That could be a bit of an exaggeration. Or maybe not?
Amazon was already blowing up our radar screens this year when analyzing retail real estate. The e-commerce juggernaut is often blamed for the hundreds of store closings taking place across sector categories in all types of shopping centers.
Then it recently dropped two huge bombs on the industry within a week. Not only is Amazon buying Whole Foods, but the company is also launching Prime Wardrobe, which will allow consumers to try on items for free before making the commitment to purchase an article of clothing.
That’s a pretty effective week if your goal is to terrify retail real estate investors.
In the case of the Whole Foods purchase, which still needs regulatory approval, it immediately makes Amazon a major brick-and-mortar supermarket player. What we already know is that Amazon will go head-to-head with Walmart, the country’s largest grocer, which has been ramping up its online food-ordering capabilities and adding more organic and specialty products for which Whole Foods is known. Traditional grocers are already struggling, and this does not well for chains that aren’t focusing on innovation, through technology and in-store experiences.
What we don’t know if how this will impact existing Whole Foods stores. So far, no locations are expected to close, but the future could bring a different reality. Picture a metro market with several Whole Foods stores. If same-day Amazon Prime delivery ramps up through the supermarkets, that could lead to a significant drop in store traffic, which could in turn mean store closures.
On the fashion front, the biggest complaint about buying clothes online is that the consumer doesn’t get a chance to physically feel items and understand how they would fit on their bodies, which is what one can do at a brick-and-mortar location. Amazon Wardrobe will eliminate the need to make a physical-store trip, and that does not look good for clothing chains and department stores, which are already having serious problems. Retail real estate investors have already had to stomach a lot of vacancies in this sector, and the potential of more closings isn’t attractive.
So what’s next? Will Amazon try to enter home improvement and take over, say, Lowe’s? Or will it try to own necessity service outlets and start a chain of locations with a salon, dry cleaning and quick-service meals all under one roof?
And if Amazon did, would it really surprise you much at this point?