Is It A Smart Retail Strategy to Accept Amazon Returns?
Thursday, October 19, 2017

Categories: Returns

Is It A Smart Retail Strategy To Accept Amazon Returns?

Kohl’s has sent shock waves through the retail industry by doing the unthinkable – teaming up with the most notorious and aggressive competitor in retail, Amazon. 82 Kohl’s stores in two major markets, LA and Chicago, will accept and manage returns for Amazon customers, for free. This, only a week after they revealed the opening of “Amazon smart home experiences,” within 10 stores in the same markets. To many, it seems like signing a deal with the devil. But when we dig deeper, we can see that the deal has promising potential for both sides.

Amazon Gets a Bigger Physical Footprint

70% of consumers used Buy Online, Return In-Store in the past 12 months.Most commentators are in agreement that this move is a powerful one for Amazon. It allows them to increase their physical  footprint. Without needing to own physical infrastructure or acquire an existing organization. Amazon is aware that their lack of stores hurts their retail strategy,  fulfillment flexibility and ultimately, their bottom line.

A recent Retail TouchPoints article highlighted the takeaways from JDA’s August Consumer Survey, emphasizing that buy online, return in store (BORIS) is quickly becoming a core consumer preference. As many as 70% of respondents said they used the service in the last 12 months. Reasons ranged from reduced hassle of returning, to faster refunds and the wish to speak with an in-store customer associate because of poor remote customer service. On this front, retailers have done a reasonably good job, as the recent Omni-1000 Global report (Oct 2017) showed that 67.2% of retailers are offering BORIS services to customers.

With Whole Foods and Kohl’s now acting as local distribution and return centers, Amazon is proving its commitment to making shopping easier and more frictionless. These moves improve customer experiences and their bottom line, simultaneously, so it’s really a no-brainer for them.

What’s In It For Kohl’s?Download the Returns Management Brief Here.

But what about Kohl’s? The question is whether there is a sane retail strategy for rolling out the welcome mat for your primary competitor?

One thing is clear: Kohl’s is smashing established norms and paradigms with its new relationship with Amazon. In an industry wanting for bold innovators at the upper echelons, Kohl’s is proving it has the mettle to take big risks for big rewards.

In fact, taking back Amazon returns could be an incredibly savvy move. After all, Amazon will pay for the transactions, and any additional costs incurred. With Amazon by far the leader in online retail sales, and given that roughly one third of all online orders are ultimately returned, this could provide a massive60% of shoppers prefer to return items to a physical store. boost to in-store traffic for Kohl’s.

This could be especially lucrative because, as UPS found earlier this year, “a majority of shoppers (60%) prefer to return items to a store, at which time 70 percent of them make additional purchases.” That is an incredible number of potential customers and sales walking through the door for Kohl’s every day. As long as they’re the de facto exclusive return center for Amazon items in two massive markets, they stand to profit quite handsomely.

The Verdict Is Still Out, But Omni-Channel Is Clearly Here To Stay

IS this the dawn of a new retail industry trend towards "co-opetition"?It can’t be lost that this is another massive call out for implementing an omni-channel retail strategy. It has significant momentum, and it works.  We will look back at this development as a watershed moment. The beginning of a very interesting set of new paradigms in retail generally and omni-channel retail specifically. It’s the ultimate example of capitalizing on the advantages of retail channels, market realities, and partnership benefits.

 As we think about it more and more, it seems that the idea of letting the big gorilla into the store will work out for Kohl’s. It will be fascinating to see what happens from here. Is this the dawn of a new industry trend towards “co-opetition”? Or is it just the first step towards Kohl’s and Amazon working towards a buyout?

A year from now we will understand much more.  Looking back we will either be saying, “what a foolish mistake” or “what a brilliant strategy”. It might seem so obvious in retrospect, but our bet is on the latter.

 

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