Will Amazon install distribution hubs in malls across America?
The Wall Street Journal has reported that Simon Property Group is in talks with Amazon.com to turn some anchor locations in its malls, which currently are home to or formerly housed a J.C. Penney or Sears store, into local distribution hubs.
The struggling department store chains, each having filed for bankruptcy in recent times, have shuttered large numbers of stores with more closures to come. Simon, the largest owner of malls in the U.S., has 63 Penney stores and 11 Sears on its properties, according to the report.
The value of the properties for Amazon are their central locations, close to population centers, giving the e-tailer the ability to speed its last mile delivery execution. The stores, typically with multiple floor layouts, can be converted into distribution hubs with plenty of available space in the mall’s lots for Amazon’s trucks. Amazon, Home Depot and others have been testing multistory warehouses in urban areas, including a three-story facility in Seattle owned by Prologis. Amazon, as previously reported, has acquired failed malls in recent years and converted them into fulfillment centers or warehouses.
For Simon, having Amazon occupy anchor locations will enable it to fill idle space, albeit at rates well below what other tenants pay and possibly causing friction since many retailers already view Amazon as a rival.
This is not the first time Amazon has been connected to J.C. Penney. In May, WWD reported that an unnamed source had said that Amazon had “a team in Plano (TX) to speak with the department store’s executives.” The exact nature of the talks, if the report was accurate, were unclear. Amazon has reportedly expressed interest in turning some closing Penney locations into its new namesake grocery concept.
Simon’s talks with Amazon could also prove premature if the mall operator is successful in its bid with Authentic Brands Group and Brookfield Property Partners to acquire Penney out of bankruptcy. The trio, which have joined together in the past to acquire Aéropostale and Forever 21, are among a number of parties bidding to acquire the department store chain on the cheap.
- Amazon and Mall Operator Look at Turning Sears, J.C. Penney Stores Into Fulfillment Centers – The Wall Street Journal
- Is Amazon about to buy J.C. Penney? – RetailWire
- Who will come to J.C. Penney’s rescue? – RetailWire
- Will multistory warehouses mean faster deliveries from Amazon, Home Depot and others? – RetailWire
- Who will seize the opportunity to turn stores into fulfillment centers? – RetailWire
- Are malls better off as fulfillment centers? – RetailWire
DISCUSSION QUESTIONS: Would Simon Property Group benefit from a deal with Amazon to lease former anchor tenant positions in its malls? Do you expect other mall operators with vacant anchor space to make similar deals if an agreement is reached by Simon and Amazon?