Longtime retail executive Gerald Storch thinks it makes perfect sense for major mall landlords to partner with e-commerce giants like Amazon.com Inc. to fill space vacated by faded retail titans.

In an interview on BNN Bloomberg, Storch, the founder and CEO of Storch Advisors and former CEO of Hudson’s Bay Company, said the confluence of declining foot traffic in major malls and Amazon’s seemingly unceasing need for distribution space would make for an intriguing opportunity for both parties.

“It’s valuable space, especially in the good malls, it’s a great place to be,” he said. “Amazon is the most voracious consumer of space on the planet. They have 200-million square feet of distribution space already in the U.S., and they have plans for another 100 million that’s on the drawing board.”

“They need more physical space.”

The Wall Street Journal reported Sunday that Amazon has been engaged in talks with Simon Property Group Inc. to repurpose space left over by ailing stores as distribution hubs for the e-commerce behemoth, citing people familiar with the matter. Simon Property Group is the largest mall owner in the United States, with 204 properties across the country.

Storch said he thinks such a tie-up would be a likely outcome, though wouldn’t be enough to meet Amazon’s needs for more real estate.

“I think the probability of it happening is pretty high. The question is, how much?” he said. “Even if all the JC Penneys and all the Sears that are sitting around right now … were to be recycled into Amazon fulfillment centres, it would still be only kind of a single-digit per cent of what they’re going to need for Amazon because they’re growing so fast.”

Storch said such arrangements wouldn’t spell the end of the traditional mall, but would force a rethink of the approach mall operators and retailers take to creating a pleasant shopping experience to draw in customers.

"The retailers we’re talking about here – the report was Sears and JC Penney locations – these were already like zombie locations, the walking dead. This is the worst part of the mall. If you’re a small shop, you don’t want to be located by the Sears.”
Gerald Storch

“I don’t think it’s the death of the mall, I think it’s the reimagining of the mall. The retailers we’re talking about here – the report was Sears and JC Penney locations – these were already like zombie locations, the walking dead,” he said. “This is the worst part of the mall. If you’re a small shop, you don’t want to be located by the Sears.”

Storch said beyond the mall operators, he’s advising small retailers in the big-box malls to look at Amazon and Walmart Inc. as potential partners, not just competitors.

“If you’re not with one of them, then you don’t have a partner in the game. It’s kind of like how small countries had to ally with Russia or the U.S. during the Cold War,” he said. “You’d better ally with Amazon or Walmart if you want to be around in the future.”

“If you’re not on Amazon, you’re invisible: you don’t even exist to half of the population.”