SHOPPING MALLS MAY BE AN ENDANGERED SPECIES
There are moremalls than ever, but online threat looms large
Are going- out- of- business sales near for America’smalls?
By many accounts, the convenient centers that have been favorites for generations of shoppers appear to be in trouble with a surge in retailers closing locations and increasing online sales.
Global financial services giant Credit Suisse predicted last week that up to 25% of the nation’s malls could close by 2022. However, shopping industry experts say the number of malls is holding steady and the sector is coping well.
Starting in the 1950s and accelerating in
the 1970s, malls became gathering places for teens, convenient shopping centers for their parents and a growing challenge to smaller retailers in cities and towns nationwide.
Between them, historic mall anchor stores including Macy’s, Sears and JCPenney are cutting back hundreds of stores. Similarly, onetime electronics giant RadioShack has shuttered more than 1,000 locations since the Memorial Day weekend as part of a second bankruptcy proceeding in two years.
In part, the closings result from increases in online shopping as traditional brick- and- mortar stores ramp up their own omnichannel strategies that give customers the ability to buy from mobile phones, desktop computers, or in- person shopping trips.
“The Internet is the enemy of shopping malls,” says Mark Cohen, a former Sears Canada CEO who’s now the director of retail studies at Columbia Business School in New York City. “Customers are willing to buy everything and anything online.”
Discussing what he termed an existential business crisis, Cohen predicted that roughly 230 to 240 U. S. shopping malls “will remain fully viable” when the industry shakeout is complete. In all, the U. S. currently has 1,211 shopping malls, the same as last year and a net increase of 46 from 10 years ago, according to CoStar Group data provided by the International Council of Shopping Centers.
Credit Suisse’s report forecast a similarly bleak and even faster outcome, based in part on sales projections for the apparel industry, a traditional mainstay for U. S. malls. E- commerce apparel sales are likely to soar from roughly 17% of overall transactions now to approximately 35.7% within 15 years, said Christian Buss, a Credit Suisse director.
Simultaneously, off- price and fastfashion retail are growing from about 20% of apparel- industry sales to what the report projects as 30% in approximately a decade. Stores specializing in those areas, such as TJ Maxx, are disproportionately located away from malls, Buss said.
Consumer shopping habits are also changing. Now, consumers increasingly forgo regular trips to an area mall in favor of less frequent trips to what Buss termed destination, A- center locations that feature improved shopping experiences.
“The logic of convenience that defined the creation of the mall in the ’ 70s and ’ 80s and ’ 90s has been replaced by the convenience of sitting at home and ordering from your laptop or your iPad,” Buss said. “What this means is that you no longer have to drive within a 5- or 10- mile radius to go to a mall that may be tired and sad, and half empty. You’ll drive further when you do choose to go to the mall, which will be less frequently, into those A- center locations.”
However, the mall industry remains confident the sector will continue to thrive despite financial challenges and changing consumer shopping habits.
“We found the opinion report amusing and inaccurate,” Les Morris, a spokesman for Simon Property Group, the nation’s largest mall operator, said in response to the Credit Suisse forecast.
The company, which boasts retail properties in 37 U. S. states and Puerto Rico, reported in April that its firstquarter mall and premium outlets occupancy was 95.6%, unchanged from last year. “We continue to see strong demand for our space,” company Chairman and CEO David Simon told Wall Street analysts.
A significant percentage of U. S. malls are likely to close, but those that do are likely to be locations with comparatively lower sales per square foot, said Kevin Berry, the chief spokesman for General Growth Properties, which operates 117 malls.
Still, “there is no statistical evidence to suggest that a 20% to 25% ( shutdown of U. S. malls) is an accurate forecast of what’s going to happen in this industry,” ICSC President and CEO TomMcGee said in an interview.
At least one CEO disagrees. “We continue to see strong demand for our space,” David Simon of Simon Property Group says.