Just when you thought Amazon (NASDAQ: AMZN) couldn’t take over another thing… it is. You’ve probably noticed the slow decline of department stores and malls for that matter. Department stores and malls have been slowly dying and in the past few years, the decline got worse. And then the past few months have really pushed it over the edge as most of the U.S. was shut down back in March because of restrictions to prevent the spread of the coronavirus.
Now in August, when retails stores are filled with back-to-school deals and customers buying clothes and school supplies for their kids, there are still restrictions on mall capacities; in most stores, you can’t even try on the clothes that you want to buy, so shopping in-store doesn’t have that same appeal. Over the past few months, people have grown accustomed to shopping online.
Seeing an empty mall with these huge, empty department stores is very strange to me. As a kid, those were some of my favorite places to go. Especially when it was back-to-school time. My dad would take me to get new clothes to reinvent myself for the upcoming school year. It was also fun just to hang out with my dad for the day and have lunch at the mall in between shopping for things that I needed or wanted. My dad gave me a limit and I would have to find the stores I wanted to go to and get the best deals. We always ended up at JCPenney.
Now, when I think about JCPenney or go into the department store, it feels like I've time traveled back to when I was a kid. That for the most part sums up what went wrong with department stores. These massive companies couldn’t modernize or keep up with the changing customer. So now you see these department stores closing down with signs hanging up reading, “Everything Must Go.” There has been a wave of bankruptcy filings by mall staples like Lord & Taylor, JCPenney, and Neiman Marcus.
Over the past decade, Amazon has increased this decline of our favorite brick-and-mortar retail stores. Amazon has been extremely convenient, but I don’t have to tell you that. You probably have a Prime membership. When you’re thinking about getting something for yourself, your family, or your home, you probably go to Amazon to compare prices, and most likely you buy that item on Amazon because you can get it in less than a week — sometimes the next day.
And now with the coronavirus and people being stuck inside their homes, Amazon doubled its profits to $5.2 billion between April and June. The company recently reported that its sales jumped 40% in the second quarter (compared with the previous year) — hitting close to $89 billion. We’ve been experiencing the shift toward e-commerce but the coronavirus has pushed that e-commerce market growth even further.
Amazon has to be able to keep up with that demand and growth in the e-commerce market. The Wall Street Journal reported that the company is in talks with Simon Property Group about converting some of its mall spaces into fulfillment centers. The Simon Property Group is one of the largest mall owners in the U.S. and for it to stay afloat, it’s going to need to find a use for all the empty space in its properties. Amazon fulfillment-center warehouses closer to residential areas would be extremely beneficial for the company. It would make deliveries even easier and quicker. It’s a win for both companies — Simon Property Group gets those spaces filled and Amazon doesn’t need to build another warehouse or fulfillment center, so that would be one less expense for the company.
Some malls across the U.S. already rent parking lots to Amazon vehicles. I saw an example of this a few weeks ago at one of the malls near me. I was curious as to why all these Amazon delivery vehicles were parked at the mall. At first I thought Amazon had already taken over a part of the mall since there were a few empty department stores.
The Wall Street Journal writes:
“For Amazon, more fulfillment centers near residential areas would speed up the crucial last mile of delivery. For Simon, turning over what was once prime mall space to fulfillment centers shows it would be willing to relinquish an essential way to bring in more mall traffic to secure a steady tenant.”
While all this is just speculation at the moment, I don’t think it’s too far off. Even if it might be temporary, Simon would have the chance of having a paying tenant rather than an empty space that no one is paying for. What’s also important to point out is that Amazon has become such a massive leader in e-commerce that it needs more spaces like fulfillment centers to keep up with the business it’s getting.
Amazon is one of the biggest companies in the world. It ships more than 2.5 billion packages every single year and that number is going to grow. According to Wall Street firm Needham & Company, the tech company scoops up 44% of all e-commerce sales and that’s set to rise to 50% by 2021. E-commerce is growing and Amazon will continue to be a global leader.
Until next time,