The mall operator Simon Property Group is in talks with Amazon to turn empty department store space into e-commerce distribution centers, according to a report from the Wall Street Journal. The talks focus on turning spaces formerly occupied by JCPenney and Sears Holding Corp into storage space.
Coronavirus has driven down mall foot traffic for sure, but it turns out that these negotiations actually predate Covid. According to the Wall Street Journal, Amazon has already acquired some failed malls. It wasn’t clear how many JCPenney and Sears spaces are under consideration.
This is an interesting development, given the competitive nature between Amazon and brick and mortar stores. It’s not a secret that e-commerce has put a dent in traditional shopping. There’s been a rash of department store failures in recent years, and now Covid is accelerating those bankruptcies. JCPenney and Sears both filed for bankruptcy last year, and have had to close locations. More recently, Neiman Marcus and Lord and Taylor have filed for bankruptcy in 2020. Nordstrom has closed 16 stores.
Meanwhile, Amazon earned $88.9 billion in the second quarter, it’s highest earning quarter yet (you know, that time when GDP had a record contraction and unemployment reached post-war highs). Now, by grabbing department store space, Amazon could be positioned to reach consumers even more easily.
It’s hard to say what will happen to the stores that stay after the department store giants leave. As a distribution center, Amazon won’t draw foot traffic the way Sears or Lord and Taylor would. Not to mention, Amazon’s having more distribution hubs would make it even easier to compete with remaining brick and mortar locations.