Amazon: Expanding Store Footprint without Costly Acquisitions
Amazon zones in Kohl’s stores
Kohl’s is providing 1,000 square feet of space for Amazon zones at ten of its store in Los Angeles and Chicago. The zones will be serviced by Amazon employees who will sell a variety of devices ranging from voice-controlled speaker Echo to Fire tablets. These zones are expected to start operating next month.
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Physical stores make sense to Amazon
The partnership with Kohl’s marks another attempt by Amazon to tap into brick-and-mortar stores to grow its sales. As Amazon expands its offerings, including areas such as grocery, it’s realizing that there’s power in physical stores. Amazon has opened a few localized pickup sites and is experimenting with a supermarket model called Amazon Go.
Amazon’s $13.7 billion acquisition of Whole Foods Market is seen as helping the company expand its physical store footprint as it pursues grocery sales. As you can see in the chart above, US grocery markets are dominated by traditional retailers such as Walmart (WMT), Costco (COST), and Kroger (KR).
$20 billion in Alexa revenue
Instead of outright acquisitions such as Whole Foods Market, Amazon is also partnering with traditional retailers to expand its store footprint, thus increasing the customer touch point.
Besides Kohl’s, Amazon has retail partnerships with Best Buy (BBY) and Sears (SHLD). Best Buy, for instance, sells Alexa-enabled devices. According to RBC Capital Markets analysts, Alexa could yield $20.0 billion in new revenue for Amazon by 2020.