By Al Urbanski
Via Chain Store Age
Many in the retail industry were surprised this week by reports that Amazon has been talking with Simon about putting distribution centers into some of the mall chain’s shuttered Sears and Penney’s stores. But close followers of Amazon’s plans to preserve one- and two-day delivery were not.
”The pandemic has helped immensely in getting online sales to accelerate, but striving to retain that next-day delivery, that’s the challenge. For Amazon to keep its sales rolling, they have to expand and get more distribution centers,” said Patrick Penfield, a professor of supply chain practice at Syracuse University’s Whitman School of Management.
He is not talking about gargantuan DCs like the one that Amazon is building in Clay, N.Y., just outside of Syracuse, a 3.4 million-sq.-ft. warehouse that will be Amazon’s largest and the second largest such facility in the world. It’s more of what Penfield calls “mini-DCs” of 100,000 sq. ft. or so that can be stationed in hundreds of communities to solve the mega-e-com’s last mile problems. Shuttered department stores fit the bill perfectly.
“Department stores closing in malls is an opportunity for Amazon, and Amazon is an opportunity for mall owners. The pandemic has a lot of them in bad financial shape,” Penfield said.
Just this week, PREIT, the large owner of super-regional malls based in Philadelphia, reported a 36% decrease in second-quarter net operating income and an occupancy rate of 92.4% that had CEO Joseph Coradino widening his search for new types of tenants.
“We are pursuing agreements with healthcare providers, food markets, and fulfillment and logistics operators,” Coradino said.
Amazon has long been building a FedEx-style transportation system. It started up a small air force in 2015 that’s gotten bigger since FedEx dumped Amazon as a customer in 2019. Amazon figures to have 70 planes by next year.