A mall CEO backs off his statement about Amazon opening bookstores
February 3, 2016 04:38 PM
The CEO of shopping mall operator General Growth Properties Inc. on Wednesday backed off his comment to analysts Tuesday that online retailing giant Amazon.com Inc. plans to open hundreds of bookstores.
Responding to an analyst’s question during General Growth’s earnings call about e-commerce cutting into mall traffic, CEO Sandeep Mathrani said many consumers come to the mall to return items purchased online. Then he said, “And just case in point, you go to Amazon opening bricks-and-mortar bookstores and their goal is to open, as I understand, 300 to 400 bookstores.”
On Wednesday, General Growth issued a statement: “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.”
General Growth did not elaborate and neither General Growth nor Amazon responded to a request for further comment. Amazon, No. 1 in the Internet Retailer 2015 Top 500 Guide, has one bookstore already. It opened in November near the University of Washington campus and about 10 minutes by car from Amazon’s downtown Seattle headquarters.
Before the backtracking, Biff Ruttenberg, a principal at Atlas Partners LLC real estate services and investment firm, speculated that Amazon might sublease 30,000-square-foot portions of Sears and Kmart stores, which typically measure about 150,000 square feet.
Ruttenberg says such a setup might be possible because General Growth Properties is a partner in a real estate investment trust called Seritage Growth Properties Inc., a real estate company split off from Sears Holdings Corp. (No. 5 in the Top 500) in 2015. Seritage leases back most of the 322 Sears and Kmart properties to the retailers. Ruttenberg says a subleasing deal would make sense because Amazon stores would drive traffic to the malls where Sears stores are located and help reduce Sears’ rent, overhead and working capital costs.
An executive at Seritage declined to comment.
If Amazon were to open stores in malls, that’s bad news for many retailers because Amazon is such a fierce competitor, Ruttenberg says. “If I’m selling anything Amazon carries, my business is potentially at risk,” he says.
Another analyst is skeptical that Amazon would ever open stores because they could hardly compete with the selection Amazon offers online, and using stores as online order fulfillment centers would duplicate the e-retailer’s plans to build mini-warehouses, says Neil Stern, analyst at McMillanDoolittle retail consulting firm.
Stern notes, however, that e-retailers such as Warby Parker (No. 247) and Birchbox Inc. (No. 254) have started opening stores to extend their connection to their customers, and Amazon might find that strategy more amenable as it starts remitting sales taxes to a growing number of states where Amazon has a physical retail distribution facility. More than 75% of the U.S. population lives in states where Amazon collects sales tax.
But Amazon stores, should they become a reality, might carry a selection of the company’s devices such as the Kindle, Fire and Echo that could benefit from personal interaction, Stern says.