Dive Brief:

• Amazon packages will now be available for pickup at a staffed Amazon Hub station inside Rite Aid stores in a new-to-the-U.S. program called Counter. The program is already in place in the U.K. and Italy.
• Counter launched Thursday in more than 100 Rite Aid stores and will expand to 1,500 by the end of the year, according to a press release. Amazon is looking to bring more retailers into the program, including small and medium-sized businesses. Consumers can select a Counter location as their delivery address just as they do with locker pickups. They have 14 days to pick up their orders and the standard shipping speeds will apply, including the recent transition of standard Amazon Prime shipping from two days to one day. 
• "A key aspect of our strategy is to grow our business by driving additional traffic into our existing network of stores to experience our retail offering and the high-level of service and care we provide. We believe that new initiatives like Amazon Locker give us a tremendous opportunity to achieve this critical objective," said COO Bryan Everett on Rite Aid's Wednesday earnings call. Amazon lockers are already present in more than 300 Rite Aid stores.

Dive Insight:

For Amazon, centralized pickup, whether it's through lockers or the new Counter program, creates greater delivery density, potentially lowering the cost of delivery per package. It also eliminates the most complex and expensive part of any e-commerce order—the last yard. As Amazon grows its logistics capabilities and brings the full journey of more orders in house, the efficiency of delivery becomes more important.

Plus, Counter has the same benefits as Amazon lockers in providing a convenient, secure place to pick up orders for consumers who prefer not to have packages delivered to their homes for a number of reasons — including potential theft.

For Rite Aid, converting Amazon orders into store traffic has an obvious benefit. The drugstore chain has been pulling every lever it can find, including significant financial restructuring and major staff cuts, to fight fierce competition from Walgreens and CVS. Rite Aid reported a net loss of $483.7 million last year and is forecasting flat to 1% same-store sales growth on top of a $170 million and $220 million loss in FY2020. 

Driving sales, especially in the front of the store where Amazon pick-up customers may grab an extra item or two while they're in the store, is key. 

Amazon lockers have been around for years, but examples of Amazon business being conducted by the staff of another retailer are fewer. Kohl's may be the closest comparison. The retailer began accepting Amazon returns in some stores in 2017 in an attempt to drive up store traffic. Kohl's expanded the program to all 1,150 of its stores in April. 

"Our testing has shown that we are driving engagement with our existing customers and attracting new and younger customers," said Kohl's CEO Michelle Gass on the company's May earnings call. The relationship has been so significant that Kohl's executives mentioned the returns program as a significant factor in projecting sales and logistics costs, while touting it a success. Kohl's explicitly does not share figures around the benefits of the Amazon partnership. 

Though Rite Aid is betting big on this strategy, skipping a trial or pilot period, executives are still unsure if the lockers already in place are in fact driving sales. "First of all, we can see they are getting utilization from data that we get back," said Ben Bulkley CEO of EnvisionRxOptions, Rite Aid's Pharmacy Benefit Manager, Wednesday. "We need a little bit of time here to quantify and measure the sales impact of this thing."