Daily Insights

Amazon to Take Over Vacant Mall Spaces

By: Anirudh Bhardwaj | Aug 26, 2020

Rumors are circulating about Amazon in talks with Simon Property Group to take over mall spaces left vacant by closed departmental stores like J.C.Penney, with the aim to convert them into fulfillment centers.  From cost-saving to enhancing the omnichannel experience for consumers, there could be multiple reasons for Amazon to make this move. 

E-commerce fulfillment requires much more warehouse space than traditional brick-and-mortar store inventory, due to the greater variety of SKUs, space-intensive shipping, and parcel operations. With a surge in e-commerce during the Coronavirus pandemic, supply chain players are looking for spaces, especially in high population density areas. 

Speedy fulfillment has always been a critical component in the evolution of Amazon’s business. By setting up fulfillment centers in deeply discounted mall spaces in urban areas with huge parking facilities and customer density all around, Amazon could expedite its delivery time from two days to one day, and then gradually, to same day. Moreover, this would also help Amazon push delivery and reverse logistics onto consumers. Specifically, if customers are willing to drive to the fulfillment center to pick up an item (because it’s faster than delivery) or drop off a return (because it’s easier than re-boxing an item and taking it to a UPS store or Post office), this would save in expenses for Amazon. On analyzing Facebook dark posts for 49 big box retailers, it was found that the retailers were promoting curbside pickup during the pandemic. This helps retailers to reduce logistics and fulfillment cost. It seems that Amazon too is planning to focus on curbside pickup or buy online, pick up in-store, to make fulfillment economical. 

The physical shopping experience has been Amazon’s only weak spot in offering a complete omnichannel experience. Thus, creating physical stores across the U.S would allow the company a way to compete with Walmart and Target, which have used stores during the pandemic to execute omnichannel strategies such as curbside pickup. 

It seems to be a win-win situation for both Amazon as well as mall owners. Malls are figuring out what they’re going to be next, as customers continue to shift to online shopping and departmental stores continue to go out of business. Last year, 9,548 stores closed with no sign of stopping given the current crisis.  

However, converting these vacant spaces into fulfillment centers isn’t going to be easy. Fulfillment and distribution facilities typically have inbound and outbound bays, but retail stores just have one set. Amazon will also have to face zoning laws, especially in suburban malls, where carrier trucks may not be able to enter during certain hours of the day and night, something that’s not a problem with warehouses in industrial locations. 

The situation looks very similar to J.C. Penney and Sears’ catalog model, which allowed customers to purchase goods over the phone and then pick them up at the local retailer of their choice, and typically had a front counter and backroom storage. Could Amazon be refreshing a business model created by department stores years ago?