The case for why Amazon should buy Macy's

Macy's is reportedly in talks to sell itself to Saks owner Hudson's Bay, but its best possible buyer may actually be the company that triggered the decline of its retail dominance: Amazon.

According to Cowen & Co. analyst Oliver Chen, a Macy's-Amazon combination could be "revolutionary," as it helps fill the needs of both companies.

In a note published Tuesday, Chen lays out his case for why a Macy's acquisition would help Amazon.

Here are the reasons:

  1. Tremendous vendor/supplier scale: Macy's would give Amazon access to a whole bunch of new apparel brands and help expand its first-party seller relationship.
  2. Speed: Amazon could take advantage of Macy's vast number of physical stores and warehouses to improve delivery speed.
  3. Big data meets retail: Amazon has the "best" predictive analytics technology in retail, so it could help Macy's make better decisions across inventory and pricing, and potentially lead to higher sales.
  4. Merging physical and digital retail: Amazon would gain foot traffic from loyal department store shoppers and get to utilize Macy's physical presence to showcase products and have customers return products easily.

On top of that, Chen argues Amazon's online traffic growth, supply chain expertise, younger customer base, and superior mobile technology could help save Macy's. He writes:

"We believe this deal could address some of the major consumer pain points we have seen in our proprietary Cowen consumer studies as 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."

Still, despite the potential benefits of a tie-up, Chen doesn't believe any serious talks between Amazon and Macy's will materialize in the near future, given the high costs of maintaining physical stores, and Macy's already struggling business model.

Plus, as noted by another Cowen & Co analyst, John Blackledge, Amazon does not typically do large deals (Macy's is worth ~$10 billion) and is more likely to start by testing and learning from smaller initiatives, like Amazon Go.

"Amazon will more likely continue to lead a charge to steal share from Macy's rather than acquire Macy's," the note says.

RELATED: Macy's flagship Herald Square store

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Macy's flagship Herald Square store
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Macy's flagship Herald Square store
Pedestrians walk through Herald Square past a Macy's Inc. department store in New York, U.S., on Monday, August 10, 2015. Macy's Inc., the largest U.S. department-store company, is scheduled to report second-quarter earnings before the opening of U.S. financial markets on August 12. Photographer: Michael Nagle/Bloomberg via Getty Images
Photograph shows a corner view of the 1924 addition to the Macy's department store building on 34th Street at Herald Square in Manhattan, New York, 1930s. (Photo by FPG/Getty Images)
397655 01: Shoppers make their way across Herald Square near Macy's department store November 23, 2001 in New York City. The Christmas shopping season started kicked off in the United States the day after Thanksgiving, one of the busiest shopping days of the year. (Photo by Chris Hondros/Getty Images)
NEW YORK - NOVEMBER 22: A holiday scene is depicted in a Macy's at Herald Square department store window during the unveiling of the retailer's holiday windows November 22, 2002 in New York City. (Photo by Matthew Peyton/Getty Images)
NEW YORK - FEBRUARY 28: The Macy's Herald Square entrance is seen February 28, 2005 in New York City. Federated Department Stores Inc. is buying rival May Department Stores Co. for $11 billion in cash and stock in a deal that would enable them to compete against Wal-Mart Stores Inc. as well as upscale retailers. (Photo by Stephen Chernin/Getty Images)
UNITED STATES - AUGUST 15: Pedestrians and shoppers pass by the Macy's flagship store at Herald Square in New York, Wednesday, Aug. 15, 2007. Macy's Inc., the second-largest department-store chain, reported quarterly profit that exceeded analysts' estimates because of reduced advertising and retirement costs. (Photo by Michael Nagle/Bloomberg via Getty Images)
UNITED STATES - AUGUST 15: Pedestrians and shoppers pass by the Macy's flagship store at Herald Square in New York, Wednesday, Aug. 15, 2007. Macy's Inc., the second-largest department-store chain, reported quarterly profit that exceeded analysts' estimates because of reduced advertising and retirement costs. (Photo by Michael Nagle/Bloomberg via Getty Images)
NEW YORK - NOVEMBER 05: The New Year's Eve Ball, which will be seen by millions as it descends above Times Square to ring in 2009, is displayed at the Macy's Store in Herald Square November 5, 2008 in New York City. The Waterford Crystal ball is comprised of 672 crystal triangles and is themed 'Let There Be Light.' (Photo by Jeff Zelevansky/Getty Images)
Shoppers look at shirts at Macy's Herald Square department store in New York, U.S., on Friday, Nov. 27, 2009. Shoppers gathered at Best Buy Co., Target Corp. and Toys 'R' Us Inc. stores from New Jersey to Texas well before midnight yesterday to take advantage of Black Friday deals on televisions, laptops and robot hamsters. Photographer: Jin Lee/Bloomberg via Getty Images ***
Pedestrians walk past Macy's department store at Herald Square in New York, U.S., on Tuesday, April 6, 2010. March sales at U.S. retailers probably jumped almost three times as much as previously anticipated, as the early Easter holiday, warm weather and an improved job market boosted consumer spending. Photographer: Jin Lee/Bloomberg via Getty Images
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