Amazon’s Expansion Into Department Stores Is All About Surveillance

Amazon’s Expansion Into Department Stores Is All About Surveillance
Photo: Denis Charlet, Getty Images

Now that it’s officially swallowed the lion’s share of online retail sales, Amazon is reportedly eyeing ways to corner our offline shopping, too. The Wall Street Journal reported on Thursday that the e-commerce giant is drumming up plans to open “several” department-style stores in a handful of cities across the U.S.

People familiar with the matter told the paper that these stores would help Amazon “extend its reach in sales of clothing, household items, electronics, and other areas.” It’s a smart move from Amazon, but also one that would end up being a privacy nightmare for a company that’s seen its fair share of scandals in the space.

Per the Journal, the first states where these department stores are expected to open include Ohio and California. They’re planned to be mid-size, at around 2,787 sq km — smaller than your average Costco or Walmart, but way larger than the Amazon 4-star stores. Like those 4-star locations, sources told the Journal that Amazon’s private-label products would be featured front and centre in these bigger locations, alongside wares from other “top consumer brands.”

The alleged department store spaces are just Amazon’s latest foray into the brick-and-mortar world. In 2015, the company began experimenting with small bookstores: first on its Seattle home turf, before trickling out to a few other cities across the US. But for all sorts of reasons, sales in these bookstores have pretty much flatlined in the years since their debut. By 2019, the company decided to fold together these stores and the company’s then-struggling “pop-up” shops — essentially mall bodegas that sell Amazon-branded tablets and e-readers. 87 of those pop-ups closed essentially overnight. Other real-world retail efforts like Amazon Go Grocery met similar ends, either collapsing into larger big-box stories from the company or indefinitely closing for unspecified “renovations.” Even then, Amazon’s retail efforts have translated into millions of dollars taken from countless competitors that were already struggling to pitch themselves against the ecommerce juggernaut.

But if the multiple ongoing federal probes into Amazon’s antitrust-y behaviour have shown us anything, it’s that the company won’t be satisfied until it dominates every sale, not just most of them. Right now, the bulk of Amazon’s real-world retail dollars are coming from its myriad grocery chains, including Whole Foods. But the company still lags behind its brick and mortar brethren when it comes to selling high-end fashion, or basic cosmetics and health goods — think toothpaste or bottles of shampoo.

In June, reports emerged that the company was mulling plans to open its own Amazon-branded physical retail pharmacies, which would help the company crater competitors like Walmart or CVS that currently rule the world of retail-ized healthcare.

Amazon’s department store push would also help the company compete with two of its tech giant pals: Facebook and Google, which together dominate more than half of the multibillion-dollar digital ad ecosystem. Amazon ranks in a distant third place by earning 10% of that spend, but that number’s skyrocketing fast — and a lot of that boom boils down to data.

Amazon’s always collected data on its shoppers and sellers, but the past few years have seen the company make a serious push to woo advertisers away from platforms like Instagram and YouTube. And that woo worked because Amazon could offer what those platforms couldn’t: data about every purchase, every search, and every wishlist from every Amazon customer.

But that still left the company with a pretty large blind spot: data from real-world, in-store purchases. Meanwhile, those real-world retailers — including names like Target, Walmart, and CVS — have started launching ad networks of their own, offering data from the real-world purchases happening outside of Amazon’s sight.

An Amazon-branded department store would potentially bring those dollars back into Amazon’s pockets, and then some. Amazon’s past brick-and-mortar efforts have shown that the company isn’t afraid to collect as much data as humanly possible from people who walk through its doors — even if that person doesn’t end up buying anything at all. Amazon knows the aisles you’re browsing, the items you’re picking up from a shelf, and whether your buys were influenced by an ad you saw on Amazon’s site. It knows how often you shop for groceries, whether you’re a vegetarian, and if you might be running low on eggs this week — which is great for Amazon and its advertiser partners, but a privacy nightmare for consumers that already have ample reason to be weirded out over Amazon’s data collecting practices.

Right now, Amazon’s future plans in the real-world retail space are mostly confined to rumour — but they still paint a damning picture. A world where Amazon department stores and Amazon pharmacies are the norm is one where Amazon knows every prescription you take, not to mention all the purchases we might want to keep quiet from everyone — our pregnancy tests, bottles of hair dye, trashy magazines. If Amazon really wants to know how often I’m buying a box of “feminine hygiene” products or something equally classy, they’re welcome to try finding out. But I’d really rather keep those details to myself.

We’ve reached out to Amazon about the Journal’s report and will update this post when we hear back.