Should Amazon open clearance stores?
Amazon.com was considering opening a clearance concept selling unsold inventory of home goods and electronics at steep discounts prior to the novel coronavirus pandemic, reports Bloomberg.
“It’s a way to be able to clean out warehouses, and get through inventory without having to destroy it,” one of the insiders familiar with the plans told the news service. “It is keeping with the value proposition of Amazon, keeping price at the forefront and allowing customers to get access to products at low cost.”
The concept would have complemented the sale online of overstock and clearance items through Amazon Outlet as well as returned and used items through Amazon Warehouse. As it has gained leverage, Amazon has also increasingly encouraged suppliers to take back unsold items.
Due to space reasons, the focus in stores would have been on smaller items such as home goods, electronics, toys, baby products and kitchen items, similar to the Amazon 4-Star store format. Apparel wasn’t being considered because carrying multiple sizes would take up too much square footage. Amazon was also considering permanent as well as pop-up locations in malls or parking lots.
The plans were preliminary and shelved as Amazon focused on fulfillment during the pandemic and the rollout of Amazon Fresh.
Off-pricers such as TJX and Ross Stores in recent years have thrived despite digital’s disruption.
Among relative newcomers to off-price selling, Macy’s launched Backstage in 2015 and saw the banner outperform its full line stores by more than three times in the latest quarter. Dick’s Sporting Goods last year launched a new off-price concept focusing on apparel and footwear that is expanding rapidly. Best Buy began opening Best Buy Outlet locations selling clearance and open-box merchandise in 2016 and it now has 14.
Amazon may have also stocked third-party seller inventory in its discount concept.
On March 31, Amazon sent a letter to third-party sellers who store inventory in its warehouses through Fulfillment by Amazon (FBA) about the benefits that Amazon Outlet offers in managing excess inventories. Amazon wrote, “Featuring products via Amazon Outlet can help you boost sales, improve cash flow, optimize inventory levels, and reduce storage fees.”
Categories promised to be given increased exposure due to current trends include lawn and garden, sports, outdoors, tools and home improvement, and apparel.
- Amazon Explored Opening Home Goods, Electronics Discount Stores – Bloomberg
- Reduce excess inventory this spring through Amazon Outlet – Amazon Services Sellers Forum
- Amazon Turns to Sellers to Fill Spring Clearance Shelves – Ecommerce Bytes
- Are off-pricers immune to apparel’s challenges? – RetailWire
- Growth for Ross Stores, TJX Seen as Amazon-Proof – WWD
- Dick’s Sporting Goods Warehouse Sale – Dick’s Sporting Goods
- Macy’s launches Backstage discount stores – USA Today
- Best Buy getting into outlet business with five locations – Best Buy
DISCUSSION QUESTIONS: What do you think was behind Amazon’s exploration of clearance stores and will they still make sense post-pandemic? Is optimizing clearance a less efficient process online than in physical stores?