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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

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