Macy’s or a Kohl’s?
Try a -7.
Amazon is way too smart to give the world something it doesn’t need, i.e. another Kohl’s or a Macy’s of a different color.
Picture it now, a scaled down Walmart or Target, replete with housewares, apparel, furniture, and essentials items, only instead of shopping this new Amazon creation in a traditional fashion, Amazon Go’s “Just Walk Out” technology allows consumers to come in, take whatever they want off the shelves or the racks, and just leave.
Sounds pretty great, right?
Heck, yes, it does. But no one should get his or her hopes up on this idea happening just yet, either.
The technology to make this happen is still years away. Amazon has only just now pushed the limits of its Amazon Go “Just Walk Out” experience in grocery to 20,000 plus square feet, and that is with grocery products that all come in standard packaging and whose weights can easily be measured by shelf sensors.
Apparel and home is an entirely different story.
These categories are oftentimes merchandised on floors or racks that make corroborating their movement by weight far more difficult, and apparel also comes in various sizes, too, which makes it difficult for cameras to understand what actual items consumers end up putting in their shopping bags.
For example, was that a small red sweater? Or a medium one? For a camera, that can be a difficult proposition to understand.
So, as cool as this type of experience may sound, it is likely still far off.
On a scale of likelihood from 1 to 10. It is a 1 in the short-term but a 10 in the long-term, and an idea one should keep very much in mind when evaluating the long-term implications of the next and last hypothesis below.
3) A Bargain Basement Returns Hub and Shipping Station
What is the business that has been hot for years? Off-price retailing.
And, what experiment has Amazon run while all this has been going on? Amazon has leveraged Kohl’s as a return hub.
So think about it.
Amazon’s likely move here is to buy up mall real estate on the cheap (which is close to consumers from a delivery standpoint), inventory only what it knows people will buy in the community, either for in-person shopping or delivery, and then also create return outposts for all the Amazon product returned throughout the country that it will then put back out on its selling floor at Crazy Larry prices and merchandised in a similar fashion to what one finds at the Pollockian offspring that is Amazon 4-Star.
Such a concept would be the treasure hunt of the century.
Amazon would not have to spend much on in-store merchandising, marketing, or invest much in additional inventory at all. They could just haphazardly put out whatever gets returned to the store, discount it against an algorithm of what it costs to ship the product back to a return center, and, voila, suddenly Amazon has an experience that is always new and exciting every time a customer walks in the door because no one will ever know exactly what he or she can expect to find.
The prices will also always be unbeatable, and the traffic to the store will always be built in because of the desire consumers have to return their online Amazon purchases to a physical store, a consumer behavior Amazon now understands because of its partnership with Kohl’s.
This is the 10 idea. This is the first-version of the Amazon “department store” that is coming.
And the American consumer will gravitate towards it like sharks to chum because it plays right into the flywheel of what Amazon does best — low prices, selection, and convenience — for those who love the thrill of the deal.
Which is kind of everybody.