Death of Malls and Changes in Retail

This year alone 25,000 stores are expected to close. This news surfaces as the COVID-19 pandemic slowly eases up and companies have a moment to reevaluate their circumstances. More than half of the closing stores will be accounted for in malls across the country. 

Sixty percent of malls host department stores, so it shouldn’t be a surprise that when those steadfast entities leave, the public has every right to be concerned about the death of malls

There are only about 1,000 malls in the United States, and according to Forbes, “The nation’s so-called ‘A’ malls represent about 20% of locations, but generate about 75% of total mall volume.”

Americans recently helped retail rebound 17.7% in May, but spending is still down annually and there is no guarantee that this trend will continue. “Really when we think about the retail industry and take out gas and automotive sales, it is only a 12.4% increase,” clarifies Ray Wimer, professor of retail practices. He also notes, “A lot of this could be stimulus check spending, which may be a one-time bump and increase in sales.”

Specific groups of retail, such as clothing suppliers, are also seeing shopping spikes but fall short below last year’s sales.

Shelley Kohan, adjunct faculty in the retail management department, speaks to the innovation mall developers have applied to be successful. She explains, “Some malls are becoming multifunctional spaces like residential offices and a shopping mall in one location. Hudson Yards is a good example. Columbus Circle is another example in New York City of a more community-like space. Places such as Columbus Circle change the model; revenue is coming from tenants, residents, retail and the grocery store. It’s a bit more protective of revenue. I think we will see more cases like this in the future.”

Although there is a consensus that malls will not be totally closing anytime soon, Wimer states, “We will see regional malls continue to decline with store foreclosures.” Malls in populated areas may fare the best under the current economic climate. “There will still be malls, but there will be fewer of them in the future,” adds Wimer.

“I don’t believe malls will die either. Shopping in the mall is about the experience,” says Guiyang Xiong, associate professor of marketing. He explains, “When consumers go to the mall, they don’t just make a purchase and go. If they can enjoy a whole experience like dining, letting the kids play or adding an entertainment factor, going to the mall will be a very experiential opportunity for consumers to keep malls alive.”

Kohan adds, “Class A and B malls will continue to do well and many mall developers are doing a lot to promote other activities in the mall such as kids’ camps, roller coasters and even as we see from a mall in New Jersey, ski slopes. Developers are thinking about including more entertainment and trying to get more unique tenants that resonate with Generation Z and Millennials.”

Wimer believes that one of the biggest hurdles for retailers to overcome is consumer behavior change. It’s possible that people will need less business attire to work from home, they may also fear to risk their health to shop in brick and mortar store locations.

Kohan agrees that consumers’ preferences are changing. “We know consumers are focused on the ease of shopping. Malls can be up to a million square feet. They need to make that shopping experience easier whether that means using digital mapping or virtual tools. It could also mean, for example, in regard to curbside pickup, that customers get a parking space number where they can wait and have goods delivered to their car to make shopping more convenient. Overall, mall developers should think about how to make it more accessible,” explains Kohan.

Stay-at-home orders and social distancing policies have also helped e-commerce gain popularity. Kindler says, “Inventory for retailers is the biggest asset and liability. We were able to continue to sell online and really drive a nice volume. In 220 of our stores, we were able to bring a couple of associates to fulfill our orders from the back of the store. One of our stores in Burlington, Vermont, fulfilled so many orders that they ran out of inventory.”

Xiong has been exploring research regarding digital marketing innovation. He shares, “Consumers may be conscious of hygiene issues when going to malls. An alternative to shopping in person is shopping online. Online shopping is less experiential but some companies like Saks Fifth Avenue have already been using virtual and augmented reality fitting rooms.”

VR fitting rooms may benefit retailers if they do not show standard marketing photos, because these may make consumers self-conscious about how clothing looks on them compared to a model, explains Xiong.

For those shopping online, they may see an increase in wait time and cost. Julie Niederhoff, associate professor of supply chain management, explains, “Instead of going to a single distribution center, now delivery services have to go to multiple retail occasions and pick up smaller amounts of packages. There’s a much more complex network to deliver things.”

Learn more about the retail industry.

Maya Bingaman
Latest posts by Maya Bingaman (see all)