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Amazon’s Department Store Plans May Be Death Knell For Walmart’s Retail Lead

News of Amazon’s plans to open department store-style physical retail locations in the coming years likely came as little surprise to industry watchers who have seen the eCommerce giant steadily ramp up its in-store offerings over the past several years, first with bookstores and most recently in grocery.

Still, the move is a blatant frontal assault on rival Walmart, which earlier this week said its omnichannel approach helped to neutralize decelerating eCommerce sales while still catering to consumers worried about the COVID-19 Delta variant.

“No matter how customers want to shop, we’re here for them,” Walmart Chief Financial Officer Brett Biggs said. “In some periods, in-store shopping will lead the way, and in some, eCommerce will lead the way.”

See: Walmart Tells Shoppers ‘We’re Here For You’ As Omnichannel Retailer Neutralizes Delta Variant

Though an Amazon spokesperson told PYMNTS that the company does not comment “on rumors and speculation,” The Wall Street Journal said the first Amazon department stores, expected to be located in Ohio and California, will be around 30,000 square feet — smaller than most department stores — and offer items from top consumer brands.

Read more: Amazon Hatching Strategy To Open Mega Brick-and-Mortar Stores

Joe Scioscia, vice president of sales at enterprise resource planning software company VAI, told PYMNTS that Amazon’s ability to scale to a full-size department store “will send ripples throughout the retail industry” and provide a glimpse at what the future holds.

“For both large brands and small local stores, Amazon has shown that consumers are becoming increasingly familiar with a tech-enabled and contactless shopping experience, especially during the COVID-19 pandemic,” he said in an email. “In the next few years, I expect to see other retailers ramp up their abilities to offer contactless shopping experiences in connection with both delivery services and curbside pickup.”

Stepping Further Onto Walmart’s Turf

In each category where Amazon has taken the lead from Walmart, it has done so by slowly and steadily chipping away at Walmart’s lead with its ever-growing digital business. And if the titanic battle were solely about eCommerce, it would already be over: Amazon’s total share of online sales is above 50 percent, according to PYMNTS Whole Paycheck Tracker Report, and its share in several categories ranges from 30 to 40 percent.

See more: Amazon Eyes Physical Stores While Walmart Doubles Down On Digital 

Of course, 80 percent of retail sales are still being done in traditional stores, and Amazon’s plans for brick-and-mortar stores shows that the eCommerce company is tired of waiting for the tide to turn, even with the unprecedented digital shift caused by the pandemic.

To be sure, Walmart’s physical footprint of 6,500 domestic storefront is formidable, and a few department stores in the Midwest and West Coast isn’t going to reshape the landscape overnight. But as Karen Webster pointed out last month, Amazon is on the cusp of becoming the largest retailer in the U.S. — all it needs is to push a little further into key retail segments.

Related: Can Walmart+ Save Walmart From Amazon?

Amazon currently has over 500 Whole Foods Markets, approximately 26 Amazon Go locations, eight Amazon Fresh grocery stores, two Amazon Go Grocery stores, 24 Amazon Books stores and 29 Amazon 4-Star outlets, according to Supermarket News.

Digging Into Department Stores

Several department store retailers have filed for bankruptcy in recent years, including JCPenney, Neiman Marcus and Lord & Taylor, but experts and analysts say the format isn’t dead — brands just need to give consumers a reason to stop by.

“If you’re uniquely great at something, customers will come,” Jared Blank, chief marketing officer at VTEX, told PYMNTS. “What we saw from the last recession … was the middle-of-the-road retailers — the Macy’s, the JCPenney, the Sears — customers did not find a reason to go there because for each niche, another company had done it better.”

Amazon, which already has over 9 percent of consumers’ retail spend, is in a prime position to prove just how much better it can be. Years of online sales have built a delivery and fulfillment network so robust that even merchants who don’t sell on Amazon are utilizing it. With department stores, Amazon could make that network truly omnichannel by adding curbside pickup and buy online, pickup in-store (BOPIS) capabilities to the delivery roster.

According to PYMNTS research, nearly 14 percent of consumers have used BOPIS since the onset of the pandemic and over 15 percent have used curbside pickup. Almost 60 percent of consumers say they still prefer to pay for products and receive them in-store, down slightly since before the pandemic but still the most common shopping journey.

See: More Than Forty Percent of U.S. Consumers Shop Through Digital Channels … And Stay There

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