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The Tiny Company Keeping Amazon Up at Night

By Bill Stoller – Jan 18, 2014 at 11:00AM

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Mall landlords announce plans for same day delivery.

Planet earth bricks and mortar leader David Simon of Simon Properties Group (SPG 0.91%) has hatched a plan that could thwart the online invaders. The Internet aliens, having grown stronger for years, are led by Amazon.com (AMZN -0.77%) and its ambassador CEO Bezos. Is there still space and time for enclosed mall success?

How could Amazon's stunning announcement be trumped?
On Dec. 1, 2013, things got a little weirder. Bezos announced the testing of eight-propellor package-delivery drone "octocopters" on CBS primetime news program "60 Minutes."

http://asset3.cbsistatic.com/cnwk.1d/i/tim2/2013/12/01/60_1130_Rose_610x343.jpg

Amazon CEO Jeff Bezos shows CBS' Charlie Rose prototypes of the delivery drones. Source: CBS via CNET.com.

"I know this looks like science fiction -- it's not," Bezos said. Okay, we've learned to expect the unexpected from a disruptive company like Amazon. But, here's something most of us never saw coming.

Mall owners announce same-day delivery
Two weeks later, mall landlord General Growth Properties (GGP) was now joined by rivals: Simon Property Group, Macerich (MAC 0.15%), and Australia-based Westfield Group. These four companies found a way to utilize the over 660 malls nationwide they own and manage: a company named Deliv.

How tiny Deliv can help malls level the playing field
Deliv is a company founded upon the vision of same-day delivery from bricks and mortar retailers.

Source: Delv.

The Deliv platform manages croudsourced on-demand drivers, and includes smart routing and the ability for shoppers to track deliveries on a map in real time. The Deliv business model also allows customers the option to select same-day delivery on a retailer's web-based check-out screen.

This story could easily become even scarier for Amazon investors. Just consider that the top 100 retailers have more than 100,000 retail stores in the U.S. alone, according to Daphne Carmeli, Deliv's CEO. Carmeli recently pointed out that all of these retail locations are potential distribution centers.

How crowdsourcing crushes octocopters
Deliv ran a pilot program this past holiday season that involved nine mall locations in San Francisco and Los Angeles. Each of the four mall owners provided Deliv with runners, concierge services, safe item storage, shipping consolidation locations, and dedicated parking for crowdsourced delivery vehicles. All pretty low-tech stuff that's easily implemented and, for the most part, leverages existing mall assets.

How investors could profit by owning retail REITs
If Deliv's model can help mall sales per square foot increase, it becomes a win-win for both retailers and mall owners. Mall landlords share in increased sales because of percentage rents in most leases. Higher average sales per square foot would result in increased base rents upon lease expirations as well. Of course, there will be both a learning curve and a ramp-up process before this program could be rolled out nationally. However, shareholders in REITs that own malls could be rewarded handsomely if this plan is successful.

Investor takeaway
Given Amazon's hurdles, consumers may see college students earning extra money from Deliv arrive at their doorstep with same-day packages long before an octocopter lands in their front yard. In fact, consumers could even see their stuff delivered on a Sunday by a croudsourced Deliv driver to boot.

Who could have imagined back in 1994 that Amazon, a tiny start-up company selling books, would disrupt the entire retail industry? Could a Deliv partnership with traditional retailers disrupt Amazon?

Bill Stoller has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Amazon Stock Quote
Amazon
AMZN
$93.41 (-0.77%) $0.72
Simon Property Group Stock Quote
Simon Property Group
SPG
$120.70 (0.91%) $1.09
General Growth Properties, Inc Stock Quote
General Growth Properties, Inc
GGP
The Macerich Company Stock Quote
The Macerich Company
MAC
$13.18 (0.15%) $0.02

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