At stake: The loyalty of the next generation of shoppers.
Amazon.com’s amzn war against traditional retailers is moving to a new battleground: college campuses.
The online retailer, with its eyes on the next generation of affluent shoppers, is quickly expanding its fleet of campus kiosks that allow students to retrieve online orders. That represents a big new challenge to traditional retailers, notably Target tgt and Barnes & Noble’s college bookstore chain. bned
According to a report this week by Bloomberg News, Amazon will have pickup kiosks up and running at 16 colleges (attended by 500,000 students), including major schools like Purdue University, University of Massachusetts Amherst and the University of Pennsylvania, by year-end. And many more are in the pipeline for 2017 as universities look to supplement their own stores, Bloomberg reported, citing the executive who runs Amazon’s student programs.
The pickup lockers, available to students who pay for the discounted Amazon Prime student membership ($49 vs the regular $99), are designed to hook young adults on using Prime, and therefore buying from Amazon, just as these consumers are developing their shopping habits. According to Bloomberg, these lockers will allow Amazon to offer same-day delivery of 3 million products on some campuses.
“On a college campus, you have all of your future customers in one place,” Riply MacDonald, the executive, told Bloomberg.
Already, some 49% of U.S. households led by someone age 18 to 24 is a member of Prime, according to research released recently by Wall Street firm Cowen & Co.
Amazon’s push comes just as Target, which operates a few campus stores under its newish small- store format, is making college stores part of its new growth push. Two years ago, Target opened its first super-small store, a 20,000-square-foot location (one-sixth the size of a regular Target) near the University of Minnesota in Target’s hometown of Minneapolis. That store focuses heavily on items students need for the dorm, with food like mac-and-cheese and Ramen noodles, kitchen supplies, and cheap clothes.
Target and Amazon, unlike campus-store leaders Barnes & Noble College and Follett (which operate 750 and 1,000 campus stores, respectively), don’t sell textbooks. But they nonetheless see a big opportunity: the College Board estimates the average student spends in excess of $2,000 a year on non-book and school supply items, compared to about $1,200 on books. (Barnes & Noble College has been trying to tap that by improving many of its stores with expanded beauty sections and store remodels.) And the National Retail Federation has estimated that back-to-college spending in 2016 would reach $48.5 billion.
Target has deemed its first campus store such a success that it has expanded its campus chain. The discount retailer now operates several stores near colleges, including University of California at Berkeley and Boston University, with many more in the pipeline, like University of North Carolina at Chapel Hill and M.I.T. There are 13 current and announced stores in all, with many more undoubtedly to come.
While it will be years before those and Target’s other smaller stores move the needle for an 1,800- store chain, they are key to recruiting its next wave of shoppers. They also help Target reach customers not served by Walmart or even its own shoppers who don’t get to the suburbs much. (Walmart has a single campus-like store at the University of Arkansas in Fayetteville.) But with Target’s sales suddenly wobbly–comparable sales fell 1.1% last quarter–the retailer is relying on the campus stores, and other smaller, urban stores to be a source of growth in the coming years.
“Everyone of those stores is performing ahead of our expectations,” Target CEO Brian Cornell told Fortune in an interview last month. “The combination of being on campus and in urban centers is a fabulous new growth vehicle for us.”
That is, unless Amazon rains on Target’s parade.