Though Amazon (NASDAQ: AMZN) clearly dominates the world of online retail, the company has, through the years, sought to expand its presence in the world of physical retail as well. Not only has it been expanding its lineup of grocery stores, but it also recently opened its first hair salon overseas.
Now, Amazon has opened a new store outside of London. And it could end up being a mixed bag as far as real estate investors are concerned.
Amazon's latest venture
Amazon just launched its first nonfood store outside the U.S. The Amazon 4-star shop, located in the popular Bluewater shopping mall outside of London, features roughly 2,000 of the online giant's most popular, highly rated products. The venture has been dubbed "Amazon 4-star" because every item featured has a four-star rating or higher by customers online.
Amazon's new store hosts a range of products, from books to toys to housewares to electronics. In essence, the store reflects the products that customers are most drawn to online.
In fact, the store has a "Most Wished For" section that highlights the most popular products from Amazon customers' wish lists. The "Trending in Bluewater" section showcases the most popular items among local customers. Finally, the "Most Gifted" section reflects the most popular items consumers are buying for others. The intent is for Amazon to cycle through different products based on factors like customer behavior, feedback, and seasonality.
Meanwhile, the store will feature digital price tags to ensure that its prices are the same both in stores and online. Just as importantly, customers can order items online and retrieve them in store. And, they can return items to the store that were ordered online.
The real estate takeaway
Some shopping center and mall operators may initially welcome the rollout of Amazon's physical stores. But Amazon's venture into brick-and-mortar locations could actually end up being a mixed bag for real estate investors.
While commercial landlords might enjoy a steady stream of rent from Amazon, the online giant's physical stores could easily end up driving many smaller establishments out of business. That could, in turn, leave landlords with vacancies to grapple with.
But it's not just smaller stores that could get hurt by Amazon. Its new 4-star concept could serve as major competition for department stores, electronics stores, and more. And losing those could be a major blow to investors.
Amazon's new venture could even end up threatening big-box competitors like Target. Since the pandemic exploded, megastores like Target have benefited by being able to offer the option of BOPIS -- buy online, pickup in store. But if Amazon opens more stores that offer BOPIS, big-box giants could lose their edge.
Of course, Amazon's latest venture shouldn't come as a surprise. The online superpower seems to have the goal of dipping its toes into just about everything, and physical retail is by no means a stretch. But it'll be interesting to see how it ultimately impacts real estate investors if more 4-star stores hit the market.