Posted: June 6, 2018 by Team CREXi
Amazon’s purchase of Whole Foods last year was a definite tipping point in the retail real estate landscape. The online giant, already thought of as the leading threat to brick-and-mortar retailing, squarely became a significant player in the physical-store place with the ownership of the country’s largest specialty grocer and its 450 stores. This wasn’t supposed to happen.
Now Amazon, the purveyor of nearly every retail category online, was adding another tool – and distribution method – to its belt, furthering its already formidable reach to millions of consumers whose attention is needed by chain stores, many of which are closing locations.
The question posed by many now is: What will Amazon buy next? If you read the rumors, it could pretty much everyone. Instead of waiting to find out, some major retailers are, or are rumored to be, in the process of taking nontraditional proactive steps and teaming up with each other to draw more customers and boost sales.
ALDIS INSIDE KOHL’S
Kohl’s isn’t exactly anti-Amazon. After all, the latter’s customers are able to return items to some Kohl’s stores in Chicago and Los Angeles, which also have Amazon kiosks.
In a much more experimental move, Kohl’s is subleasing spaces to grocer Aldi as part of a test program. So far there are 10 of its discount department stores set to house food items. If it is extended to more locations, then it would put Kohls somewhat on par with competitors Walmart and Target, selling both food and apparel.
It also benefits both Aldi and Kohl’s in brand exposure to customers that potentially didn’t previously shop at one of them. Plus, both target cost-conscious consumers.
A TARGET-KROGER COMBO?
In bigger news, it has been rumored for a few months now that Target and grocer Kroger could combine. This would be a major deal, giving Target a much-needed boost to its grocery offerings, and it would give Kroger’s several chains access to mass-merchandise items. And surprisingly, there is not a whole lot of geographic overlap between the two, which would total 4,600 units together.
Though there are synergies that would make this merger logical, many analysts don’t believe it will actually take place, in part, because both companies have a great deal of debt, and Target would likely have to cut back on general merchandise in stores to make way for groceries, which could hurt its profit margins.
COULD WALMART GET FANCY?
Don’t expect Walmart to sit back idly as Amazon’s growth increases exponentially every year. In what would have thought of as a major stretch years ago, the world’s largest retailer is in reports saying that it could be eying upscale department-store chain Nordstrom as a potential acquisition candidate.
This would give Walmart access to a whole new customer base that it hasn’t attracted before. Reportedly Nordstrom customers are 55 percent less likely to shop at a Walmart than the average American.
Other than Nordstrom, Walmart could have something in the works with Lord & Taylor. It started selling the luxury chain’s goods on its website late last year, improving the reach of the two to very different demographics.
Retail is definitely changing as a reaction to Amazon, making major players greatly expand their reach to consumers with a wider assortment of products.
For his part, Southern California mall owner Rick Caruso said that this competition has helped brick and mortar outfits up their game and that “Amazon has been great for retail.” It has certainly made the industry interesting as of late, as we await the next big acquisition by the online behemoth and its competitors’ reactions.
What this means for operators of commercial real estate is that the poorest-performing players are getting weeded out by Amazon. The chain stores that are around, and in some cases thriving and expanding, are those that give customers a compelling reason to physically show up to make a purchase. When done successfully, these outfits obviously drive needed traffic to shopping centers. You can purchase anything sold at an Apple Store online, yet its stores have the highest sales per square foot of any chain. What landlord wouldn’t want one of them in their development.
If these mergers work out, the idea is that they will very experiential in nature, bringing more people to stores because of increased offerings, thus improving traffic and boosting the stores around them.
These possibilities have certainly made the industry interesting as of late, as we await the next big acquisition by the online behemoth and its competitors’ reactions.