If You Were Amazon, Would You Open Stores in Dying American Malls?
The news from American malls just keeps getting worse, with long-time anchor stores Macy’s, JCPenney, and Sears reporting ongoing closings and bad results. Yet, we heard a leak earlier this year from General Growth Properties, one of the largest mall operators, that Amazon might be opening 400 mall stores.
They quickly retracted this leak, but my sense is Amazon must be at least in discussions with malls, especially based on this news yesterday from Washington State. If you were Amazon, would you go into the older malls?
The old American mall concept has lost much of its luster, no longer appealing to teens as a cool hangout location. That cool hangout location is now online. Meanwhile, older people continue moving to online shopping, where the less sexy but necessary products are always in-stock, and buying them is a simple one-click undertaking.
Then, ironically, we have the American downtown making a comeback, the same places the malls turned into wastelands decades ago. Not to mention these older malls have been surrounded by larger upscale malls out farther from urban centers, in another manmade shopping ring, effectively cutting off the older malls from both city dwellers and suburbia.
So why would Amazon want to go where Waldenbooks and Borders once were?
If they do, I’ll give them this: it’s one helluva brave, contrarian play. Or a foolhardy act of self-destructive di-worse-ification. Is this ambition for brick-and-mortar locations an act of corporate hubris, driven by misguided corporate avarice? Are they acting off-strategy or is this brilliant?
If residential home ownership is all about location, location, location, then the cutthroat world of brick-and-mortar retailing takes that truism to the next level. And like our homes, the market tends to stratify into the super large and the indie small. Amazon owns the super large with their online dominance. Indies own the local small. Barnes & Noble is already occupying the perilous middle ground.
The problem for the old malls with their Macy’s on one end and Sears on the other, is they are neither super large nor indie small. They are stuck in that problematic middle ground. The shopping experience they offer cannot compete with our rejuvenated downtowns or our huge suburban malls. They are, in fact, geographically stuck in the middle, as well as being sized wrong, with older retailers not appealing to affluent shoppers.
It could be Amazon will negotiate a terrific deal with General Growth Properties at some point or not go that route at all. Does anyone remember the old Rand McNally retail map stores located in city downtowns? That was a smart strategy at the time. Maybe Amazon makes more sense pursuing that smaller urban retail strategy near Starbucks. Or an actual new concept partnership with Starbucks, their Seattle neighbor.
My own view is Amazon is fortunate to be the world’s largest online retailer, free from the costly turf battles brick-and-mortar retailers must constantly fight, with frequent store remodels and relocations just to stay current. The beauty of Amazon is they transcend physical location. That’s the whole point! They have achieved unique differentiation, yet now they want to be like the old-timers? My sense is this is the dangerous tug of backwards strategic thinking, in opposition to the forward thinking that made them who they are.
As for the dying older malls, the customers shopping there don’t strike me as bibliophiles, who increasingly are shopping retail indie or online. With Amazon.
I’m curious what others think Amazon will end up doing? This recent article on the state of our dying malls by David Stockman is worth a read.