The American shopping mall has been in decline for around a decade, and the department stores that anchor them aren't faring any better. From 2005 to 2015, U.S. department-store sales fell 31%. They continued their descent in 2016, with Sears Holdings(NASDAQ:SHLDQ) Sears and Kmart stores, Macy's (NYSE:M), and J.C. Penney (OTC:JCPN.Q) leading the way.

The three department stores have plans to close hundreds of stores, and the entire brick-and-mortar industry isn't faring much better. There have been about 1,200 store closures since the middle of last year, according to Cantor Fitzgerald analyst Youssef Squali. And the biggest beneficiary of these store closures is (NASDAQ:AMZN).

A vacant mall parking lot.

Where have all the shoppers gone? Image source: Getty Images.

Sears, Macy's, and J.C. Penney's pain

Sears saw its revenue decline by $3 billion in 2016. Half of that revenue decline came from store closures, while the other half is due to declines in same-store sales. For the full year, sales at comparable Kmart locations declined 5.3% and Sears' comparable sales fell 9.3%. Those numbers were even higher in the fourth quarter: 8% and 12.3%, respectively.

Sears is also feeling pressure on its margins. Gross margin declined 190 basis points for the year. Management specifically points to lower margins on its apparel business -- an area Amazon has been steadily gaining market share.

At the beginning of 2017, Sears announced plans to close 150 additional stores.

Macy's sales fell 5% in 2016, and its net income cratered 43%. That marks its second straight year of declines in net income. Macy's is also suffering from declining same-store sales, but not nearly as bad as Sears. Comparable sales at Macy's on an owned basis declined by 3.5% last year.

Macy's is in the midst of closing 100 locations. It has about 34 more to go.

Finally, J.C. Penney saw relatively flat sales in 2016 and comparable-store sales were flat for the full year. Comparble sales fell a slight 0.7% in the fourth quarter, but overall J.C. Penney seems to have stabilized its revenue decline. Still, revenue is well below pre-2011 levels. The company generated $17.3 billion in sales in 2011 versus $12.5 billion in 2016.

J.C. Penney is accelerating its efforts to provide home services such as bathroom remodeling and blinds installation, and selling and installing awnings, water systems, and smart home technology. It sounds a lot like what Sears does, so it's not clear what kind of impact it would have on sales. Amazon also offers similar services through third parties.

J.C. Penney plans to close 140 stores.  

Combined, Sears, Macy's, and J.C. Penney are closing 390 stores, and losing billions in sales every year.

Amazon's gain

Squali estimates that the 390 store closures will put $2.5 billion in annual sales up for grabs, and he thinks Amazon can take between 20% and 40% of that revenue. Amazon benefits from being more convenient and providing a better customer experience. It's also making inroads with shoppers by producing its own private labels for clothing among other things, directly cutting into the department stores' biggest verticals.

Amazon continues to spin the flywheel of Amazon Prime, which can make it more convenient for shoppers to buy things from Amazon than drive to the mall and fight for a parking spot. The more Prime subscribers Amazon attracts, the more third-party retailers join Amazon's marketplace. As a result, shoppers can find just about anything they're looking for on Amazon. Amazon's customer service, meanwhile, remains at the top of the industry.

Although $500 million to $1 billion in annual sales is a small amount for Amazon, which brought in $124 billion across its retail segments last year, it's the overall trend that's important for investors to see. As department stores such as Sears, Macy's, and J.C. Penney continue to close stores and see declining same-store sales, Amazon is there to pick up the lost revenue. 

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