Amazon goes shopping at the mall
Amazon.com has been on a buying spree that provides further proof that Americans have changed their shopping habits in recent years and, most notably, since the novel coronavirus pandemic hit the U.S. What has Amazon been buying? The answer in a word — malls.
NBC News reports that the retail and technology giant received approvals last month in Baton Rouge, LA, and Knoxville, TN, to transform malls in those locations into distribution facilities. Amazon also got the okay to do the same at a mall in Worcester, MA, in December.
These recent real estate pickups for Amazon are not anything new. NBC, citing Coresight Research, reports that Amazon converted 25 malls into fulfillment centers between 2016 and 2019.
The acquisitions are not happenstance. Malls, specifically second and third tier properties, have struggled in recent years as consumers have opted to buy more of the products they use online. This situation grew more acute as the pandemic hit and stores were first ordered to close by health officials and then struggled to attract shoppers after restrictions were lifted due to concerns about contracting COVID-19.
Amazon has seen its business grow by significantly in recent years, a trend that intensified in 2020. It experienced challenges meeting demand in the early months of the pandemic and has sought to ramp up its distribution capabilities to serve a growing market including more than 100 million Prime members.
Amazon’s mall conversions meet the company’s need for facilities that are close to population centers. The properties offer ample space for Amazon’s trucks to bring goods in and out.
The Wall Street Journal reported last August that Amazon held talks with Simon Property Group, the nation’s largest mall operator, about leasing anchor locations on some of its properties that were currently and formerly occupied by J.C. Penney or Sears. Simon later went on to acquire Penney out of bankruptcy, likely signaling that at least some of those spaces were now off the table.
A new client note by UBS estimates between 80,000 and 150,000 stores, primarily mall-based, will be shuttered by the end of 2026. UBS analysts Michael Lasser and Jay Sole based the 80,000 estimate on the expectation that online sales will represent 27 percent of all goods purchased at retail, up from 18 percent today.
- Amazon is snapping up disused shopping malls and turning them into fulfillment centers – NBC News
- Amazon and Mall Operator Look at Turning Sears, J.C. Penney Stores Into Fulfillment Centers – The Wall Street Journal
- Will Amazon install distribution hubs in malls across America? – RetailWire
- What will 80,000 closed stores mean for America’s retailers? – RetailWire
DISCUSSION QUESTIONS: Do you expect to see more second and third tier malls around the U.S. converted into distribution centers? Will other large retailers with growing online sales such as Target and Walmart also look to convert shopping centers into fulfillment facilities?