Why Amazon and Kohl’s Need Each Other

Amazon and Kohl’s are expanding a relationship that appears to be working for the two frenemies. As announced recently, all 1,150 Kohl’s stores across the United States will accept Amazon returns, thus expanding a program the two companies began to pilot in 2017. Kohl’s will accept eligible Amazon items (without a box or label) and return them for customers for free. As a result, Kohl’s becomes a product return center for Amazon. 

How Amazon Returns Work at Kohl’s

In early 2018, I visited a Kohl’s location in Woodridge, Illinois, shortly after the store began accepting Amazon returns. A giant banner at the front of the store made it clear that Amazon returns were welcomed. The designated Amazon returns station was set up near the entrance. I asked a sales associate why the Amazon returns center was at the front of the store. Wouldn’t it be better to place the center in the back, which would generate more foot traffic throughout the store? She replied that Kohl’s already operated its own returns counter at the back of the store, and having an Amazon returns counter at the same area was confusing to customers. But to encourage foot traffic, Kohl’s gave Amazon customers coupons with discounts for in-store purchases.

In April 2019, I visited the same store. I noticed that the Amazon returns desk had been moved to the back to an all-purpose service counter for customers of Amazon and Kohl’s (for both online pickup and returns). Signs throughout the store directed Amazon customers to the consolidated returns center.

Each person at the service counter accepted all returns, whether from Kohl’s or Amazon. It was clear that the associates had been trained to fulfill both types of returns based on how quickly they managed the process. An associate also confirmed that Kohl’s continues to provide coupons (with a one-week expiration date) to encourage Amazon customers to stay in the store and shop for Kohl’s merchandise. Someone at Kohl’s must have gotten the message: when you see an opportunity to get customers walking through your store, you take it. With the passage of time and the assistance of clear signage, customers will figure out where to take their returns.

In addition, near the entrance, an Amazon-branded pop-up store offered a wide range of Amazon products, including different Echo speakers and Fire products. Here was an attempt to make Kohl’s a distributor for Amazon as well via a pop-up store. But apparently the attempt failed to take root. Amazon recently announced the discontinuation of pop-up locations including those at Kohl’s stores. It should be noted, however, that Kohl’s will stock Amazon products, just not in an Amazon-branded space. So Kohl’s has become a retail outlet for Amazon after all. Why bother with a pop-up store if Kohl’s will stock your merchandise, anyway?

Does the Strategy Work?

Data from Earnest Research suggests that the partnership is paying off for Kohl’s. After Chicago stores began accepting Amazon returns in 2017, “Chicago sales, transactions, and customer growth all outpace the same metrics nationwide for 2018,” according to Earnest.

And the relationship certainly makes sense for Amazon even if the pop-up stores have failed. Having Kohl’s as fulfillment partner attacks one of the headaches of buying online: ease of returns. And Amazon enjoys the services of a returns counter without having to own a brick-and-mortar store. Of all Amazon’s services, such as retail, advertising, cloud computing, retail remains particularly costly. It behooves Amazon to find better ways to contain expenses (which the company is doing based on its latest quarterly earnings report). Even the mighty Amazon needs partners 

Meanwhile Kohl’s is maximizing the value of its floor space in other ways, such as by leasing locations to Planet Fitness. And Kohl’s is not the only retailer leasing floor space. Macy’s has been leasing space to retailers such as Sunglass Hut and LensCrafters

What’s Next?

It will be interesting to see how this relationship unfolds. Will Amazon lean on Kohl’s to sell more of its products, such as its fast-growing stable of house brands? In fact, Motley Fool speculates that Amazon could buy Kohl’s outright. The notion isn’t that far-fetched (see Amazon’s acquisition of Whole Foods). Retail apocalypse or opportunity? Stay tuned.

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