Once stomping grounds for loitering teens and serious shoppers alike, many malls are decrepit relics of the 20th century.
Yellow liquidation sale signs, waterless fountains and empty hallways are representative of the trajectory trend malls are seeing.
Closings are expected to hit 50 percent within 15 to 20 years, adding to the billion square feet of already vacant space, retail analyst Howard Davidowitz said.
The original model for the shopping mall, a colossal suburban structure with big-box retailers as anchors, no longer attracts shoppers.
Instead, consumers are looking for established town centers or downtown areas in walking distance from their homes – if they’re not shopping from their phones or laptops.
Developers are satiating consumers’ wants by building artificial downtowns as an alternative to the traditional mall.
In the 1950s, commercial developers aggressively reached out to the new class of suburbanites with strong buying power, creating one-stop centers for maximum convenience.
By the 1960s, the retail industry brought money from major cities into suburban markets, displaying a large shift in retail that peaked in the 1990s and early 2000s. Now there are more than 200 U.S. malls and shopping centers with at least 250,000 rentable square feet, according to real estate information company CoStar Group.
“The typical U.S. mall, unless it is completely reinvented, will be a historical anachronism – a 60-year aberration that no longer meets the public’s needs, the retailers’ needs, or the community’s needs,” Rick Caruso, the CEO of real-estate company Caruso Affiliated, told the audience at the National Retail Federation’s annual convention in January.
For Simon Property Group, the open-air model, with its downtown vibe, has been profitable. Simon’s outdoor centers incorporate mixed-use development, from high-end retailers and restaurants to office, apartment and hotel space.
Revenue for Simon, the nation’s largest mall operator, has grown in the past four years; the company also built five new outdoor malls in 2013, two in the U.S.
But the trend isn’t keeping consumers’ dollars in the mall arena.
Bike shops, local offerings and green grocers like Trader Joe’s and Whole Foods appeal to the younger generations, and, until recently, malls haven’t offered those options to consumers, according to the Urban Land Institute’s 2013 study on Generation Y buying patterns.
“Smaller formats are more suitable for time-conscious shoppers, many of whom may just be … looking at goods they will ultimately buy online,” according to the study.
Showroom models are popping up within urban spaces, where consumers can try on a product and have it delivered in-store or to their door, without the option of purchasing it immediately.
Although the concept of showrooming has been around – think fiddling with a phone at Best Buy, before ordering it online through Verizon – reverse showrooming spins the idea.
Shoppers can stop by pop-up boutiques for online-only retailers, and try on items on before heading to the computer and purchasing them.
Lifestyle blog Goop is the latest to open a pop-up store in Brentwood, Calif., taking cues from retailers such as Warby Parker and Bonobos, who pioneered the “clicks-to-bricks” strategy.
“Stores of almost any size and scale encourage you to see (a product) and buy it,” even if it’s not in the color or size you need,” said Maureen McAvey, senior resident fellow at the Urban Land Institute.
The personalization aspect of shopping is gaining more traction, especially online, where analytics can recommend options for the consumer.
“Consumers are more willing than ever to share their information with retailers,” Keith Mercier, an associate partner at IBM’s Retail Center of Competence, told MarketWatch. “But there’s expectation that if I share, you are going to personalize the information I receive. That expectation is increasing. The opportunity for retailers is: How do you capitalize on that? There’s potential traffic and sales opportunity.”
In the technology market, applications and subscription services offer the feel of a personal shopper, without having to leave the couch.
The online component of shopping not only changes the market for consumers, but also takes away business from traditional retailers, McAvey said.
E-commerce giant Amazon.com Inc., for example, had a 21.9 percent increase in net sales in 2013.
Big-box retailers are most vulnerable to online shopping, because consumers can find the commodity item they need at a lower price than in-store, likely accounting for store closures, McAvey said.
While malls saw almost a 50 percent decrease in foot traffic during the 2013 year-end shopping season, according to the Wall Street Journal, online retailers don’t share the same concerns.
Online purchases constituted 5.8 percent of U.S. retail sales in 2013, nearly tripling from 2004, according to the U.S. Census Bureau.
Large indoor shopping areas rely heavily on department stores, but big-box retailers can’t anchor malls, as they did in the past, when they’re competing against online prices and convenience.
Before Macy’s acquired several department store chains in 2005, including May’s, Kaufmann’s and Hecht’s, they were all fighting for a prime corner.
Now, Macy’s, Nordstrom, Neiman Marcus and Saks are at the higher end, with J.C. Penney and Sears struggling to contend.