Sandeep Mathrani, CEO of mall operator General Growth Properties, said Amazon will build out 300 to 400 stores in malls to conquer that pesky last mile issue. Crazier things have happened.
On General Growth Properties' earnings conference call, Mathrani said:
I think it is 38% of e-commerce purchases for soft goods that are bought online and return to the bricks and mortar store. So to really get a true and proper understanding until the retailers start to show you exactly what the return rate is and how it is being impacted is really hard to evaluate in this omnichannel world why one growth is bigger than the other because you have to take the return rates into account which really no one does.
And this case in point, you've got Amazon opening bricks and mortar bookstores and their goal is to open as I understand 300 to 400 bookstores and it should sort of sit back and say that the last mile is all-important which is why Bonobos is opening bricks and mortar stores and Warby Parker is opening bricks and mortar stores and Birchbox is cutting their overhead to open bricks and mortar stores.
It is a very interesting evolution because the cost of the last mile is that important and again the mall business you have to appreciate which is more focused on fashion is very different than a staple business where you are buying commodities. So in the mall business, the impact of e-commerce is a lot less, it is actually your friend, not your enemy.
To hear Mathrani tell it, e-commerce players are going to be filling in the void vacated by traditional retailers. It's worth noting that Mathrani was obviously speaking off the cuff neither Amazon nor General Growth Properties is going to be saying anything more.
Update Feb. 3: Mathrani has indicated that a statement he made concerning Amazon during GGP's earnings conference call held on February 2, 2016, was not intended to represent Amazon's plans.
Does the Amazon-to-mall concept make sense?
Perhaps. The power of omnichannel is really online buying and store pickups. With those transactions, there are no shipping costs. Returns can also be processed more easily. Amazon may be building bookstores, but rest assured that any mall effort is likely to include a healthy dose of logistics too. The main takeaway is that online brands are becoming big in the physical world too.