In post 1, we referenced the existing downturn for malls and the worsening outlook due to the pandemic. Today’s post discusses how category killers or Aliens are continuing to foster malls' decline.
Amazon is opening up colossal amounts of space with 250 new facilities and 100 of them just in September 2021. (“ Amazon spokesman Scott Seroka declined to comment about the project in Woodbury, but said Amazon has opened 250 new warehouses, fulfillment and distribution centers in the United States this year, including 100 in September.” , https://www.startribune.com/amazon-to-build-a-fourth-twin-cities-warehouse-in-woodbury/600106498/ )
As colossal as that statement sounds, read our post on Amazon to understand that these warehouses are actually substantially bigger than they sound from this announcement.
As the aphorism says, “Follow the money.”
Even one of the largest REITs and mall investment enterprises – Simon Property Group has engaged with converting ‘mall space’ to ‘Amazon space’. (https://www.nbcnews.com/business/business-news/amazon-snapping-disused-shopping-malls-turning-them-fulfillment-centers-n1262914 )
Amazon, an Alien previously discussed, is growing by very roughly 1% of the $5.6T Retail sales.
Although the slice of retail sales by Amazon is dropping (7.8% in 2021Q1 to 7% in 2021Q2) this doesn’t factor the leverage exerted by the Alien:
1) All of the sales revenue increases include likely acceleration of revenue per sq ft including adding 80,000,000 or more sq ft. (And ignoring new Amazon facilities are reported to be 4 or 5 “story” buildings that may have 30-40 foot clear ceilings instead of traditional 20 foot heights)
2) Amazon Logistics can increase the velocity and value of increased utilization rates and efficiencies based on increased volumes – across product segments (such as ‘sortable’ and ‘non-sortable’ merchandise) and manufacturers
(https://www.aboutamazon.com/workplace/facilities , https://about.prod.amazon-blogs.psdops.com/_preview?_cms.db.previewId=00000166-e583-d336-a366-efd795480000 )
3) Capital and cash flow management are different for an enterprise at Amazon’s scale although this works to Amazon’s disadvantage when major trends increase costs
4) Amazon makes money on its warehouse space by charging vendors for its fulfillment and charging for storage after 6 months. Unlike traditional businesses, scaling up warehouse space scales up revenue.
5) Amazon generates more revenue per square foot than struggling malls, so it can buy or lease existing Mall space economically
Amazon is the most notable alien in the retail space today. Its impact is felt throughout the industry far beyond its share of revenue. Malls were under siege for a long time. Amazon is just riding the wave of change in the consumer marketplace.
If you’re competing with an Alien like Amazon and you’d like to find out how to thrive despite the competition, go to www.ekalore.com/contact to set up a call with a senior exec.
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