In the United States, there has been considerable analysis and discussion about Amazon’s acquisition of Whole Foods. While that is an experiment in progress, there is another disruption headline most missed. Amazon has purchased one of the largest defunct retail malls in America to build a colossal warehouse in the US heartland. Beyond the ultimate irony, this is a case study of the current retail disruption. The mall could not attract enough customers to survive, so Amazon is now seizing the opportunity to build another cornerstone of distribution that further leverages the last mile of delivery to customers’ doors. Yet, another “Prime” example of the “Amazon Effect”.
Amazon “pickers” will now ship what retailers formerly sold in the mall
The Randall Park Mall was at one time one of America’s largest retail shopping malls. In the era of “build it bigger and they will come”, the Mall enjoyed three decades of success bringing prosperity to the community North Randall, Ohio. As customers shifted to omnichannel and more purchases online, the mall traffic eroded and it closed in 2009.
What was displayed in the mall stores is now sold on Amazon. In malls across the US, traffic continues to decline as consumers increasingly choose the convenience of online purchase with delivery at their door. The ultimate irony of this story should be lost on no one – on the site of the former mall, Amazon fulfillment pickers will be standing where former retail associates were waiting to serve customers in retail stores.
A graphic story of a Phoenix rising from the ashes of a retail wasteland
Gizmodo published a number of photographs from Seph Lawless taken just before the mall’s demolition. They are enough to send chills down any retailer exec’s or store owner’s spine:
Symbolism aside, it is an era of hope for the community of North Randall to have anything replace this tragic retail wasteland. For the community, it must seem like nirvana to have a fulfillment center replacing the mall, bringing back an estimated 2,000 jobs. This development will in turn create the potential opportunities for restaurants and small businesses building around the new Amazon fulfillment center.
The question is whether the metamorphosis of this mall to Amazon fulfillment center is a sign of the times, and what does it mean for other retailers?
It’s not Amazon’s fault, but the Amazon “Effect” is real and pervasive
The community surrounding and working at the Randall Park Mall are no different from the rest of us. As the mall traffic continued to decline, more residents were shopping online and enjoying the convenience Amazon Prime and delivery to their doorstep. However, let’s be clear, Amazon did not directly cause the Randall Park Mall to close. Consumer behavior and expectations of “retail” are rapidly transforming.
Amazon has simply been one of the most innovative retailers executing consumer choice and convenience. Amazon has been riding the wave of shifting consumer behavior to shop and purchase online. The “Amazon Effect” has been to increase consumer expectations, and at the same time raising the bar across all retailers in a number of areas:
- Convenience of one click orders plus subscriptions
- Visibility to inventory, or availability status
- Free delivery, with options for increased speed
- Tracking from the moment of purchase
- Delivery the last mile to your door
- Options to schedule time of delivery
- Easy returns with preprinted labels
A major key to Amazon success is the distribution and logistics to “deliver the last mile” to the consumer’s door, and provide a premium experience in ways that the customer chooses.
Traditional retailers’ weak link is the “last mile” of fulfillment
It is not surprising that the weakest link and biggest threat for traditional bricks and mortar retailers is individual fulfillment to the customer’s door. Stores were designed as shopping destinations, not last mile shipping points. The “last mile” in the delivery chain is the most difficult, complicated and expensive. Estimates are that the last mile can literally account for as much as 40% of the delivery cost.
Yet, the last mile is exactly what Amazon continues to build and leverage. The conversion of Randall Park Mall to a fulfillment center is all part of the overall strategy for overnight capability for everything from a computer, to shoes to groceries. While Walmart is countering Amazon on many fronts, smaller retailers do not have the capacity, technology or resources to compete head to head with Amazon … especially if they are paying high rents at mall stores!
Distributors are retailers new BFFs – Best Friends in Fulfillment
Beyond the largest national chains, most retailers do not have the time or margins to build out last mile fulfillment. To survive and thrive, small and medium retailers must seek new alternatives to offer today’s consumer options, especially for delivery.
“As traditional brick-and-mortar retailers look to wage war on the dominance of e-commerce giants, delivery services are a key battleground. Breaking from traditional fulfilment strategies can offer a competitive advantage if leveraged and tailored appropriately.” Ken Chrisman, Division President of Sealed Air
The old adage is still true – Do what you do best, outsource the rest. This is especially true in the race for the last mile.
The smart distributors are becoming much more than “box movers” from vendors to retail distribution centers. There are many strategic partnership opportunities where distributors can provide value add fulfillment services that enable retailers to remain competitive and profitable:
- Virtual inventory options and management to expand offerings
- Logistics and order tracking at the customer level
- Drop shipments to reduce retail inventory and increase speed
- Speed of last mile delivery that equals or exceeds Amazon
- Easy and convenient return logistics
In many ways, Amazon is a distributor as much as it is a retailer. The future of retail is not just about products, or places called stores. A critical success factor will be logistics and fulfillment. Future retailer success will come from strategic partnerships … especially between distributors and retailers.
I wonder how long it will be before we see a distributor/retail coalition purchasing and transforming a bankrupt mall?