Why Kohl’s Just Became Best Buddies With Amazon

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It used to be that the threat of Amazon.com Inc. (NASDAQ: AMZN) in any new sector was not very different from seeing the Death Star suddenly appear in the sky. Bad things were about to happen. That was definitely true in the retail sector.

Kohl’s Corp. (NYSE: KSS) ran a pilot program with Amazon in 2017 to see how it would work if Kohl’s stores started acting as an Amazon return destination. Apparently, it worked quite well.

Kohl’s shares rallied on Tuesday on news that Amazon customers will now be able to return items shipped from Amazon at all Kohl’s store locations for unpackaged goods as a convenience rather than having to return items via postal or shipping services.

The pilot is currently operating in 100 stores, but all Kohl’s locations will begin accepting returns from Amazon customers starting in July. The pilot stores were originally just in the Los Angeles, Chicago and Milwaukee markets, which should stand out as markets where there is a combination of public transportation and car ownership locations. The new program will include more than 1,150 Kohl’s locations and will be in 48 of the 50 states.

Kohl’s will accept eligible Amazon items, regardless of whether there is a box or label, and will return the goods to Amazon at no charge to the customers.

While this move may seem surprising, Kohl’s had announced a month earlier that it planned to expand its relationship by carrying Amazon products in more than 200 stores.

Kohl’s gets an obvious advantage here: extra foot traffic that hopefully will buy goods while they are already inside the Kohl’s stores. The advantage to Amazon is also simple in that it now has that many more locations where customers can return goods, and it has little to no real estate cost for the effort.

Investors cheered the news, sending Kohl’s shares up 12% to $75.60 in late afternoon trading. The 13.3 million shares traded with about 45 minutes until the market’s closing bell was already more than four times normal trading volume. Kohl’s has a 52-week trading range of $57.89 to $83.28.

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