Are Shopping Malls Dying?

The traditional shopping mall, a long-time symbol of American consumerism, is facing significant challenges. Now, more than ever, confronting numerous obstacles many malls, especially mid-level and lower-end malls, may soon close 

• The economic realty is that many high-end malls are doing quite well while other mid-tier and lower end shopping malls are struggling and dying, with the risk of taking some major retailers down with them.
• "Retail is undergoing a transformation. It's always been a business of creative destruction, but the pace is accelerating due to the introduction of e-commerce," says Tad Philipp, Director, CRE Research , Maddy's Investors Service.
• Competition from e-commerce, higher taxes, the soft recovery after the recession, have all put pressure on high profile national mall anchors. J.C.Penney and Sears have both been struggling for some time. Trouble of these anchor chains has meant trouble for stores located in the mall that rely on them for traffic. The old business model for malls used to be, and still is in many cases, that the anchors would draw customers to the mall and the mall landlords would make money by renting out space between the anchors to smaller stores. This caused the traditional mall to have anchors at the ends, such as big box stores, a food court in the middle, and smaller, sometimes local retailers, in between.
• Many of us are old enough to remember when malls were a "new" fad and their emergence caused many local downtowns to struggle with empty Main Street store fronts dotting the countryside. The recession that hit in late 2007, and the subsequent slow recovery, has created less sale volumes in the malls generally. Some also say that the eroding middle class has put mid-tier department stores under pressure as customers, who have traditionally shopped there, are either going to the high-end better retailers or the low-end discounters. Also, some argue that too many malls were built in previous decades leading to a correction today. Some of the stores that are feeling the heat are Abercrombie and Fitch. Aeropostale, and American Eagle Outfitters.
• E-commerce cannot be discounted for the effects it has had on brick and mortar stores and big box stores as sales through e-commerce seem to grow annually.
• These problems did not arrive over night and some malls and retailers saw the signs and have managed to adapt. One of the leaders is Macy's, which has been at the forefront of localizing inventories at the store level to better meet the needs of the customers and also utilizes e-commerce as well as any other big box retailer.
• It's anyone's guess as to what this new normal will ultimately bring. Just as the emergence of the malls created many empty store fronts in downtown America, the closing of the malls, or at least the closing of the low and mid-tier malls, will bring major changes to consumers across the country. As with all change, there are opportunities and pitfalls, proving once again that the only constant is change.