Amazon Could End Up as an Unlikely Winner of the Retail Apocalypse

It's in a position to open physical storefronts while others shutter due to the pandemic

In its 2020 U.S. Store Closures report, research and advisory firm Coresight Research estimated that there would be 20,000 to 25,000 store closures this year, up from a record 9,800 in 2019.

That means we really haven’t seen anything yet as far as the alleged retail apocalypse goes.

Odest Riley Jr., CEO of WLM Financial, agreed that many small businesses won’t reopen following the pandemic because competitors like Amazon, Costco and Walmart had the infrastructure and capital in place to bring in customers—and they’ve also taught consumers to shop online.

While neither Amazon nor founder Jeff Bezos has commented on future plans, the increase in available inventory certainly presents an opportunity for a deep-pocketed platform like Amazon, which is omnipresent in online retail but has had a more modest physical presence to date.

Rumors have swirled about Amazon’s interest in struggling retailers like department store JCPenney. Reuters reported JCPenney also had talks with buyout firm Sycamore Partners. But as more retailers file for bankruptcy, plenty of other options remain regardless.

“No one really does know what Amazon is going to do next,” said Zach Weinberg, director at research firm Gartner. “They are very opportunistic and they love to experiment. The evidence of their love to experiment is in all those … different store types.”

To date, Amazon has opened 25 cashier-less Amazon Go locations in the U.S. and a single Amazon Go Grocery store in Seattle, 24 Amazon Books stores, 30 Amazon 4-star stores and seven pop-ups. It also has grocery stores coming in Chicago, Los Angeles and New Jersey.

“[Amazon] always experiments in small, choice locations,” said Tim Milazzo, CEO of real estate fin-tech company StackSource. “At the same time, they have scaled massively in warehouses, data centers and last-mile delivery.”

But, Weinberg said, it’s possible Amazon is now motivated by Walmart’s Q1 earnings report, where its ecommerce business was up 74%, thanks in part to its physical presence where customers can pick up orders.

Without feedback from Amazon, it’s hard to tell what this will look like exactly, but there are options. Milazzo said an acquisition where Amazon gives a struggling business like a JCPenney a shot in the arm makes more sense than simply soaking up vacant real estate.

“That seems to be the pattern. Whole Foods is still Whole Foods,” Milazzo said. “It’s still Whole Foods branded with some connection with your Amazon account. You get perks, but they use data in addition to using that retail center as a hub to do deliveries.”

Carson Alexander, an agent at real estate brokerage Triplemint, however, said he foresees the Amazon name on a future venture.

He continued that it won’t likely be “JCPenney by Amazon” but more of a takeover in which Amazon brings brand recognition, technology, logistics and, most importantly, cash.

Meanwhile, Riley noted, Amazon is in a great position to pick up “tons of square footage at a really cheap price,” but his guess is Amazon would use this to bulk up its warehouse footprint. Riley said Amazon could also possibly pick up smaller stores in the same neighborhood, which it could leverage further for distribution.

“I would say what they’d really benefit from is picking up a lot of space. There are opportunities to see if they want to open up locations, and if they decide it doesn’t work, it gives them an opportunity to become landlords,” Riley said.

Alexander said it could be a while before Amazon makes a move, though.

“I don’t foresee [retailers] being extremely distressed for another quarter or two,” Alexander said. “Amazon will wait for the right price and opportunity. … If Amazon is looking for opportunities, it’s looking for people already circling the drain before this happened.”

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This story first appeared in the June 15, 2020, issue of Adweek magazine. Click here to subscribe.