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Amazon Looks to JCPenney and Sears Buildings

Amazon, Inc., considered by many to be the mall industry’s single biggest disrupter, has recently been in talks with the largest mall owner in the United States to take over space left by ailing or vacant department stores. Simon Property Group has been working with Amazon to explore the opportunity of turning some of the property group’s vacant anchor department stores into Amazon distribution hubs. 

Specifically, Amazon is looking into taking over JCPenney and Sears department stores, as both former retail giants have filed for bankruptcy and are in the process of closing hundreds of storefronts throughout the United States. Both chains were struggling long before the days of COVID-19, due to the drastic consumer shifts toward online shopping,  but the pandemic has hit these retails especially hard.

As part of the proposed deal, Amazon could potentially take over former anchor department store spaces previously occupied by Sears and JCPenney. In fact, Simon Property Group is seeking an acquisition of JCPenney, which would give them even more control over how both current and former storefronts are utilized. This is nothing new to Simon, which has been snapping up retailers, such as Aeropostale, Brooks Brothers, and Forever 21, as they became available over the past few years. 

This deal could provide a great benefit to Amazon by providing conveniently located warehouse space in cities and suburbs all throughout the United States, potentially decreasing the e-commerce giant’s already lightning fast delivery times. However, all parties involved seem to be remaining tight-lipped about the deal, as Rachael Lighty, a company spokesperson for Amazon, told inquirers that “Amazon has a policy of not commenting on rumors or speculation” and a JCPenney spokesperson also said the company has “nothing to share.” Sears representatives also declined to comment on the matter.

Mutual benefits of a deal

Traditionally, shopping mall owners and landlords prioritize finding and bringing on tenants that would bring in foot traffic and new customers, such as stores or even gyms and fitness centers. These Amazon fulfillment centers wouldn’t draw customers the way traditional stores would, nor is it likely that Amazon employees would spend their breaks shopping and spending money with other mall retailers, but since the start of the COVID-19 pandemic, these traditional retailers have seen overall sales falter, while Amazon’s sales have soared. 

If a deal is reached, Amazon would be able to speed up its final mile deliveries, getting goods from distribution hubs to customers’ front doors in even more regions. Traditionally, shopping malls are located close to highways or interstates and residential areas than huge free-standing warehouses, which will prove to be key in allowing for faster shipping times. And, on the other side, Simon could find a creative way to fill vacant, prime retail space in their shopping centers – with a reliable digital-facing tenant whose growth shows no signs of slowing down anytime soon. Mall owners need cash-rich tenants to fill vacant spaces, so while Amazon fulfillment centers won’t necessarily bring in new foot traffic, they will help pay the bills – making the deal a win-win for both sides. 

 

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