Report: Amazon to Turn Mall Department Stores Into Fulfillment Centers

Amazon.com is in discussions with mall owner Simon Property Group about using some closed J.C. Penney and Sears stores in its malls for fulfillment centers, The Wall Street Journal reported on Sunday. The talks have been ongoing for months, the sources said.

“For Amazon, more fulfillment centers near residential areas would speed up the crucial last mile of delivery,” the WSJ said. “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." There are currently 63 J. C.Penney and 11 Sears stores in Simon malls, per the WSJ. Simon and Amazon also have explored buying mall space back directly from retailers. Amazon also is considering putting locations of its upcoming grocery stores in some J.C. Penney stores, the sources said.

Total Retail's Take: The great mall transformation is officially underway. The potential partnership between Amazon and Simon Property Group could be the beginning of major changes at retail centers across the country. After all, it's the first major action of reshaping malls after months of speculation about how anchor tenants can be replaced or converted into different uses. It also comes after many traditional mall tenants have been have declared bankruptcy. And while it may be a profitable relationship for both Amazon (the Sears and J.C. Penney locations could give the online retail giant more fulfillment center space and position its distribution closer to customers, speeding up order delivery times) and Simon (the proposed deal delivers the promise of a steady tenant which pays its bills on time, in full), it may prove to be another challenge for remaining mall-based retailers, both from a foot traffic and competitive positioning perspective.