Report: Amazon plans to open department stores

After years of squeezing brick-and-mortar retailers, Amazon will soon open its own department stores, with a focus on apparel, electronics and household goods, according to a report in the Wall Street Journal.

An Amazon spokeswoman declined to confirm the news or provide details. “We do not comment on rumors and speculation,” she said in an email.

The e-commerce giant, which last year had $386 billion in sales, has been expanding into physical retail in recent years, opening grocery stores, book shops and specialty pop-ups around the country.

Analysts say its latest foray – while unexpected – provides an opportunity to reach customers in a new way.

“More stores bolster Amazon’s whole ecosystem and flywheel,” said Neil Saunders, managing director of GlobalData, a research and consulting firm that tracks the retail market. “They also allow Amazon to gather data and to understand consumer preferences better – understanding that can, in turn, be used to improve the whole proposition.”

Traditional department stores, he noted, have been declining for years because of a “failure of innovate and adapt.” Stores such as Macy’s, J.C. Penney and Kohl’s, which made up about 15% of retail sales in 1985, now account for less than 3%, Saunders said.

The pandemic has created new challenges for the nation’s department stores, tipping a number of storied chains, including Neiman Marcus, J.C. Penney and Lord & Taylor into bankruptcy.

Nearly 200 department stores have permanently closed since last year, and another 800 – or about half the country’s remaining mall-based locations – are expected to shutter by the end of 2025, according to commercial real estate firm Green Street.

But for Amazon, this could be an opportunity to shake things up: Its 30,000-square-foot department stores would be about one-third the size of a traditional mall anchor, mirroring plans by many of the country’s retailers to open smaller, more easily-accessible stores.“If it gets rolled out in a serious way, it is very bad news for traditional department stores,” Saunders said. “The lack of innovation by traditional department stores means their defenses are very weak so the last thing they need is to fend off a new invader to their space.”

Amazon’s reported expansion comes as some retail chains – having survived the financial shock unleashed by the coronavirus pandemic – mount a vigorous comeback.

As many Americans work to reconfigure their social lives in the second year of the pandemic, department stores are cashing in on the increased spending.

The sector, which saw sales plunge more than 40% early last year, is beginning to make up for some of those losses, according to monthly data from the Commerce Department.

On Thursday, the retail chain Kohl’s reported massive earnings results for the second quarter, as compared with the same period last year, during the first summer of the public health crisis.

Revenue soared 31%, to $4.45 billion, as profits swelled by more than 700% to $382 million.

After exceeding expectations, the company is raising its forecast for the year. Kohl’s stock jumped more than 7% in morning trading.

Macy’s, too, is drawing huge gains as customers head back to stores and fill up online shopping carts.

Goods that consumers tended to avoid purchasing during the initial bout of the pandemic, such as denim, luggage and dresses, saw a resurgence this quarter, the retailer said, while items that held strong continue to sell well, like fine jewelry and perfume.

Revenue swelled 59%, to $5.65 billion, compared with the year-ago period, and the company climbed out of a $431 million loss to generate a profit this quarter of $345 million.

Like Kohl’s, Macy’s is also raising its financial outlook, banking on the momentum of an economic recovery.

Macy’s shares surged more than 15% after releasing results.