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What Amazon gobbling up failing malls means for the retail industry

According to the Wall Street Journal, Amazon has had talks with Simon Property Group to discuss taking over space left by ailing department stores. The boom in e-commerce and the coronavirus pandemic have caused a large wave of large retailers to close their doors. The Final Round panel breaks down the details.

Video Transcript

MYLES UDLAND: All right, let's turn our attention quickly to a story out of "The Wall Street Journal" over the weekend that I think certainly has some of us feeling like ah, yes, the inevitable move for Amazon to acquire defunct anchor stores in malls, turn them into distribution centers. Akiko, this is a story we've heard about in various versions for a long time. I see this story, I think, yes, great, sure, makes sense. And then I realize, well, Simon Property Group is sitting on a ton of real estate that stinks. They'd love if Amazon would come in and give them even $0.50 on the dollar for some of this space.

AKIKO FUJITA: But isn't it essentially just kind of handing over the reins? Like you said, the inevitable, right? We've been expecting, or we have been seeing this transition away from physical retail stores onto online. Amazon obviously has led the way on that front. So on the one hand, sure, it certainly makes sense. Simon Property Group no question has been struggling. We had a guest on last week who said we are starting to see sort of the malls getting phased out. It's not the end of the malls, but people aren't just going to feel comfortable shopping in these big enclosed buildings.

And so if you can turn those into warehouses, that's certainly going to provide a huge revenue driver for Simon Property Group. And as the Journal reports, they're really looking at JC Penney's and Sears stores that are closing. Those are massive spaces that need to be used in some way. It's difficult to think of any other retailer that's willing to take up that kind of property right now, especially at a time where we've seen such a downturn.

[INTERPOSING VOICES]

MYLES UDLAND: Yeah, go ahead, Dan.

DAN ROBERTS: I was going to say, with Amazon, I mean, there's been so many examples now of steps they've taken with some kind of hybrid model. I mean, even back when Amazon bought Whole Foods, if you remember, a lot of analysts are saying, OK, A, this is really just an experiment for Amazon's own grocery ambitions, and we'll see what they do with the brand. There's some people who still think that soon enough, you know, they get rid of the Whole Foods name maybe and just rebrand those as Amazon grocery stores, but also, it gives them more storage space.

I mean, every Amazon retail experiment is also really just a way to store stuff, right? The bookstores, now the Amazon Five Star Store in New York, which is all sort of items they have a five star rating on Amazon. So in some ways, I'm with you, Akiko, that it's depressing.

And if Simon does it, it's also like waving a white flag instead of digging in the heels. But also if this does happen, I don't see Amazon just using it as a straight place to dump things. I'm sure there's going to be some kind of hybrid brick and mortar retail experiment or model, because again, because they have the space, because they have the cash, and because they want to do those experiments to get that learning.

MYLES UDLAND: Yeah, I was just going to say. Maybe we can all meet back here in 40 years, and we could talk about Amazon's defunct warehouse is being turned back into malls in a hearkening back to the boom times of the 1980s, an era that certainly by then will be well back in our--