Will Amazon Expand Into Brick And Mortar? Some Wall Street Analysts Are Saying Yes

Operating stores costs money and lots of it between rent, maintenance, salary, insurance, etc. Yet, some Wall Street analysts are making the case that Amazon should ditch its online-only presence and acquire a retail chain.

CNNMoney cited Cowen's analyst Oliver Chen who argued that Amazon should create a bidding war for Macy's Inc M as the struggling chain reportedly received an acquisition offer from Canada's Hudson's Bay.

The Argument For Going Tangible

The analyst argued that in addition to buying physical space, Amazon will gain new relationships with vendors, especially in the apparel business where Amazon is quietly building a presence.

"Amazon needs better brands, a more curated assortment, a physical place to return items, and customers could use help with ensuring fit — Macy's would also give Amazon greater credibility in curation and fashion authority," Chen said in his note.

Also, owning physical space naturally gives Amazon's consumers a place to pick up their orders throughout the day and drop off items that are destined for a return.

However, the analyst also pointed out that the risks may outweigh the reward. After all, does the online retailer really want to become responsible for managing a portfolio of properties and the associated costs such as rent?

Dollar Store In Play?

Separately, CNNMoney noted that Bernstein's analyst Brandon Fletcher thinks Amazon should buy the dollar store chain Dollar General Corp. DG.

Fletcher's argument is simple. Dollar General is very active in rural markets where there is less competition from major chains.

"The most powerful element of this combination is that the core strategy of price and convenience is a defensible one AND the location of most of the growth is defensible," the analyst wrote. "Being a rural retailer has serious advantages when the dominate disruptor is primarily urban."