Adhering to the old adage, keep your enemies closer, Kohl’s (KSS) has struck a deal to operate Amazon.com-branded (AMZN) shops at some of its stores.
The department store chain, looking to shake off six straight quarters of sales declines, said on Wednesday it will provide 1,000 square feet of space at some 10 Kohl’s stores in the Los Angeles and Chicago areas next month and focus on Amazon’s smart home offerings. Kohl’s joins the ranks of retailers such as Best Buy (BBY) and Sears (SHLD) to make the pragmatic choice to collaborate with a company that has stolen a ton of market share from brick-and-mortar chains in recent years. (Sears recently said it will sell Kenmore appliances on Amazon, while Best Buy is also giving space in its stores to Amazon.)
Investors clearly like the news, sending Kohl’s shares up 4% in morning trading, in the belief that the Amazon spaces could spur traffic. Kohl’s operates some 1,160 stores, so this arrangement at 10 locations will hardly move the needle, but some Wall Street analyst surmised a broader rollout would come later. (A Kohl’s spokeswoman said the retailer had no current plans to expand this.)
“This is a smart move, and puts Kohl’s ahead of its department store peers (many of which are focusing less on the electronics category), as the retailer now boasts a unique, differentiated traffic driver that sets them apart from the pack,” Jefferies analyst Randal Konik wrote in a research note.
The Amazon areas will be staffed by Amazon employees and showcase how a variety of Amazon devices, including Amazon Echo, Echo Dot, Amazon Fire TV, Fire tablets and others interact with Alexa, Amazon’s voice enabled technology.
The move also shows how even Amazon, which has been opening a number of its own stores, sees the benefit of physical retail at a time it is pushing its Echo products and the like, Konik said. Indeed, as soon as Amazon’s acquisition of Whole Foods Market closed last week, the online retailer’s Echo devices could be seen at Whole Foods stores across the country.
At a time Kohl’s has seen some of its apparel and house brands struggle, it has been focusing on areas like activewear and electronics to carve a niche for itself among its peers. Last year, Kohl’s began operating small Apple (AAPL) areas within its stores, and earlier this year, began selling Under Armour (UAA)products.