Change or die: US malls con­front Ama­zon era Re­tail­ers are tak­ing space from ex­it­ing depart­ment chains

Kuwait Times - - BUSINESS -

As the re­tail in­dus­try churns in the Ama­zon era, Amer­i­can shop­ping malls are turn­ing to a new gen­er­a­tion of stores, food and en­ter­tain­ment of­fer­ings to make up for an ex­o­dus of depart­ment stores.

Prime mall real es­tate is in­creas­ingly going to play­ers who be­gan on­line and are grad­u­at­ing to brick-and-mor­tar, such as plus-size cloth­ing la­bel Elo­quii, or stores sell­ing niche items like candy and con­flict-free di­a­monds.

In some cases, these re­tail­ers are tak­ing space, lit­er­ally, from ex­it­ing chains like Macy’s. Other ad­di­tions in­clude the trendy burger restau­rant Shake Shack, and Dave & Buster’s, whose video game and pro-sports view­ing restau­rants are em­blem­atic of the “ex­pe­ri­ences, not stuff” mantra now res­o­nant among con­sumers. The changes to malls-cli­mate-con­trolled bea­cons to Amer­i­can con­sumerism that grew rapidly in the lat­ter part of the 20th cen­tury-are part of a fun­da­men­tal in­dus­try re­think as e-com­merce, led by gar­gan­tuan pur­vey­ors like Ama­zon, takes mar­ket share and al­ters con­sumer ex­pec­ta­tions.

“This isn’t the same cul­ture as 30 years ago,” said re­tail in­dus­try an­a­lyst Dana Telsey, who sees to­day’s moves as the “early in­nings” of a mul­ti­year evo­lu­tion. Malls will en­dure be­cause they of­fer “the ex­cite­ment of be­ing able to see what’s new,” she told AFP. “It’s a meet­ing place. It’s an en­ter­tain­ment cen­ter.”

“You’re al­ways going to have shop­ping cen­ters that en­gage,” said Telsey, chief ex­ec­u­tive of Telsey Ad­vi­sory Group. The chang­ing times are a pe­riod of reck­on­ing for hun­dreds of se­cond-tier shop­ping cen­ters in a coun­try that experts say has long been “over­malled.”

A Jan­uary re­view of 1,070 malls in the US by Green Street Ad­vi­sors, a real es­tate re­search and ad­vi­sory firm, clas­si­fied more than 330 malls as “at risk to close” due to de­clin­ing oc­cu­pancy, low sales, weak so­cioe­co­nomic de­mo­graph­ics and an­chor store va­can­cies.

“These malls only ac­count for roughly five per­cent of mall value in the US,” the re­port said. “Most won’t be missed.”

Sur­vival of the fittest

Many of the most vul­ner­a­ble malls were built in the 1960s and 1970s with depart­ment stores as anchors that at­tracted enough cus­tomers to also sup­port sec­ondary stores. But stores in malls were of­ten pricier than free-stand­ing shops be­cause of the heavy rents for com­mon costs such as heat­ing, main­te­nance and se­cu­rity, said Fred Hurvitz, pro­fes­sor in re­tail stud­ies at Penn State Uni­ver­sity’s Smeal College of Busi­ness. The ar­rival of e-com­merce and greater price trans­parency means malls must com­pete not only with Ama­zon for more cost-con­scious cus­tomers, but with dis­count chains.

“You’re see­ing a whole move­ment to­wards any way you can save the cus­tomer money, that’s going to make you more vi­able with the cus­tomer,” Hurvitz said. “With­out high traf­fic lev­els, the malls die.”

The ex­o­dus of re­tail­ers means shop­ping cen­ters that were once hives of ac­tiv­ity are hol­lowed-out shells with a few well-stocked shops sur­rounded by empty store­fronts. Park­ing lots that were jammed with cars a few decades ago are now mostly empty seas of as­phalt.

“It’s a very de­press­ing place,” Nakul Ku­mar, an eco­nom­ics pro­fes­sor at Blooms­burg Uni­ver­sity, said of the Columbia Mall in Blooms­burg, Penn­syl­va­nia, which just lost its J C Pen­ney store.

Ku­mar joined a Planet Fit­ness gym that opened ear­lier this year at Columbia Mall in a space for­merly oc­cu­pied by Sears, and he says he hopes that in­creased traf­fic from gym mem­bers will spur more ac­tiv­ity. But it was not, per­haps, a good sign when Columbia Mall was pro­filed ear­lier this year by film­maker Dan Bell as part of his YouTube “Dead Mall Series.” The Bal­ti­more doc­u­men­tar­ian has also fea­tured vis­its to seen-bet­ter-days malls in North Carolina, Ten­nessee and Mary­land. Bell’s port­fo­lio was spot­lighted in a July New York Times Style story that rued the pass­ing of an era.

New in­vest­ments

Yet mall de­vel­op­ers dis­miss talk of their demise de­spite to­day’s re­tail in­dus­try tra­vails. “I will tell you, it’s not a very fun en­vi­ron­ment,” David Si­mon, chief ex­ec­u­tive of the real es­tate in­vest­ment trust Si­mon Prop­erty Group, said re­cently about find­ing new tak­ers for va­cated real es­tate.

“We’re pound­ing the pave­ment more than ever,” he said in a con­fer­ence call. Si­mon said he has been en­cour­aged, how­ever, by a trend of ecom­merce chains like ap­parel maker Elo­quii or eye­glasses seller Warby Parker rais­ing cap­i­tal to open brick-and-mor­tar stores. Some of these newer brands could ul­ti­mately have as many as 400 stores, he said.

“In this clut­tered world of try­ing to get peo­ple fo­cused, we are see­ing more and more brands that want to grav­i­tate to where the traf­fic is,” Si­mon said. “By and large, in com­mu­ni­ties through­out the coun­try, that’s the mall. And that has not changed.” GGP, an­other real es­tate in­vest­ment trust, plans $1.5 bil­lion in mall in­vest­ment, in­clud­ing a green­field mall in Nor­walk, Con­necti­cut and a ma­jor ex­pan­sion to the Staten Is­land Mall in New York City that it bills as a “shop­ping cen­ter of the fu­ture.”

Staten Is­land will add the Ger­man su­per­mar­ket chain Lidl, as well as Dave & Buster’s, a new AMC movie theater and a few new ap­parel stores. GGP has also bud­geted “re­fresh cap­i­tal” for ex­ist­ing malls-some­times stretch­ing into the mil­lions of dol­lars. The com­pany re­cently re­moved an old foun­tain and spiffed up the din­ing area at its Wayne, New Jersey mall. “You’ve turned your old, very tired look­ing food area into some­thing very mod­ern,” Kevin Berry, a vice pres­i­dent at GGP, said of the Wayne up­grade.

MOSCOW: A build­ing of apart­ments in a pre­dom­i­nantly tourist area in down­town Moscow yes­ter­day. —AFP

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