By Lee Peterson
In 2017, more than 15 U.S. retailers filed for bankruptcy, a rate not seen since the Great Recession eight years earlier. In all, at least 8,000 stores closed their doors last year.1 Most of those closures were by national chain stores, with no category harder hit than apparel.2 It’s nothing short of an existential threat. Even worse, the Four Horseman are coming next for department stores. Already this year, Bon-Ton Stores, Inc., which operates 260 department stores, filed for bankruptcy.3 Meanwhile, Wall Street is beginning to value the real estate network owned by Macy’s more than the brand itself, with its stores worth about $16 billion,4 twice the company’s value. Many leading department store brands are billions of dollars in debt.5 By year’s end, Sears will have closed another 220 locations.
What might be done? More importantly, what would even work?
No sector of the retail industry right now is more vulnerable than department stores. Footfalls are declining fast, especially inside B and C class malls. In fact, mall visits declined by half between 2010 and 2013, and have kept declining year over year. The timing couldn’t be worse. The flush, boom years for the reliable, traffic-generating anchors inside malls are over. If more department stores fail, a surplus of retail space will flood the market. Today, there are only about 1,100 malls still in operation, and as stated, a quarter of them may close in the next five years.6
We all know that the variables leading to the decline of malls are legion: Amazon, the proliferation of power centers, lackluster remodels, cannibalization of old malls by new malls, lack of investment. The traditional mall began its steady decline as three converging trends redefined social life: the rise of the gig economy, the dominance of social media for communications, and an alarming rise in social isolation. As ecommerce further stakes out its influence on the once exclusively social activity of shopping, social isolation is destined to rise even further. Digital Natives (18-29 years old) are seeking activities in the physical world to build connections between their online and offline identities, not just shop for a pair of jeans in one of a lineup of stores.
The time hasn’t just come to reinvent the proverbial anchor—and with it, specialty retail. The entire idea of a mall needs more than a new look. It needs a full-scale reinvention. This, we believe, is the central idea we got from consumers in our study.
The spaces that have long constituted the beating heart of consumer culture have grown tired and irrelevant. There’s a need for vitality and dynamism to replace the traffic lost to these once vibrant anchors. The industry, collectively, needs to re-claim and reinvent the mall. This is the tipping point.
Our research aims were focused: Find out what concept for mall reinvention shoppers find most appealing. The heyday of traditional, enclosed malls passed at least a decade or more ago. The last enclosed mall was built in 2006. Despite the waning of this once vibrant retail concept, with more than a thousand traditional malls remaining in operation throughout the United States, there are billions in sunk costs in these sprawling commercial centers. Also, they remain in vital, infrastructure-heavy thoroughfares. The problem is too many are staid, outdated, and boring, with little about format reinventing through the years. The closest thing to re-invention has been the advent of the ‘town center’ open air mall, versus the re-thinking of the tenants themselves.
To find a solution, we scanned the landscape of contemporary consumer culture, and in doing so, isolated 11 concepts with the energy, and relevance to draw a crowd to a physical space in our increasingly digitized world. Our theory was this: The only way to reinvent and save malls is to transform the space dominated, for now, by department store anchor tenants and specialty apparel into other purposes entirely. In effect, we decided for specialty retailers to survive—and for the developers and owners of America’s remaining malls to escape financial turmoil—expending any resources on saving the traditional department store format (for one) had become a fool’s errand. It’s a tough truth, but one we must face.
But what might replace the department store? Or for that matter, any open space within the current environments?
We examined the diversity of commercial space in America today, and came away with renewed hope, especially after probing the trends—wellness (Goop, anyone!), foodie culture (craft beer to canning, farmer’s markets to farm to table), outdoor lifestyle (glamping, hiking adventures, cycling), co-working (freelance nation), fitness (there are 38 million yoga practitioners in America alone) and beauty (the Millennial boom in cosmetics, for instance). These are only a few of the trends bringing new life and vigor to consumer culture today. From food halls and farmer’s markets, fitness centers to sports complexes, there are plenty of other vital and dynamic movements within the cultural zeitgeist to exploit, and most importantly, the kind of trends that drive people to engage in physical space, instead of through social media, or online shopping alone.
With these trends informing our research, we asked 4,000 shoppers:
- What concept was most appealing to them?
If this tenant reinvention concept were available in a mall, would they visit more often?
The results are telling – especially analyzed through the eyes of Digital Natives versus Digital Immigrants. Let us just say that the way to a consumer’s heart is through their stomach.
To see the results in their entirety, you’ll have to download the white paper. In addition to what has been already been revealed, you will learn:
- The untapped potential in vulnerable real estate spaces
- How to make malls not just useful, but desirous to shoppers again
- How brands might re-claim and become mall anchors themselves
- What concepts will best prompt shoppers to visit the mall again, and possibly more often than before
Buy the paper here: www.wdpartners.com/research/apocalypse-to-relevance