An ongoing death rattle is being heard in the US retail sector, as malls across the country are being forced to deal with what some are calling the “retail apocalypse”. Credit Suisse Bank has forecast that as many as a quarter of them will be closing their doors by around 2023. The malls have fallen victim to consumers' changing shopping habits and desires and, of course, online shopping.
The most shocking example of closures is that which has struck clothing stores which have been decimated as families and individuals buy online which saves them much-needed money and which can then be used on travel, eating out and other leisure activities which are more in line with consumer desires.
Foot traffic is on a long downward decline as customers continue to leave behind suburban malls for the ease of online shopping. U.S. e-commerce sales are expected to account for 17 percent of all retail by 2022, up from 12.7 percent in 2017, with Amazon.com Inc. being the major force, according to Forrester Research. Some analysts believe that the decline in the number of malls is another ramification of the financial crisis of 2008 and the huge recession that followed by turning many US consumers into necessity-based shoppers. That did away with the need to spend a day, or even just an afternoon, impulse shopping at the mall. Consequently, all across the United States are the sad remains of once-thriving shopping malls.
Last year alone, it is estimated that more than 9,000 stores closed down. The names of the store provide a strong indication of what's happening in modern-day America: Macy's, Sears, Kmart and JCPenney.
The decline of the mall has led to an estimated half a million retail jobs disappearing since 2002.
In many cases, all that remains are huge, useless, abandoned blocks of concrete. Too expensive either to keep running or to dismantle, they are eyesores spread across the United States.
Around 1,500 malls were built in the U.S. between 1956 and 2005, and their rate of growth often outpaced that of the local population. The decline started more than a decade ago. And between 2010 and 2013, mall visits during the holiday season, the busiest shopping time of the year, dropped by half.
“We are over-retailed,” says Ronald Friedman, a partner at Marcum LLP, which researches consumer trends. There is an estimated 26 sq. ft. of retail for every person in the U.S., compared with about 2.5 sq. ft. per capita in Europe. As an indication of the profuse numbers of shopping possibilities, more than half of Macy’s stores due to be shuttered are within 10 miles of another Macy’s.
Why is this happening? Mostly because our new digital lives give us an easy and quiet way of shopping at a click. Life has clearly moved on: where malls were designed for leisure time and pleasant shopping, a great deal of peoples' time has been taken over by busier lives and second jobs and apps that let you buy anything at any time of the day from anywhere. As Harvard University business professor Leonard Schlesinger has commented, “They [the malls] were built for patterns of social interaction that increasingly don’t exist.”
Some ailing malls have already moved on to a second life. Among the type of businesses hit by this change in thinking by consumers, inevitably, is jewelry stores. One Los Angeles-based jeweler said: "We have seen the figures showing that people are visiting malls less and it is a concern. Jewelry fits into that impulse shopping category. If consumers are filling that hole by buying online, then for the retail jewelry industry overall it is not such a problem. However, for jewelry store owners, with all the overheads involved, this is becoming an increasing problem."
The surplus of shopping centers is responsible for many of the vacancies shopping centers face nationwide. In an effort to fill those vacancies, malls across the nation have turned to nontraditional tenants - stores not normally seen in malls. "Malls are struggling to fill vacancies, so they're looking at different ways to fill those spaces," said Erin Hershkowitz, a spokeswoman for the International Council of Shopping Centers. "It could work in the long run, especially if they can bring in tenants that can bring in more traffic."
As a result of changing shopping habits and also a shift in the country's demographics, mall developers and owners are having to become more creative in how they ensure that shoppers continue to visit malls. This has meant, in some cases, bringing in non-retail businesses, such as fitness centers, to take the place of so-called anchor stores which have moved out. Anchor stores would typically be a large chain with a wide range of products, including food, which consumers will always need.
High profile closures of anchor stores at malls across the United States in recent times have included Bloomingdale’s leaving the enormous Mall of America, the store’s only location in Minnesota, and Nordstrom departing the Westfield Vancouver Mall, where it has been an anchor store since 1977. As a result, mall owners are scrambling to redesign the shopping center concept. Some malls more closely resemble ghost towns than bustling economic enterprises. But what does this mean for malls and the consumers who frequent them?
"It all relates. It all goes back to the consumer, the real core of all of this," said Howard Davidowitz, chairman of Manhattan-based Davidowitz & Associates Inc., a national retail consulting and investment banking firm. "The consumer is buying less or is looking to downscale his shopping."
Around 15% of US malls will fail or be changed into non-retail space within the next 10 years, says a report by Green Street Advisors, a real estate analytics firm. “It’s a unique way of reframing the concept of anchor stores,” said Kim Kitchings, Vice President, Corporate Strategy & Program Metrics, Cotton Incorporated. “What’s interesting about fitness facilities as anchor properties is that they may see repeat customers once or twice a week, which could have enormous potential for the shopping center as a whole.”
That could be a change that sits well with the diamond jewelry business, since that is the type of demographic who is also likely to be a jewelry buyer. "There are many pockets of wealth across the United States – from consumers who have a comfortable lifestyle to those who have become very wealthy," explained one retailer. "If you visit some of these places, in Southern California and Florida, for example, you see that there is a close link between the whole jewelry and luxury and fitness lifestyle."
Michael P. Glimcher, Chairman and CEO of Glimcher, said: “The way consumers enjoy the mall has changed. Today, the mall is a destination, offering more than just retail … people want a mix of retail, restaurants and entertainment.” Results of the Glimcher Retail Monitor show that shopping at the mall remains a social experience, with 81% of Americans saying they shop with someone.
“In-store retail can’t compete with the convenience of online shopping, so brick-and-mortar stores have to bank on experiences that can’t be had online,” says Kitchings. “Interestingly, this may make shopping centers more convenient for harried shoppers in the long run.”
Though the Great Recession spelled doom for many of America’s malls, it may have actually turned out to be a catalyst for their much-needed reinvention.
The multi-channel approach means that retailers are indifferent to where a purchase occurs, whether in person, online, or via a mail order catalogue. The key to success in this strategy appears to be a seamless integration across the different channels to ensure a consistently engaging, quality experience for the customer.
Not many retailers – apart from those at the lower end of the general retail market – are opening new stores, focused instead on taking advantage of those already existing stores and maximizing conversion to purchase, as well as expanding their online presence. Consumers walk into a dollar store with the intention to buy, not to browse, and almost always walk away with something. In addition, dollar-store traffic has been increasing over the past few years because they have expanded their selection of products, making the channel even more useful and pleasing to price-savvy consumers.
Millennials are reportedly increasing their activity in the market, because as much as online and mobile channels are ingrained in their brain, shopping is still a social behavior for this group. Seeing and touching, as well as researching and deciding where to purchase a product, are all important aspects of their shopping experience. This omni-channel and omnipresent age group also seeks instant gratification and at the lowest price, which is why younger consumers are also increasing their dollar store visits.
What's the fate of the shopping mall? Clearly, its major role in the retail sector in the United States has taken a huge blow as demographics and changing consumer tastes create different needs and requirements. Interestingly, however, malls in other parts of the world retain huge popularity – particularly across Asia where the five largest malls in the world are located. Although the long-term outlook for malls in America remains shaky due to the increasing popularity of online shopping, efforts to reshape and reinvent themselves could give them a long-term future – or at least aid them to extend their lifespans.
By our Israel correspondent Abraham Dayan
