‘A big decline in department stores’
Shoppers are looking beyond the traditional mall
On a Thursday afternoon, cars are parked throughout the multiple lots that surround the Mall at Robinson.
Inside Macy’s, Charyl Potts, 70, searches through a clearance rack of pants. The Monaca resident came to the mall in Robinson because the stores near her “suck,” she said.
“I shop online very little, and I don’t like returning things,” she said. “I shop at different stores. I love Marshalls, but it depends on what mood I’m in that day.”
Ms. Potts believes that malls today lack smaller curated shops that, she said, could be found back in the day. “I miss those; less places to buy stuff for my grandchildren,” she said. She decided to leave the store to browse JCPenney, still looking for pants.
From the outside, it may look like the enclosed mall is full of customers looking to shop. But a view inside at the lack of customers tells another story — one where shoppers are moving away from department stores in favor of online shopping and outlet malls.
This shift in consumer behavior has been plaguing malls and department stores across the country for decades, experts say. People of all generations are shopping differently, forcing companies to re-evaluate their business models.
“There’s been a big decline in department stores over a long period of time,” said David Swartz, senior equity analyst at Morningstar Research. “It’s especially accelerated the past 20 years or so. And there’s no reason to really think that it’s going to change, because shoppers’ behavior has changed.”
‘Shopping in different places’
Department stores got their start as anchor tenants in enclosed malls in the 1960s and 1970s, Mr. Swartz said. It made those stores’ survival directly linked to the success of malls. If enclosed malls continue to decline, so will the department stores, he said.
“It’s not that people are not shopping in stores anymore,” Mr. Swartz said. “They’re shopping in different stores and shopping in different places. The industry cannot adapt to that very quickly. If you own hundreds of
department stores, they don’t just disappear overnight.
“That’s the situation that Macy’s found itself in.”
Macy’s announced last month that it would be shuttering 150 of its stores across the country in an effort to shift the department store’s brand toward smaller luxury and outlet stores, with a heightened focus on its e-commerce platform. The company said in an email to the Post-Gazette that the brand’s shift is not a result of the decline of malls.
“We will continue to meet our customers however they choose to shop by delivering a seamless shopping experience across channels through a mix of the best onand off-mall locations; off-price stores; and a best-in-class digital shopping experience,” a Macy’s representative said.
Mr. Swartz believes Macy’s should have started closing stores years ago since malls are no longer financially viable. It was different 40 to 50 years ago, he said, because malls may have been the only place to shop within driving distance.
But when stores such as Costco and Walmart began popping up and Amazon took over the online marketplace, department stores began to lose their competitive edge of being the one-stop shop for anything from homewares and jewelry to shoes and electronics.
Stores including Sears, which filed for bankruptcy in 2018, Lord and Taylor, which closed in 2021, and Gimbels, which closed in 1987, haven’t been able to keep up.
JCPenney also filed for bankruptcy in 2020 but was purchased by Simon Property Group, an Indiana-based real estate company and the largest mall operator in the country, and Brookfield Asset Management, based in Canada.
“Simon rescued it, I think not so much that they love JCPenney, but because JCPenney is an anchor at many of their malls, and they did not want it going under,” Mr. Swartz said. “But that’s probably a Band-Aidon a very serious wound.”
Department stores that do not rely on malls, including Kohls, have been more successful, he added.
‘An alternative to the traditional enclosed mall’
Enclosed malls began to open after World War II and were built at rapid speed geared toward those in the middle class. This left the industry with too many malls and not enough shoppers, Mr. Swartz said, as the U.S. has a smaller middle class than most countries but with two to eight times more malls.
“A lot of malls are likely to close in the next five to 10 years, especially in smaller and midsize cities that have limited population growth and limited income growth,” he said. “They just don’t need these big malls anymore because people have so many places to shop.”
There are 700 malls across the U.S., but studies suggest there will only be 250 by the end of the decade, said David Caputo, data scientist at Moody’s Analytics.
Then there’s another shopping destination: The outlet mall, which offers discounted items at stores including TJ Maxx. At first, these malls were few and far between. Now they are a popular destination and a major threat to enclosed malls.
“People are willing to go out of their way to go to these outlet malls,” Mr. Swartz said. “They also do well with tourists, international tourists and Americans on vacation. They’ve become an alternative to the traditional enclosed mall.”
Mall operators, including Simon Property Group, did this to themselves, he added, because they opened outlet malls all over the country not expecting them to be so successful.
Not all enclosed malls are struggling.
Green Street Advisors — a California-based investment advising company — ranks malls annually with a grade system based on four main factors: Tenant mix, productivity, location and condition.
“A” grade malls have a mix of high-end and national tenants, moderate tenant demand space, good demographics, steady tenant occupancy, above-average tenant sales and minimal anchor tenant vacancies, according to Green Street.
Nationally, these malls have remained successful, since they target those in the higher class, Mr. Swartz said.
‘These vacancies are not going away’
Local “A” grade malls include the Ross Park Mall in Ross, owned by Simon Property Group. The mall hosts multiple high-end tenants including Louis Vuitton and Gucci, while holding multiple anchor tenants, and has over 33 million visitors annually, according to the mall’s owner.
On a recent Monday afternoon, the parking lot of the mall was packed. Shoppers browsed around the multilevel mall featuring 170 different retailers.
Brooke Aymar, 23, a North Hills resident, came to the mall to exchange an item from Old Navy that she originally bought online. She comes to the mall every couple weeks to buy clothes, she said, though most of her shopping for non-clothing items is done online.
“I do prefer in person shopping to try stuff on, but there is more availability online and usually there are more discounts,” she said. “They [the mall] took away my Forever21 and said it would come back. The mall is definitely getting more high-end.”
Ms. Aymar occasionally shops at outlet malls as well, she added, but finds that the selection can be “hit or miss.”
It’s the “B” and “C” grade malls that are continuing to decline. Operators of these malls have to get more creative with their tenant profile in order to stay afloat or have the space be completely redeveloped, Mr. Caputo said.
The Pittsburgh Mills Mall, in Tarentum, has tried this approach, leasing to Riverside Church, Total Control Training, Tang Soo Do Karate and the Citizens School of Nursing.
“Diversification of tenancy is very much relevant for Pittsburgh Mills,” said representatives of New York-based Namdar Realty Group, the mall’s owners, in an email to the Post-Gazette. The mall, as of September 2023, had a 43% vacancy rate.
“For ‘B’ and ‘C’ malls, redevelopment or demolition is in the works for a lot of them,” Mr. Caputo said. “There’s been a high demand for a lot of these high vacancy malls to be redeveloped. Zoning laws are being revised by those in government to make the process as easy as possible because landlords are noticing that these vacancies are not going away.”
Ultimately, both malls and department stores will have to adapt to consumer preferences in order to remain profitable, analysts said.
“Because of the differences in the way people shop, department stores are having to change where they have their stores,” Mr. Swartz said. “They’re going to be off-mall, they’re going to be smaller, and they’re going to be more oriented towards discounts.”