“I think Amazon’s great for retail.”
It’s a sentiment that isn’t shared by many—certainly not President Donald Trump, who has given rebukes about the e-commerce giant’s top billing in his Twitter stream lately.
Even so, it’s coming from a source that’s almost as unlikely: a mall owner.
On Monday, real estate developer Rick Caruso, whose portfolio includes a slew of outdoor town centers in California, including The Grove, joined CNBC’s Squawk Alley program to discuss Amazon in the wake of the Commander in Chief’s accusations that Amazon dodges state and local sales taxes and undermines the U.S. Postal Service.
Even without the president’s piling on, Amazon has been at the center of a persistent narrative that paints online shopping in general, and Amazon specifically, as the culprits for all of the issues rocking retail. Of course, the story isn’t that black and white—think massive amounts of debt and archaic supply chains—but there’s no question that consumers are shopping differently.
The change in consumer behavior is exactly what Caruso sees as the reason why Amazon is so important right now.
“[Amazon has] also shown us a path to success. A competition just on price doesn’t work. You have to compete on knowledge, you have to compete on knowing your customer, you have compete on being convenient,” Caruso said. “Brick and mortar retailers need to get out of their swim lane and swim to where the customer wants them to be and service them well.”
As for pinning the mall meltdown on Amazon, forget it. Caruso said the issues there are self-inflicted.
“I predicted four years ago that the indoor mall, unless completely reinvented, is going to fail and we’re seeing that,” he said. “Many of these retailers that are suffering are suffering because they’re stuck in an environment where the consumer just does not want to go.” Moreover, he said, retailers are struggling because they stopped innovating.
Caruso’s sentiment on Amazon is largely echoes that of Matt Fassler, managing director at Goldman Sachs.
Speaking at last month’s ShopTalk convention, Fassler rattled off a list of retailers that have been on the ropes for a decade or more like Toys R Us, Sears and Kmart. Of companies like these, he said, at most Amazon hastened the inevitable.
“I don’t think Amazon will be the death of retail. If we think about some of the highest profile bankruptcies, these are companies and segments of the ecosystem that have been struggling for a very long time,” he said, adding that Amazon isn’t the cause though maybe it’s a catalyst. “That revenue trajectory for Amazon has created a moment when the marginal companies would have a tougher time.”
Further, Fassler said if it weren’t for Amazon, the industry would still be in the dark ages. “Amazon is making the surviving retailers better,” he asserted. For example, he said, the way Amazon uses technology like AI has forced other retailers to get on board.
It’s unlikely that Donald Trump would be swayed by these arguments.
The president insists the online retailer is hurting other stores by avoiding the taxes its brick-and-mortar counterparts are expected to levy. The fact is a patchwork of state and local tax codes along with a 25-year old U.S. Supreme Court ruling has resulted in varying laws and a standoff over what exactly e-commerce retailers can be held accountable for. While Amazon had not been collecting sales taxes, it now does so in all states where its required to—for its direct sales; for any transactions through its third-party marketplace, levying taxes is left up to the sellers. Recently though, reports surfaced that his own retail shop, Trumpstore.com, only collects taxes in three states.
As for the claim that Amazon is taking advantage of the post office, like malls, that institution had been struggling long before 2013, when it entered into a deal to deliver the retailer’s packages on Sundays. While some see the relationship as a lifeline for the postal service, others say maybe but the rate Amazon pays is too low.