Amazon is currently in talks with Simon Property Group about converting a few closed J.C. Penney and Sears stores into Amazon fulfillment centers.
J.C. Penney is the largest mall in the US and it might convert its closed stores if talks with Amazon go well. Amazon plans to convert these stores into Amazon fulfillment centers.
Simon Property Group explores the possibility of transition with Amazon of turning some of the company’s department store property into Amazon hubs.
The fulfillment center functions as a distribution hub and they use this structure as both a warehouse and processing facility.
Amazon Takes Over
The talk with the company includes Sears Holdings Corp to convert possibly even currently occupied stores.
Both department-store chains J.C. Penney and Sears Holdings filed for chapter 11 bankruptcy protection. This prompts their plans to close about dozens of stores all across the country.
There are a total of 63 Penney and also 11 Sear stores under the umbrella of Simon. This is all according to the recent public filing they released in May.
It was still very unclear as to the number of stores Amazon will convert. It is also a possibility that two sides might not reach an agreement.
The Effect of the Coronavirus
Malls took a huge blow over the years since more and more customers now prefer to stay at home and do online shopping.
The spread of the now widely known coronavirus forced a majority of malls to undergo temporary closure. This is also due to the limited crowd even after the establishments reopen.
On the other hand, Amazon is able to make its way through the new logistical challenges that go on through COVID-19. Amazon also reports this quarter as the company’s greatest.
Amazon will benefit from the deal with Simon improving its logistics and adding strategic distribution hubs near residential areas.
For Simon, any agreement to Amazon would breach the company’s long-existing business model. The company relies on a huge department store to attract foot traffic from other neighbouring shops and restaurants.
The model broke in recent years as many other malls and department stores struggle to survive.
Lord & Taylor, another huge store, filed for bankruptcy some time earlier this month. Neiman Marcus Group Ltd. filed for bankruptcy in May.
Another company, Nordstrom Inc., just closed 16 stores in the past few months.
The Effects of Amazon Fulfillment Centers
Amazon fulfillment centers could possibly trigger a few co-tenancy clauses. A few landlords say they still prefer this change in comparison to keeping the whole space vacant.
Still, despite the situation, Simon’s different tenants might not take the deal in a positive light. Many will blame the giant online retailer for heavily disrupting their business.
Its very presence in the neighborhood could possibly pacify them. This could happen should Amazon’s possible comping distribution centers were in the well-located Simon malls.
The location of the Amazon fulfillment centers in Simon malls helps make the online retailer a whole lot more competitive by helping the delivery speed improve.
The fulfillment centers will not attract attention and could be potentially harmful to surrounding stores in the area.