Kohl’s Amazon Shops Gain Traction

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\"\"As posted last September in The Robin Report, I congratulated Kohl’s for having the vision to initiate a test of Amazon shops in 10 of their stores. Amazon shops would sell devices and make home appointments to teach consumers how to integrate smart devices (IOT) into their homes. The shops would also be used as pick-up and delivery points. The pick-up and delivery part of the relationship was then expanded to 82 Kohl’s locations (without the shops).

Kohl’s objective for this partnership was to increase traffic while also increase productivity in either an underperforming space or space shrinkage due to increases in their online business. Amazon’s objective was obviously to make use of Kohl’s locations as distribution points for pick-up and delivery. Kohl’s locations are closer to more consumers than Amazon, which begins to help solve the costly “last mile” delivery issue Amazon is constantly working on. The closer-to-the-consumer strategy reduces costs, time and losses, while better satisfying consumers. Walmart has the jump on Amazon with its 4500 stores located within a 10-mile distance of 90 percent of the population. Amazon is within a 20-mile distance of only 40 percent of the population with their DCs which, of course, are not stores consumers can go to.

As an aside, I took a leap and opined Amazon as the Trojan Horse in the deal, testing a physical store retail business prior to acquiring Kohl’s. Why would Amazon do such a thing? Just as they acquired Whole Foods for 400 distribution points closer to the consumer, they would be gaining 1150 Kohl’s locations, closer to the consumer. In context, Jeff Bezos declared from day one that Amazon must become dominant in two categories: food and apparel. Why not just lease the space? Because, you cannot become dominant under the control of another entity.

Anyway, my speculation may or may not happen.

However, there is now a measure of how Kohl’s goal of achieving more traffic is succeeding. According to analyst Chuck Grom “the KSS/AMZN partnership seems to be overwhelmingly accomplishing the goal of driving incremental traffic to Kohl\’s stores.\” Kohl’s 82 test locations have outperformed their other stores by 8.5 percent, and they have gained a large number of new customers. And as I speculated, the Amazon pick-up and return customers, as well as device shoppers (in those 10 test stores), are spending time in Kohl’s other departments making impulse purchases.

So, Kohl’s will likely roll out this traffic-building and growth strategy across the rest of its fleet. But, what about Amazon? What are they getting out of it? Yes, they are shrinking last mile delivery time and costs and satisfying convenience and speed desires among consumers. But what’s the true end game strategy here? If they are a Trojan Horse, will we be seeing Amazon nameplates on acquired Kohl’s stores in the future?

This is an exciting, unpredictable, very scary time we are living through.

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