Kohl’s Enlists Amazon as Ally in Bid to Drive Store Traffic

Updated on
  • Home Depot, meanwhile, is teaming up with Google Express
  • Kohl’s will offer Amazon products in 1,000-square-foot areas

Amazon Is Conquering More Than Just Kale

In a sign of the times, Kohl’s Corp. and Home Depot Inc. are the latest traditional retailers to embrace online giants.

Kohl’s aims to turn an e-commerce threat into an ally by offering Amazon.com Inc. products in some of its stores. Home Depot, meanwhile, will sell goods online via voice commands through Google Home and the Google Express website and mobile app. Wal-Mart Stores Inc. announced a similar pact with Google last month. 

In the Kohl’s deal, the department-store chain will open 1,000-square-foot Amazon areas in 10 of its locations, offering gadgets like the Echo voice-activated device and the Fire tablet. The new store-in-store concept, dubbed the Amazon Smart Home Experience, will begin appearing next month.

The partnership lets Kohl’s ride Amazon’s coattails and provides another way to drive traffic to its brick-and-mortar locations. The broader department-store industry has struggled to maintain sales, and the specter of customers defecting to Amazon is seen as a major threat. Same-store sales -- a closely watched measure -- dropped 0.4 percent at Kohl’s last quarter.

News of the tie-up helped send Kohl’s shares up 4.9 percent to $42.37 on Wednesday. The stock had been down 18 percent this year, battered by retail gloom.

The Kohl’s announcement, while financially immaterial, may end up foreshadowing
a larger relationship in the future, Mark Altschwager said in a research note.
In fact, the department-store chain could become an acquisition target for e-
commerce giant, he said.

Altschwager cited Kohl’s “off-mall” status: Its stores are often in close proximity to supermarkets and have excess space that could be repurposed to serve Amazon’s distribution network.

Renovation Boom

Home Depot faces less pressure from the online realm. It’s been one of the best-performing retailers for several years -- fueled by rising home values that have encouraged customers to spend more on renovations. But the deal with Alphabet Inc.’s Google, which takes effect later this year, may give it a way to pick up some additional sales.

The chain’s shares rose 2.4 percent to $156.56 on Wednesday, adding to a 14 percent gain for the year.

Voice-Controlled Devices

The dueling announcements are part of the jockeying by Amazon and Google to gain share in voice-controlled devices. Up until now, Google has struggled to compete with Amazon in this category. To increase its appeal, the search-engine giant recently dropped a $10 monthly membership fee for the service.

More than 35 million Americans will speak to internet-connected devices at least once a month this year, more than double the number in 2016, according to a May report from research firm EMarketer Inc. About 71 percent will use Echo devices, with the Google Home speaker trailing at 24 percent.

For Amazon, the Kohl’s deal offers another distribution channel to support its rapid expansion. The e-commerce giant just completed its purchase of Whole Foods last month, marking its biggest push yet into the brick-and-mortar world. It also is building out a chain of physical bookstores.

The Smart Home Experience will be offered at Kohl’s stores in the Los Angeles and Chicago areas, aiming to be ready in time for holiday shoppers. The idea is to let consumers test out the products -- including devices powered by Amazon’s voice assistant Alexa -- which can be used to manage entertainment, home security and other tasks.

Still, the partnership will be limited to a tiny fraction of Kohl’s chain. The retailer has more than 1,100 department stores in 49 states. Terms of the Amazon deal weren’t disclosed.

    Before it's here, it's on the Bloomberg Terminal.