When Jeff Bezos founded a little digital book shop in the 1990s, no one expected much. After all, the Internet was a fad that would soon be abandoned for the next big thing, and books? Who buys books (or anything else) online? But, as Amazon grew, so did its fierce rivalry with Walmart (NYSE: WMT), one of the biggest retailers of all time.
Amazon gained a wider audience and added more products; Walmart started dabbling in e-commerce. Amazon bought Whole Foods to get a foot into the real world; Walmart revamped its online shopping experience and added app-based purchasing. Amazon and Walmart pulled the ol' coyote and roadrunner bit again and again for a solid 20 years.
Early this morning, the Wall Street Journal broke some truly massive Amazon-related news that may change retail forever.
Welcome to Amazon's next evolution
Amazon has been experimenting with a variety of retail types for some time now, including Amazon Pop-Ups, Amazon Books, Amazon Fresh, Amazon 4-Star, Amazon Go, and Amazon Go Grocery, as well as their Whole Foods grocery locations. The Amazon-branded locations, to this point, have mostly been relatively small properties, ranging from just slightly bigger than a mall kiosk in the case of Amazon Pop-Ups to a few thousand square feet for properties like Amazon 4-Star and Amazon Go.
Grocery brands like Amazon Fresh and Whole Foods are necessarily larger, roughly 25,000 to 40,000 square feet, but it takes a lot of floor space to design a successful grocery store that caters to a diverse enough population to keep the doors open. And besides, the Whole Foods stores are largely in the same locations where they were when Amazon acquired them in 2017.
Amazon's new adventure in physical retail takes all of these small experiments and rolls those experiences together to create something that will absolutely get the attention of Walmart and other big-box retailers: a full-fledged Amazon department store.
According to the Wall Street Journal, the first locations are expected to appear in Ohio and California, coming in at around 30,000 square feet each. They'll likely focus on giving the many brands owned by Amazon a physical presence, helping to reduce purchase reluctance for customers who aren't sure just how that shirt will fit or if the novelty waffle maker will make big enough waffles.
Although this is only a rumor at this time, Amazon's other stores, including Amazon Go, were also once "only" rumors. Amazon rumors tend to not be rumors for very long. A representative from the company declined to comment on this project.
Amazon now out-retails Walmart
The New York Times reported another pretty impressive piece of information just days before the Wall Street Journal broke the news of upcoming Amazon department stores: Amazon has officially surpassed Walmart as the highest-selling retailer online or off.
In the 12 months ending in June, Amazon customers spent more than $610 billion on products purchased directly from Amazon (not including third-party sellers on the Amazon marketplace). Walmart, on the other hand, only sold $566 billion to customers in the 12-month period ending in July. It's not an insignificant sales volume command, and it's one that's been a long time coming.
It was always speculated that Amazon would outpace Walmart sooner or later, but the pandemic helped make sooner even sooner than expected. When everyone was at home trying to find better solutions to easing their pandemic retail woes, Amazon was helping them, many for the first time, to find the products that would make life a bit easier.
Walmart has long struggled to catch up to Amazon with its e-commerce efforts, though not for a lack of trying. The initial Walmart e-commerce iteration was bulky and difficult to use, losing the company valuable years while Amazon was building a solid, loyal customer base with two-day, one-day, and two-hour delivery windows.
The Millionacres bottom line
This big news out of Amazon, even if it's still-speculative-but-almost-certainly-fact, is a big deal. I'd be lying if I said it wasn't. However, Amazon has a habit of opening just a few test stores and stopping there, so it's hard to say yet if this will become a widespread phenomenon or a local one. Should Amazon decide to invest in its physical retail space, the department store model is poised to be highly successful.
Not only will it be a sort of competitor to Walmart, which has developed a villainous reputation among some shoppers, but Amazon already has a huge following that would be easily convinced to come into stores instead of strictly shopping from the couch.
Investors in shopping malls, strip malls, and other properties that have adequate space to house an Amazon department store could be well positioned should Amazon decide to commit to these shops and start building them nationwide. They'd make excellent anchor stores, attracting plenty of traffic of their own and helping to build up other businesses' foot traffic in the same property, which would logically allow for rent increases. It's really all a huge win, should Amazon decide to scale.