Amazon is planning to buy up space in malls as fulfillment centers. It is in talks with Simon Property Group, a large mall owner, about turning some of its J.C. Penney and Sears stores into Amazon fulfillment centers.
Shuttered malls in search for new lease of life
The Coronavirus Pandemic has led to many malls witnessing shutdowns or near enough no traffic or footfalls in recent months.
Big malls and shopping centers were facing difficulties even before the virus struck due to the popularity of online shopping. Most big stores were facing competition from e-commerce sites, which allowed you to shop from the comfort of your homes. They come with added advantages of cash rewards, markdowns and other attractive incentives.
Many big stores that were on their last legs witnessed the last blow with the pandemic and declared bankruptcies—like JC Penny, Neiman Marcus, Centric Brands, J. Crew and Sears.
Recent data show 722 companies sought bankruptcy protection around the US last month, a 48% increase from last year during the same period. In fact, corporate Chapter 11 filings increased to a record 560 new cases during the month of April, which is a 26% increase from the 444 filings the previous year.
"This is a sign that already weak companies are succumbing to the lockdown recession," Chris Kuehl, an economist with the National Association of Credit Management, which tracks bankruptcies, said in a research note. Businesses that were struggling before the pandemic "are starting to get in some real trouble," he added.
A break from longtime business model
It is the space of such big-name stores that Amazon is ready to take up as fulfillment centers and warehouses. It will aid the malls to rake in decent rents from declining rates and give Amazon the advantage of serving its customers faster through these centers' last mile deliveries. These department stores are already located in prime areas near major roadways and suburbs.
The details of how many store locations are under consideration are not clear. Or whether even the deal will even come to fruition.
The property group currently owns 63 JC Penny and 11 Sears stores.
Only disadvantage will be for the other shops and businesses renting space in the malls. The absence of big brand names will hit them with now even lesser customers being attracted to malls, and the presence of warehouses is bound to take some shine off the exclusive experience.
For Simon to ink a deal with Amazon "would signal a break from a longtime business model for malls” says a new report.
Suburban shopping malls became a part of the US landscape during the mid-1990s. There was a new mall springing up somewhere in the US every alternate day almost during their popularity.
But by 2010, malls were losing their sheen alongside big name brand stores. Both Sears and JC Penny together have closed more than 300 shopping locations in the US itself.
Amazon has also teamed up with several U.S. malls to store van fleets in their parking lots.
The pandemic may have sounded the death knell for many retailers, the hospitality and travel industry, but for those in the digital space, information technology and services, it is time to take advantage. Tech shares are hitting the roof. Service industries in the digital space are taking advantage of being already in the business and going ahead with innovations and logistics support. With people either in lockdown or maintaining social distancing, it is these digital servers who are keeping things moving at a pace.