Amazon's In-Store Returns Program Needs Some Work

  • Gordon Haskett’s Grom visits Kohl’s to review partnership
  • Kohl’s has now started selling Amazon products, taking returns

Kohls' Gass on Amazon, Holiday Season, Becoming CEO

Amazon.com Inc. began letting customers return products at some Kohl’s Corp. locations last week, an attempt to meld its e-commerce prowess with brick-and-mortar stores.

But the effort needs some work, said Chuck Grom, a Gordon Haskett analyst who visited six stores offering the service in Chicago on Monday. The returns desks at Kohl’s weren’t particularly visible, which may mean the program needs better marketing, he said in an interview. Kohl’s has started taking Amazon returns at 82 of its stores.

Amazon Smart Home Experience in a Kohl’s location

Source: Gordon Haskett Research Advisors

“I think ultimately the success of it will be 100 percent dictated by getting the word out and advertising, so ultimately people affiliate Kohl’s with Amazon if that’s what both parties want to do,” he said.

Another concern, he said, is that a wide range of products purchased on the website don’t qualify for the return service. Only items sold and shipped by Amazon are eligible for the free in-store returns, with third-party goods excluded.

“Certain products qualify for it and certain products don’t,” he said. “That’s a little bit of a limitation because sometimes consumers just don’t know.”

Store-in-Store

The second part of the Kohl’s-Amazon partnership -- a store-in-store concept that allows shoppers to test out gadgets in a home-like environment -- made a better impression, Grom said.

Kohl’s announced the concept, dubbed Amazon Smart Home Experience, or SHE, in September. It entails 1,000-square-foot Amazon areas in 10 of its Los Angeles and Chicago locations, with the goal of driving traffic. Amazon’s Echo voice-activated device and Fire tablets, among other gadgets, can be purchased there. The retailer wants to drive traffic after reporting a 0.4 percent same-store-sales drop in its most recent quarter.

Kohl’s declined to comment about the partnership. Amazon, through a spokeswoman, also declined to comment.

Retailers have struggled to maintain sales as customers defect to Amazon and other online platforms. While some companies, like Wal-Mart Stores Inc., are striving to compete by building up their own web presence, Kohl’s has opted to embrace the e-commerce giant directly.

“If you’re Kohl’s, you’re in the search for frequency into your stores,” Grom said. “Selling Amazon products will give consumers the opportunity to touch and feel the items and -- equally important -- talk to somebody about how they work.”

Home-Like Setting

For Amazon, the Kohl’s partnership is part of its push to enter brick-and-mortar retail -- an effort that’s included its acquisition of Whole Foods Market Inc. and a new bookstore chain. The idea is that Kohl’s offers a comfier setting than a Whole Foods produce aisle or tight bookstore to showcase the smarthome features that Amazon is promoting.

News of the partnership fueled speculation that Amazon might make a bid for the Menomonee Falls, Wisconsin-based retailer. But Kohl’s incoming chief executive officer, Michelle Gass, quelled these talks earlier this month, saying -- “I don’t think so, no,” -- when asked if Amazon might acquire the chain.

The store-in-store areas are staffed by Kohl’s and Amazon employees, with the latter selling home entertainment products and Kohl’s employees managing the returns, Grom said.

Overall, “it’s probably not a bad strategy,” Grom said. “I think it’s a respectable move to test it, learn and then go from there.”

— With assistance by Spencer Soper

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