Economic News

Amazon Reportedly Eyeing In-Mall Fulfillment Centers

Recent years have seen numerous retail chains closing locations, filing for bankruptcy, or disappearing altogether. Unfortunately, the coronavirus pandemic has only accelerated this trend. In particular, these closures have impacted shopping malls, which now find themselves with large retail footprints to fill. However, it seems that one of the nation’s largest mall owners could find the solution in a “strange bedfellows” situation.

According to a report from the Wall Street Journal, Amazon has been in discussion with Simon Property Group about the possibility of filling some mall vacancies with order fulfillment centers. Notably, these talks apparently began even before the pandemic hit. The report also suggests that conversations have specifically revolved around converting locations that previously housed Sears and JC Penney stores.

On the one hand, a potential deal between Simon and Amazon would seem like a no-brainer for both companies as well as customers. Under such an arrangement, Simon would be able to fill spaces left by the closure of anchor department stores, Amazon would enjoy improved “last mile” shipping logistics, and customers would have another delivery option — and one free from so-called “porch pirates.” However, there are still many questions about how much other mall tenants would benefit from a fulfillment center or if they’d even want to share space with the online shopping giant. After all, it’s unclear how many consumers picking up Amazon packages would bother sticking around to spend money at other retail and dining locations in the complex. Moreover, as WSJ notes, there is also the possibility that such a fulfillment service would make Amazon orders in a local market even more popular, which could further hurt traditional brick-and-mortar locations.

Incidentally, certain mall properties already have a relationship with Amazon as they lease part of their parking lots to serve the site’s van fleet. Meanwhile, Amazon has apparently also been in talks with some properties to open grocery stores (likely their cashier-less Amazon Go concepts as opposed to Whole Foods, which they also own) in available mall spaces. Speaking to CNBC, Compass Point real estate analyst Floris van Dijkum said of the plan, “[G]rocery offerings at A-rated malls, similar to Europe and Asia, would provide essential retail use and boost shopper traffic, in our opinion.” While it’s unclear if Amazon-owned grocery stores could be part of a deal with Simon, the property group’s CEO David Simon was asked about the general possibility of grocers coming to malls, to which he said, “Yes, I am hopeful that we can certainly do more business with that category.”

If Simon and Amazon were to reach a deal, it would definitely be a sign of the times. In the short term, such a proposition may be the best hope for ailing malls. Of course, whether or not it would work out in the long run is another question. With talks still on-going, we’ll have to wait and see what if anything ultimately comes of this potential partnership.

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