Amazon $AMZN ( ▲ 1.31% ) just got approval to build a hybrid big-box store and fulfillment center outside Chicago, and the footprint is reportedly about 2x the size of a typical Target $TGT.
At first glance, this feels backwards.
Amazon is literally the company that helped kill mall traffic, so why would it want to sink money into a giant physical retail box, especially after earlier in-person experiments like Amazon Go never became the next big thing?
Because this is not a “retail store” bet.
This is a distribution + habit capture bet.
Why Amazon would do this (the real reasons)
Amazon has two big motivations here:
1) Most retail still happens offline
Even after 20+ years of e-commerce dominance headlines, most purchases still happen inside physical stores.
So if you want the biggest retail pie, you cannot just own the online slice. You have to show up in the real world too.
2) Amazon customers still spend tons of money at Walmart and other big-box rivals
This is the most important part.
Consumer Intelligence Research Partners found that 93% of Amazon customers also shop at Walmart $WMT.
So Amazon is basically staring at a brutal truth:
Even their “loyal” customers still split their wallet with the competition.
And groceries make this even more obvious
Amazon has been pushing into groceries for years, but groceries are still overwhelmingly in-person.
CIRP estimates that basically all Amazon customers buy groceries somewhere else, which is insane when you think about it.
It means groceries are still the one category where Amazon does not own the routine.
And in retail, routine is everything.
Bottom line: this Chicago hybrid facility is Amazon trying to win share in the parts of retail that still live offline, especially groceries, while pulling spending away from Walmart and other big-box giants.