The Dallas Morning News
What’s in store for ... stores?
Pandemic pushes once important mall anchors to adapt — or shutter
Adrienne Whyte used to go to the mall twice a week, where she might meet up with her personal shoppers at Neiman Marcus and Saks Fifth Avenue or scour Macy’s for bedding and kitchenware.
But it’s been well over a year since she set foot in a department store — and she isn’t sure when, or whether, she will again.
“Now if I need something, I buy it online,” said the 72-year-old retiree from Falls Church, Va. “The department store is a one-stop shop, but so is the internet.”
Department stores had been spiraling downward long before the pandemic turbocharged online shopping and helped tip a number of big-name retailers into bankruptcy.
Nearly 200 department stores have disappeared in the past year alone, and another 800 — or about half the country’s remaining mallbased locations — are expected to close by the end of 2025, according to commercial real estate firm Green Street Advisors.
Those closures, analysts say, will have a cascading effect on American shopping malls, which are already battling record-high vacancy rates and precipitous drops in foot traffic.
“There’s nothing department stores have done to make themselves particularly relevant in the 21st century, and the pandemic has only made that more clear,” said Mark Cohen, director of retail studies at Columbia Business School and former chief executive of Sears Canada. “They have too many stores, too many things, too many brands. ”
The pandemic set off an economic chain reaction that rippled through the country’s department store chains, forcing several into Chapter 11 proceedings. Neiman
Marcus, Stage Stores and J.C. Penney filed for bankruptcy last May, followed by Lord & Taylor and, most recently, Belk in February.
Even companies on relatively stable footing, like Macy’s, are shuttering dozens of stores as they try to move away from traditional shopping malls.
“In the old days, department stores offered convenience,” said Greg Portell, a partner in the consumer and retail practice of consulting firm Kearney. “But now that we can get that without leaving the couch, it’s no longer enough.
“Department stores have to offer more: They need smart curation, high-touch service and personalization.”
To that end, Saks Fifth Avenue is spinning off its website into a stand-alone company in hopes of doubling down on e-commerce. Nordstrom is offering virtual styling appointments and recently launched an online channel where shoppers can buy merchandise during livestreamed events.
At Neiman Marcus, the first department store chain to file for bankruptcy during the pandemic, executives say they have invested heavily in e-commerce, hosting “shoppable” virtual events and making store employees available by text, email and video chat.
“We’ve never had to make so many changes at once like we did in the past year,” said Lana Todorovich, president and chief merchandising officer of the Dallas-based retailer. “Everything, including our product assortments, changed in an incredibly short period of time.”
The company, she said, is stocking its shelves more frequently with “buy now, wear now” products and is seeing a resurgence in bridalwear as well as swimwear and jewelry.
Overall retail spending rebounded sharply in March, rising 9.8% after an unexpected dip in February, the U.S. Commerce Department reported this week. Department store sales rose 13% from a month earlier, boosted by recent stimulus checks and burgeoning demand for clothing and shoes, though they have yet to reach prepandemic levels.
But analysts say retailers’ challenges extend beyond short-term sales figures. They also must grapple with questions about the viability of shopping malls, which saw vacancy rates hit 11.4% in the first quarter, compared with 10.5% the preceding three months, marking the biggest spike on record, according to Moody’s Analytics’ commercial real estate division.
Already struggling midand lower-tier malls have been disproportionately affected, adding to the widening gap between the country’s most profitable malls — which tend to be newer, welllit properties with restaurants and in-demand chains like Apple, Lululemon and Sephora — and the rest of the industry, analysts said, though the latest round of bankruptcies and liquidations has created new challenges throughout the industry.
“The department store as an all-encompassing emporium is a product of the 20th century and a victim of the 21st,” said Cohen of Columbia Business School. The best will prevail, he added, because people are not going to settle as they once did, “simply because they don’t have to.”
The country’s largest department store chains have shuttered roughly 40% of their locations since 2016, according to a Washington Post analysis of corporate earnings releases and annual reports.
Some of those locations have found new life — most recently as coronavirus testing or vaccination centers, but also as Amazon warehouses, community colleges, medical offices and car dealerships. (Amazon’s founder, Jeff Bezos, owns The Washington Post.)
Commercial real estate experts say the sprawling properties left behind in U.S. shopping malls are often well-positioned, with large parking lots and easy access to highways and public transportation.
“Many of these malls built in the ’60s, ’70s, ’80s and ’90s were economic development projects, so they’re surrounded by great infrastructure,” said Thomas Maddux, a principal at commercial real estate services firm KLNB.
“The question now is: What’s the next chapter in this story? Malls may not have five or seven department store anchors like they once did, but they may have other uses — a grocery store or a car dealership or a hotel. We just have to live through the cycle.”