According to sources, Amazon will open department stores in Ohio and California, and the stores will be roughly 30,000 feet which is about a third the size of traditional department stores. They will be also used for fulfillment, logistics, and returns. The stores will primarily stock clothes, household items, electronics, and other merchandise with its private label brands featured.
Many have speculated that the company could be interested in an acquisition of a retailer already with locations around the country like Kohl's
The goal of the department stores would be to reach customers who prefer trying on clothes and seeing items before buying. It would also boost growth of its high-margin, private label brands. They would also be warehouses and fulfillment centers to help Amazon reach its goal of providing same-day or next-day delivery to the whole country. The company would also be taking advantage of cheap commercial real estate given department stores and malls closing all over the country which many would blame on Amazon.
Overall, department store sales declined from $184 billion to $135 billion over the last decade with e-commerce taking the bulk of this revenue. It's led to many bankruptcies in the sector with 1,000 locations closing since 2018. Of course, the pandemic only exacerbated the situation. Department store closures have negative, knock-on effects as they are considered to be the magnets that bring people to malls and spend money at the smaller stores and restaurants inside.
Amazon's opening of physical stores also follows many similar online brands which have recently opened physical stores to increase brand awareness and reach a different set of customers. Of course, critics say that Amazon helped destroy department stores and is now going to profit from the depressed real estate values to recreate the same concept.