How Online Shopping Is Killing Retail Stores

The Shopping Malls Really Are Being Killed By Online Shopping

As industries change, as technologies change so that industries have to, there’s often an awful lot of whistling in the wind among those who don’t want to have to admit that the world is changing against their interests. And so it is among people talking about shopping malls in the US. I’ve seen very much the same thing in my native Britain when people start to talk about the death of the “High Street” (what might be called “downtown” in an American shopping sense). When I point out that 12% or so of the stores on said High Street are vacant, 12 % or so of retail spending is nnow online, there’s always a desire to explain that it’s just not that simple, that something else is going on.

No, very little else is going on. More retail spending is moving online thus we need and desire (or, more importantly, we can support) less bricks and mortar retail space. And I’d argue that very much the same thing is happening in the US now with malls. My insistence being despite the insistence of those involved in the industry that that’s not it at all:

One factor many shoppers blame for the decline of malls — online shopping — is having only a small effect, experts say. Less than 10 percent of retail sales take place online, and those sales tend to hit big-box stores harder, rather than the fashion chains and other specialty retailers in enclosed malls.

Well, OK, so 10% or so of sales are online now.

About 80 percent of the country’s 1,200 malls are considered healthy, reporting vacancy rates of 10 percent or less. But that compares with 94 percent in 2006, according to CoStar Group , a leading provider of data for the real estate industry.

Nearly 15 percent are 10 to 40 percent vacant, up from 5 percent in 2006. And 3.4 percent — representing more than 30 million square feet — are more than 40 percent empty, a threshold that signals the beginning of what Mr. Busch of Green Street calls “the death spiral.”

Right, there’s 1,200 malls in the country, of those perhaps 15% are 30-50% vacant and:

Since 2010, more than two dozen enclosed shopping malls have been closed, and an additional 60 are on the brink, according to Green Street Advisors, which tracks the mall industry.

And 2% have gone bust and another 4 % or so are gravely indanger of doing so. Now I know my math here is pretty rough but that is around and about 10% of retail space in malls nationwide either empty or closed while online retail is 10% or so of all retail sales. I’d say that the connection between the two is pretty firm myself, just as it is in the UK.

However, there’s one more part to this story that I think is interesting:

Well aware of the cultural dimensions, as well as the economic stakes, the industry is trying to turn around public perception of these monuments to America’s favorite pastime: shopping.

The malls that are doing well tend to be destinations. Those that aren’t tend to be places where people just go shopping.

Of course, we’ve all made jokes for decades about “retail therapy” and how people go off shopping as something to actually do rather than a task that has to be achieved so that food can be eaten, clothes can be worn. And that is what seems to be becoming ever more apparent. Those places that are places that people go to in order to “shop the mall” are performing a form of entertainment duty. And those are the places that are staying vibrant, for it’s the experience that is being looked for (and I will resolutely retrain myself from making the usual jokes about male and female sterotypical shopping jokes). Those places that were places where people simply went to the store in order to purchase something are the places feeling the real brunt of that online competition.

Another way to put this, and the piece makes the point that it is “high end” malls that are doing well, the middle market that is failing, is that high end shopping is still that experience desirable in and of itself while middle ranking shopping is, well, it’s just shopping, that thing that is so much easier to do online. And however convenient, cheap or simple Amazon or other online stores are, “experience” is not really the description we would apply to the use of them.

http://www.forbes.com/sites/timworstall/2015/01/04/the-shopping-malls-really-are-being-killed-by-online-shopping/#7df076ba183e

Leave a Reply

Your email address will not be published. Required fields are marked *