Decaying mall culture... A blow to department stores in the US
The malls, once considered as the driver for retail growth, are today dying a slow death...
The malls, once considered as the driver for retail growth, are today dying a slow death. The rapidly changing retail environment has put added pressure on malls, severely damaging the very foundation on which malls grew in stature…, leisure shopping with fun-filled ambience. Today, people no longer want to spend time on shopping and prefer to shop online or go to standalone stores for the in-store experience, rather than going to crowded malls that are like glorified ‘fairs’. Some analysts predict that by 2022, 1 out of every 4 malls in the US could be out of business, being victims of changing tastes, a widening wealth gap and the embrace of online shopping.
There is an estimated 26 sq. feet of retail space for every person in the
US, compared to about 2.5 sq. feet per capita in Europe. The year gone by was very difficult for most US department stores, for the most part; these stores were much more worse hit than their other retail peers in 2017. As a result, most department stores faced major downsizing and consequently the malls that housed these stores are
facing a serious crisis. This downsizing by some analysts is being seen as a market correction as the number of stores in operation by most retailers was unviable. Macy’s, JCPenney, Sears and other major department stores have been so-called anchor tenants for malls, and as they pull out, it opens the door for other stores to break their leases or negotiate for much cheaper rent. In fact, as soon as one big store closes, it has the potential to take several smaller stores along with it. The seriousness of the situation can be gauged from the fact that the vacancy rate in the shopping malls across the United States has gone up by 8.4 per cent in the first quarter of 2018 as compared to 8.3 per cent in the fourth quarter of the previous fiscal year. This vacancy rate is the highest since the fourth quarter of 2012, revealed a report released by Reis Inc., which is engaged in providing commercial real estate market information and analytical tools. At least 77 metropolitan areas were covered in the survey.
In addition to malls, the vacancy was also reported in neighbourhood
and community shopping centres. At least 41 of the 77 areas reported vacancy during the 12 months ending on March 31, 2018. While, most industry watchers attribute mall vacancy rate to the rising fascination towards e-retail among consumers, Dan Bell, a filmmaker who produces the Dead Mall Series on YouTube, an eerie record of the nation’s fading commercial temples, says that the younger Americans look at malls in an antiquated way… They see it as: ‘That was my parents’ thing, and it’s not my thing’.
In an interview to CNBC, Vicki Howard, author of the book From Main Street to Mall: The Rise and Fall of the American Department Store candidly said, “I think the story of department stores is closely twinned with the story of the shopping mall… Can [mall] developers continue to find ways to make things appealing? That would be something that could benefit department stores as closures continue.”
In reality, malls that have found ways to keep the customers coming back are still in demand
Vicki Howard, author of the book From Main Street to Mall:
The Rise and Fall of the American Department Store said, “I think the story of department stores is closely twinned with the story of the shopping mall… Can [mall] developers continue to find ways to make things appealing? That would be something that could benefit department stores as closures continue.
and that includes malls that have a high-street feel of both indoor and outdoor facilities. Two good examples are the Grove in Los Angeles and The Palisades Center in West Nyack, N.Y. While the first has a mini main street and trolley running down its centre, meant to evoke an urban boulevard, and hosts a summer concert series, The Palisades Center has a bowling alley, a comedy club and an indoor ropeclimbing course.
In addition, malls that have niche value, primarily catering to luxury, are also very much in business. From the 375-store Galleria in Houston to the Shops at Crystals in Las Vegas to the Bal Harbour Shops near Miami, complexes filled with runway brands such as Gucci and Louis Vuitton are reporting healthy revenues. As a greater percentage of America’s wealth is concentrated in a smaller share of its population, these elite malls partly avoid competition with
Amazon by catering to those who don’t need to scour for deals.
In the meanwhile, the situation remains grim and many retailers in the past year, like US teen fashion brand rue21 Inc and Toys “R” Us have filed for bankruptcy that has not only shaken up the retail industry but has also led to a drop in new employment opportunities in the US. In fact, local jobs are a major casualty of what analysts are calling, the retail apocalypse. Since 2002, department stores have lost 4,48,000 jobs, a 25 per cent decline, while the number of store closures this year is on pace to surpass the worst depths of the Great Recession. The growth of online retailers, meanwhile, has failed to offset those losses, with the e-commerce sector adding just 1,78,000 jobs over the past 15 years. In this changing retail landscape wherein fewer consumers are going to malls to make purchases, a glut of unsold and out-of-style inventory has led to big debts for companies including Macy’s, Sears and Kohl’s, who are trying to reinvent themselves in this new age of retailing. Some of their latest strategies have included opening smaller-format stores and closing less-profitable larger locations, partnering with in-demand apparel brands, making enhancements to mobile apps, and trying to amass a more loyal customer base. Among other things, 2018 will bring in new management for some department stores, the deepening of strategic partnerships with retailers including Walmart and Nike, more restructuring of real estate, and inevitably elevated talk of Amazon and other influential online players.
The growth of online retailers, have failed to offset losses in jobs due to closure of malls and with the e-commerce sector adding just 1,78,000 jobs over the past 15 years.
Niche malls carrying high-end brands are thriving, while malls housing department stores are closing down