Amazon reportedly planning bigger stores

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Locations would operate much like department stores, selling apparel, consumer electronics and household items

NEW YORK — In the week that big-box retailers reported that shoppers are returning to stores came news of Inc.’s latest brick-and-mortar experiment.

Citing people familiar with the plans, The Wall Street Journal reported that Amazon intends to open retail locations that would operate much like department stores, selling apparel, personal-technology gadgets, household items and other merchandise, and handling returns.

The Seattle company declined to comment on the plans or provide the Journal with details. Sources told the newspaper that the first stores, encompassing about 30,000 square feet, would open in Ohio and California.

Amazon has previously expanded into physical retail with concepts including Amazon Go, Amazon Fresh, Amazon 4-star, Amazon Books and about 500 Whole Foods Market stores across the U.S.

Amazon’s department store-like locations will dwarf many of the company’s other physical retail spaces, according to the Journal, with footprints significantly smaller than the department stores long operated by companies like J.C. Penney and Sears.Amazon Logo

Amazon last month said online sales increased 13% in its latest quarter, after growing at rates between 37% and 49% amid the pandemic. Big-box retailers Target Corp. and Walmart this week also reported growth in e-commerce sales, and noted that growth rates had slowed as more customers return to stores to do their shopping.

Amazon CFO Brian Olsavsky discussed the online sales slowdown during the retailer’s fiscal-second-quarter earnings call.

“About mid-May of last year the growth rate for the business jumped into the 35% to 45% range from what had been about 20% to 21% growth rate pre-pandemic. So we’re starting to lap that year-over-year. And that’s why you see some of the growth rates coming down,” Olsavsky said. “Once we lap May 15, we see the business growing in the mid-teens percent. It’s essentially a combination of lapping last year’s COVID strength, and also the additional mobility that we’re seeing among our customers especially in the United States and Europe, people getting out more, doing other things besides shopping.”

Fulfillment costs are rising

Meanwhile, Amazon is boosting wages and increasing its use of incentives to fill some of its open positions, resulting in higher costs in its fulfillment network.

Said Olsavsky: “So far, we’ve had good success in hiring them with our wage and benefit package that’s pretty competitive. So we’re watching it carefully. But it’s probably one of the bigger elements of inflation in our business right now.”

Amazon added 64,000 employees in the quarter ended June 30, reaching a new high of 1.33 million worldwide full- and part-time employees. Olsavsky said the company’s fulfillment and delivery network has doubled in size over the past 18 months.

That network is the backbone of a retail business that serves more than 200 million global subscribers of its Amazon Prime membership program, which costs $119/year in the U.S. and provides members with free shipping as well as perks including streaming media, cloud storage and discounts at Whole Foods.

Getting more shoppers to come to the merchandise could help the company manage fulfillment costs.

Another advantage of building out its physical footprint would be to let Amazon shoppers touch items or try them on before buying, thereby reducing complaints about shipped goods that don’t come as advertised or are damaged en route. Plus, the Journal noted, Amazon executives think a bigger store network would make it easier for them to glean customer data and gain insights that could lead to improved shopper experiences.



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