Like all retailers, department stores weren't immune to the blow the COVID-19 pandemic dealt. Many, in fact, have closed their doors since the start of the crisis, which has left shopping malls in a tough spot.
Malls routinely rely on department stores to serve as anchor tenants, drawing in customers and encouraging leasing activity for nearby stores. And so losing department stores is a blow that mall REITs, or real estate investments trusts, can't afford in 2022.
Now the good news is that some department stores are taking steps to expand their customer base in the new year. And one such brand is J.C. Penney (JCPN.Q). The struggling retailer recently announced that it will be partnering with DoorDash (DASH -2.24%) to offer same-day delivery on home products in more than 600 of its stores. And that could be just the thing that saves it.
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A tough ride
Like many retailers, J.C. Penney was forced into a bankruptcy filing in the spring of 2020, when a lack of foot traffic hit the already struggling retailer hard. A few months later, the department store giant got a bailout of sorts when Simon Property Group and Brookfield Asset Management, two major mall operators, bought it out of bankruptcy.
But J.C. Penney is still facing its share of hurdles. Despite its generally affordable price point, it doesn't exactly have a stellar reputation when it comes to appealing inventory. And in an age when customers are increasingly doing their shopping online, the chain's e-commerce experience leaves much to be desired.
Teaming up with DoorDash, however, could give J.C. Penney a solid edge over its competition. These days, more retailers are making it easier for customers to procure the goods they need. Not only have many ramped up their delivery speeds, but they've also taken to offering BOPIS -- buy online, pick up in store -- as well as curbside pickup.
Offering same-day delivery could help J.C. Penney grow or at least retain its customer base for the convenience factor alone. This especially holds true at a time when supply chain holdups are forcing consumers to wait longer for the goods they order online.
Good news for real estate investors
Losing a mainstay like J.C. Penney could spell serious trouble for mall operators all over the country. In fact, a big reason why Simon and Brookfield opted to acquire J.C. Penney was to spare their own properties that loss.
By offering up same-day delivery, J.C. Penney is doing its part to once again become a contender in the department store space. And while it may need to take other steps, like revamping its inventory, to really grow its fan base, right now its DoorDash partnership is an unquestionably strategic one.
In fact, there's a good chance we'll see other retailers explore similar partnerships as consumers increasingly do their shopping online. Granted, they won't necessarily engage DoorDash's services, but same-day department store delivery could soon become a common offering. And it could give real estate investors a reason to breathe easier when it comes to their mall REIT holdings.
