Why Amazon is putting pick-up and drop-off lockers in Philly-area malls

In 2011, Amazon lockers began popping up at malls so that the web retailer's customers could have another location to get their goodies.

They're typically not much more than a few rows of yellow lockers against a lobby wall that you could easily miss.

But in the realm of mutually beneficial relationships, this one is working.

Many U.S. malls are struggling, thanks mostly to — what else? — online shopping, particularly from the likes of Amazon.com.

Traffic to physical stores in November and December fell 12.3 percent from the previous year, according to the National Retail Federation. But e-commerce sales, which includes online and catalog sales, rose 12.6 percent.

So why not get more people into malls by giving them a spot to pick up their Amazon online orders, or to drop off a return. And make it all as easy as picking up a gym bag after a workout.

Amazon, the nation's predominant online retailer, snapped up nearly 40 percent of online holiday shopping dollars in 2016.

"Amazon's lockers are intended to be a convenience feature for customers who would rather have a more secure 'holding' place for their merchandise, rather than have it left on a porch" or some place less secure, said Charles O'Shea, lead retail analyst for Moody's.

The idea has been percolating for a while. Best Buy has had stores-within-a-store with Samsung, Apple, and other makers getting "to showcase its products in a brick-and-mortar location without needing its own stores," O'Shea said. "So it is mutually beneficial."

Google, which has no brick-and-mortar presence, leases space in some big-box retailers such as Best Buy or Target, where it builds a display to showcase products, such as the Chromebook, a laptop that runs on Google's chrome operating system, or the Pixel, Google's phone.

Microsoft does this as well with its homegrown products.

Amazon pop-up stores that sell electronics are in malls in a dozen states, from the Westfarms Mall in Hartford, Conn., to North Star Mall in San Antonio, Texas.

But the Amazon lockers take convenience to a new level, say some, especially for returns, where you don't have to repackage the item that didn't fit or meet expectations.

You can simply put it in an Amazon locker with the original receipt.

"I get a confirmation email immediately that the return process started," said Michael Sperger, 40, of Jenkintown, an Amazon Prime member who was showing his daughter, Anna, 13, how to use an Amazon locker at Willow Grove Park Mall last week. The lockers were off to one side of an H&M clothing store.

To use the new service, customers select an Amazon locker during checkout when shopping on Amazon.com. They are notified by email as soon as their package has been delivered and is available for pickup at the location they choose. They are given a pickup code.

Once at the designated site, the customer punches in the code on the keyboard to open the locker. Directions on the wall screen guide every step.

If you don't pick up your package within three business days, the item is returned to Amazon and you get a full refund, according to the company.

If the package is too big, customers aren't given the option of selecting an Amazon locker on the website's checkout page. An item must be smaller than 16.5 by 13.8 by 12.6 inches with a shipping weight of less than 10 pounds.

Sperger, who works for a local software company in sales, said he and his daughter now do more than 90 percent of their shopping online with Amazon, but last week, "she needed some new clothes and she needed to try them on."

He said he likes using Amazon lockers for returns because there is no additional fee and he doesn't "have to repackage and mail at a FedEx or UPS. I just drop into one of these slots and it's done."

At least 30 percent of products ordered online are returned compared with 8.89 percent in brick-and-mortar stores, according to Invesp. This may be due to consumers' buying multiple versions of a product online, covering different sizes or colors, and deciding later which to keep.

In the race for survival against online's growing impact, Amazon lockers offer malls a slender lifeline.

"The public is adapting to what today's definition of a mall is," said Steven H. Gartner, managing director for retail services at commercial real estate firm CBRE Inc.  "It used to be a place that you might have spent all afternoon, in a controlled atmosphere, buying, eating, and hanging with friends.

Now, "you may only go to one store there, and leave. So, anything that increases the frequency of visits, for any reason, is a positive. At some point, however, people are actually going to have to buy stuff for malls to stay vital as a store location. Not just a place you pick up something, then leave."

A recent CBRE report estimated that online returns from the recent holiday shopping season could reach $29 billion – and not everyone will want to repackage and mail them back.

Pennsylvania Real Estate Investment Trust offers Amazon lockers at 15 of its East Coast malls, including Plymouth Meeting and Willow Grove Park Malls, and Cumberland and Moorestown Malls in South Jersey.

The partnership was announced last fall as the first-in-industry multilocation locker installation. "We fully embrace the growing intersection of physical and digital retail," PREIT chief executive officer Joe Coradino said at the time. The program will "welcome new consumers to our properties."

Since the lockers debuted, "we don't have specific numbers to share, but thousands of packages are coming through the lockers monthly," PREIT spokeswoman Heather Crowell said. "They are used more frequently when there is a college or university nearby," such at Willow Grove Park Mall, which is near the Penn State Abington campus.

Crowell  said PREIT was also exploring building out some space in its malls for online retailers to pop up in physical space — another sign of further convergence between in-store and online.

"It's adapt or die,"  said Tom Caporaso, CEO of Clarus Commerce, an e-commerce solution provider that owns FreeShipping.com and ShopSmarter. "Mall traffic is ultimately going the wrong way, and e-commerce is going the other.

"There's only so much consumer spending to go around."