Amazon wants to hit hard in the USA by opening physical department stores [Analysis]

Amazon is launching a new salvo of arrows on his physical commerce competitors: he would plan to open department stores in the United States, initially in California and Ohio, according to the Wall Street Journal which quotes sources close to.The net giant, who refuses to comment on this information qualified as rumors, is not a beginner in the Brick and Mortar.

He opened his first shops, Amazon Books bookstores, in 2015 and now has 24 in the USA.He also launched other specialized stores such as his Amazon 4 Star, reserved for the best rated articles on his site (30 to date), or his grocery stores without Amazon Go staff (22 in total in the country).But it was in 2017 that he made his big blow, by getting his hands on the distributor of food products Whole Foods, specializing in organic, which has more than 500 supermarkets in the United States.

3000 square meter stores

Whole Foods aside, these stores, often located in the city center, are small: an Amazon Go is an average of 40 and just over 200 square meters.This time, the company is more ambitious: it wants to open spaces of about 3000 square meters.They nevertheless remain three times smaller than traditional departmental stores, which generally measure around 9000 square meters.

Clothes, electronics… Amazon should focus its offer on non-food products, of which it has very fine knowledge thanks to its site and the billions of data that it collects there.The group could offer on its shelves articles of major brands but also products from its own brands, such as Amazon Basics (IT accessories, audio, etc.) or Amazon Essentials (clothing).Be careful, however, the Wall Street Journal indicates, the project is still likely to evolve.

Doma competitors

This strategic movement towards the Brick and Mortar operated by the Net giant raises questions, because the department stores have bites the dust since the start of the pandemic.Between January and August 2021, these establishments only garnered 1% of the total retail sales in the USA, according to a study by the Customer Growth Partners consulting company cited by the Wall Street Journal.10 years ago, it was 10%. En 2020, fragilisées par la crise sanitaire, les chaînes de grands magasins américaines JC Penney, Neiman Marcus Group ou encore Lord & Taylor ont fait faillite. Le grand magasin de vêtement Lord & Taylor a même annoncé en avril 2021 qu'il devenait un distributeur en ligne à 100%.

What if it was precisely for this reason that Amazon chose this moment to open its first department stores?The battle will be much easier for the group for already moribund competitors.The health crisis, in addition, very widely benefited from the net giant, pushing consumers to turn to e-commerce.If some buyers will return to store after the pandemic, part of them are converted to online sale.

A strategy fueled by data

Amazon became in June 2021 the first retail merchant on the planet (excluding China), dethroning Walmart.The group has garnered $ 610 billion in sales between July 2020 and June 2021, compared to $ 566 billion for Walmart according to FactSet.The results of the tech giant in 2020 make it vertigo: it has garnered a turnover of 320 billion euros, up almost 40% over a year.Amazon therefore now has the kidneys solid enough to assume the big investments necessary for the creation of a chain of department stores.

In food, the company had decided in 2017 to rely on Whole Foods because it did not know at all this market.This time, Amazon is a horseman alone, because he has a very fine knowledge of the non-food.It has a colossal history of data, which should allow it to position its products at the right price, to maximize its sales and not to crush its margins too much.On its site, Amazon classifies the search results to optimize its chances of concluding a sale.He should therefore know which products put forward on his shelves because they attract the barge.He knows, thanks to the data he has collected since the launch of his e-commerce platform, the tastes of his customers in each region or city, which could allow him to adapt his assortments to each geography if the project takesextent.His colossal data mine also allows him to predict future trends.Through Whole Foods, he acquired skills in the management of a store park, which he can reuse.In short, the company goes well armed in this battle, against competitors weakened by the COVID 19.

Thanks to these future investments, Amazon hopes to boost the share of its turnover garnered by its physical stores, which is today only 4%, mainly carried out within its Whole Foods supermarket channel.Because the future of the retail is not 100% digital and Amazon knows this well.Bringing back on departmental shops will allow the tech giant to boost sales of certain categories of articles, such as products requiring a demonstration of the seller (electronics), very expensive items (luxury) or that customers want to try before d before'Buy (clothes).These department stores will allow Amazon to establish its domination on the clothing market, where its sales have exceeded in 2020 those of Walmart in the USA, according to Wells Fargo.The net giant carried out $ 41 billion in the country in the sector in the sector, 20 to 25% more than the distributor Brick and Mortar, leaded by the Pandemia.